SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 1, 1998
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IMATRON INC.
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(Exact Name of Registrant as Specified in Its Charter)
New Jersey
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(State or Other Jurisdiction of Incorporation)
0-12405 94-2880078
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(Commission File Number) (I.R.S. Employer Identification No.)
389 Oyster Point Boulevard, South San Francisco, CA 94080
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(Address of Principal Executive Offices) (Zip Code)
(415) 583-9964
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(Registrant's Telephone Number, Including Area Code)
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Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. Agreements with and regarding Positron Corporation
Effective May 1, 1998, the Company entered into several agreements with
Positron Corporation, a Texas corporation, pursuant to which the Company will
acquire a majority ownership of Positron. In addition, the Company will
immediately begin making working capital advances to Positron of up to $500,000
to enable that company to meet a portion of its current obligations. The Company
has agreed to support Positron in several other ways, by agreeing to take, after
the date of the closing, all reasonable efforts to cause the placement of ten
Positron (TM) PET cameras over the next three years, particularly with the
Company's affiliate Imatron Japan, Inc., and by assisting Positron to arrange
for additional third-party financing in an aggregate amount of at least
$8,000,000.
ITEM 7. Exhibits.
7.1 Loan Agreement between the Company and Positron, with Schedules and
Exhibits.
7.2 Stock Purchase Agreement between the Company and Positron,with
Schedules and Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IMATRON INC.
Date: June ,1998 By:
----------------------------------------
S. Lewis Meyer
Its: President & Chief Executive Officer
EXHIBIT 7.1
LOAN AGREEMENT
with Schedules
and Exhibits
LOAN AGREEMENT
THIS AGREEMENT is made as of the first day of May 1998 by and between
POSITRON CORPORATION ("Borrower"), a Texas corporation with its principal place
of business at 1304 Langham Creek Drive, Houston, Texas 77084 and IMATRON INC.
("Lender"), a New Jersey corporation with its principal place of business at 389
Oyster Point Blvd., So. San Francisco, CA 94080.
R E C I T A L S:
WHEREAS, Borrower has requested Lender to make certain loans to Borrower
for working capital and certain other needs as provided herein and Lender is
agreeable to make such loans upon the terms and conditions hereof;
NOW THEREFORE, in consideration of these premises and the mutual
covenants and agreements herein contained and other valuable consideration,
the receipt and adequacy of which the parties hereto acknowledge, the
parties have agreed as follows: 1. DEFINITIONS.
As used in this Loan Agreement, the following terms shall have the
following meanings unless the context requires otherwise:
Borrower's Obligations means all present and future obligations of Borrower
to Lender hereunder, under the Note, or any other document executed in
connection herewith.
Default means any event set forth in Section 6.1 hereof.
Lender's Obligations means all present and future obligations of Lender to
Borrower hereunder, or any other document executed in connection herewith.
Loan Agreement means this Loan Agreement and all attachments, exhibits,
schedules hereto, all as may be amended from time to time.
Loan Rate means the Prime Rate listed in the Western edition of the Wall
Street Journal or, if not so listed, the reference rate in use by Bank of
America NS & TA on the final business day of each month, plus one-half percent
(1/2 %), as applied to the payment for the next month.
Payment Dates means the first day of each calendar month.
2. LOANS.
2.1. Lender agrees, on terms and conditions of this Loan Agreement, to make
loans (hereinafter called individually a "Loan" and, collectively "The Loans"),
to Borrower in an aggregate principal amount at any one time outstanding up to
but not exceeding Five Hundred Thousand Dollars ($500,000). Within such limit,
and subject to the various conditions set forth herein, Borrower may borrow,
repay, re-borrow at any time or from time to time from the date hereof up to and
including the earlier of March 1, 2000 and the termination of the commitment of
Lender, as provided at Section 6.2 below. The obligation of Lender to make Loans
up to but not exceeding such aggregate amount at any one time outstanding herein
is hereinafter called its "Commitment."
2.2. Except for the borrowing contemplated to be made upon execution of
this Agreement, as set forth in Schedule 3.1(g), Borrower shall give Lender at
least three(3) calendar days' written notice (effective upon receipt) specifying
the amount and date of each borrowing under Section 2.1. The foregoing
notwithstanding, and provided all conditions have otherwise been met, the timing
set forth in Schedule 3.1(g) shall be deemed written notice of the amounts and
dates set forth in the Schedule.
2.3. Borrower's obligations to pay the principal of and interest on the
Loans shall be evidenced by its grid promissory note in the form of Exhibit A
hereto (the "Note") payable to the order of Lender. The Note shall reflect the
amount of the Commitment, with actual Loans, repayments and balances noted by
Lender on the grid attached to the Note and made a part thereof. The Note shall
bear interest on the unpaid principal amount thereof until such principal amount
shall be paid in full at a per annum rate equal to the Loan Rate (based on a
year of 365 or actual number of days elapsed). The Loan Rate shall apply to the
average outstanding principal balance on the Note during any month which shall
be the summation of the daily balances during such month divided by the number
of days in the particular month. Unless accelerated in accordance with the
provisions of this Loan Agreement, the interest on the Note for any calendar
month shall be paid within fifteen (15) days of each consecutive Payment Date
immediately following such calendar month until full payment of the Loan (and
related interest), with the first Payment Date being the first day of the month
immediately following execution of this Agreement. All principal and interest on
the Note shall be due and payable in full on March 1, 2000. If any Payment Date
(or other date for payment hereunder) falls on a day which is not a business
day, such Payment Date (or other date of payment) shall be the next succeeding
business day.
2.4. Mandatory Repayment. The foregoing notwithstanding, beginning on and
after any date, from the date of this Loan Agreement to the termination of
Lender's Commitment, that Borrower receives third party financing, whether
equity or debt ("Financing"), in an amount in excess of One Million U.S. Dollars
($1,000,000) in the aggregate ("Financing Threshold"), Borrower shall repay,
fifty percent (50%) of each dollar received above the Financing Threshold from
such Financing, toward any and all amounts of principal and interest outstanding
under this Loan Agreement until such amounts have been fully repaid and further,
Lender's Commitment shall terminate and not be renewed. Solely by way of
example, in the event Borrower shall receive Financing in an aggregate amount of
$750,000 at any time during the first nine (9) months of this Agreement, and six
(6) months thereafter Borrower receives additional Financing in an amount
$500,000, Borrower shall repay to Lender, promptly following receipt of the
$500,000, the sum of $125,000 representing fifty percent (50%) of all Financing
received above the Financing Threshold, which amount shall be applied to all
interest accrued on the Loans and unpaid to that date plus, to the extent that
accrued unpaid interest constitutes less than $125,000, that amount of principal
outstanding representing the difference between the amount of accrued unpaid
interest and $125,000. Thereafter, fifty percent (50%) of every dollar of
additional Financing provided to Borrower shall be paid over to Lender, and no
more Loans shall be authorized, until the full amount of any and all unpaid
principal and interest on the Loans shall have been paid.
2.5. All payments to Lender shall be paid by Borrower to Lender at Lender's
address as follows: Imatron Inc., 389 Oyster Point Blvd., So. San Francisco, CA
94080, Attn. President. All amounts paid shall be applied first, to the payment
of all interest accrued and payable with respect to the Note; and second, to the
payment of outstanding principal of the Loan; and third, following Default, to
the payment of all expenses and charges, including reasonable attorneys' fees,
included by Lender for the protection of its rights or the pursuance of its
remedies.
2.6. The Loans or any part thereof may be prepaid at any time without
penalty.
2.7. The interest and other charges charged with respect to the Loans shall
not exceed the highest rate permissible under any law which a court of competent
jurisdiction or an arbitrator or panel of arbitrators shall, in a final
determination, deem applicable to the Loans. As of the date of execution of this
Loan Agreement, the parties hereto, in good faith, agree that the total interest
and other charges payable by Borrower to Lender under the terms of this Loan
Agreement do not exceed the maximum legal interest rate applicable to the Loans.
If it is determined that Lender has received interest and other consideration
with respect to the Loans in excess of the highest rate applicable to the Loans,
Lender shall promptly refund not more than such excess amount to Borrower and
the provisions hereof shall be deemed amended to provide for such permissible
rate.
3. CONDITIONS OF LENDING.
The obligations of Lender to make a Loan is subject to the fulfillment of
the following conditions:
3.1. The following documents shall have been duly authorized, executed and
delivered by the Borrower to the Lender, and shall be in form and substance
satisfactory to the Lender and its counsel and shall be in full force and effect
on the date of the Loan.
Prior to the first Loan:
(a) an executed Loan Agreement, and all executed documents,
certificates and instruments contemplated by this Loan
Agreement, including but not limited to the Security
Agreement;
(b) a certified copy of the resolution of the Board of Directors
of Borrower, certified by the Secretary or a responsible
officer thereof, duly authorizing execution, delivery and
performance of this Loan Agreement and the Note contemplated
hereby;
(c) a certificate of recent date from the Secretary of State of
the state of incorporation of Borrower as to its good
standing;
(d) an incumbency certificate of Borrower dated as of the date of
funding, as to (i) the person or persons authorized to execute
and deliver this Loan Agreement, the Note, the Security
Agreement, and any other documents to be executed on behalf of
them in connection with the transactions contemplated hereby
and (ii) the signature of each person or persons;
(e) the executed Note;
(f) documentary evidence satisfactory to Lender that any and all
liens or other security interests on any of Borrower's
tangible or intangible property, including but not limited to
accounts, computer hardware and software, copyrights,
equipment, inventory, licenses, patents, trade secrets,
trademarks, general intangibles, chattel paper or other
property, and all proceeds thereof, shall have been
released or otherwise subordinated to Lender's security
interests contemplated herein, except as otherwise provided
by that certain agreement by and among ProFutures Bridge
Capital Fund, L.P., a Delaware limited partnership
("ProFutures"), Lender and Borrower, dated as of April 28,
1998 and attached hereto as Exhibit D, and except as provided
by that certain agreement by and among Uro-Tech, Ltd.,
Lender and Borrower, dated as of April 28, 1998 and attached
hereto as Exhibit E; and
(g) an expense plan and budget, including an acceptable cash
control system for managing expenditures within the plan and
budget, ("Expense Plan"), attached hereto as Schedule 3.1(g) ;
and
(h) documentary evidence satisfactory to Lender that any Letter of
Intent or contract arrangements of whatever nature between
Borrower and CTI PET Systems, Inc. have expired or otherwise
been terminated, and that there are no obligations of whatever
nature in effect between Borrower and CTI PET Systems, Inc.
For each Loan (including the first):
(i) an officer's certificate in the form of Exhibit B which shall
include the written request from Borrower setting forth the
requested amount of the Loan and the proposed date of
borrowing;
(j) for each Loan after the first Loan, documentary evidence
satisfactory to Lender, including but not limited to Exhibit
B, that Borrower is adhering strictly to the Expense Plan; and
(k) such other documents and evidence with respect to Borrower as
Lender may reasonably request.
3.2. On the date of each borrowing pursuant to Section 2.1 above, (i) no
Default or event that with the giving of notice or lapse of time or both would
constitute a Default hereunder has occurred and is continuing or would result
from the performance of this Loan Agreement, (ii) no material adverse change
shall have occurred since the date of this Loan Agreement in the financial
condition or operations of the Borrower, and (iii) there shall be no juridical
proceeding or regulatory action instituted by or against the Borrower, or, to
the best of Borrower's knowledge, any threatened proceeding or action which may
materially adversely affect the business, property, operation, or financial
condition of the Borrower. By acceptance of a Loan, Borrower represents as of
such Loan date, that each of the foregoing items is true. The foregoing
notwithstanding, Lender acknowledges that it has been advised of the status of
Borrower's lease for space located at 1304 Langham Creek Drive, #310, Houston,
Texas 77084, as set forth on Schedule 4.5 herein, and that such status will not
be deemed a breach of this Section 3.2.
4. REPRESENTATIONS AND WARRANTIES.
4.1. Borrower is a corporation duly organized and validly existing
in good standing under the laws of the state
of Texas.
4.2. Borrower has full corporate power to own its properties, to carry on
its business as now being conducted and has full corporate power to execute,
deliver and perform all of its obligations under this Loan Agreement and the
Note.
4.3. The execution, delivery and performance by Borrower of this Loan
Agreement, the Note, the Security Agreement and all related documents
contemplated by this transaction have been duly authorized by all necessary
corporate action of Borrower and do not violate any provision of law, statute,
rule or regulation, applicable to Borrower, or any judgment, franchise, permit,
order, decree, ruling, writ or injunction of any court or administrative body,
applicable to Borrower, or of Borrower's certificate of incorporation, by-laws
or the terms of any of its securities or result in the breach of, or constitute
a Default under, or require any consent under, any indenture, bank loan, credit
agreement or other agreement or instrument to which Borrower is a party or by
which Borrower or any of its property may be bound or affected.
4.4. No filings, recordations, notifications, registrations, notarizations,
authentications or other formalities or property, stamp or similar taxes or
duties and no approvals, licenses, orders, authorizations, consents or
undertakings of any governmental bodies or regulatory, supervisory authorities
are necessary in connection with the execution, delivery and performance by
Borrower of this Loan Agreement or the Note, or for the payment to Lender of all
sums hereunder or under the Note or for the legality, validity, binding effect
or enforceability hereof or thereof.
4.5. Except as disclosed and described in Schedule 4.5 hereto, Borrower has
good and marketable title to, or a valid leasehold interest in, the tangible
personal property or other properties and assets used by it, located on its
premises, or shown on the most recent balance sheet, free and clear of all liens
or other security interests.
4.6. This Loan Agreement and the Note, have been duly executed and
delivered by Borrower and are legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to (i) the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, (ii) the
availability of the remedies of specific performance or injunctive relief as
subject to the discretion of the court before which a proceeding for such
remedies may be brought, and (iii) the exercise by any court before which any
proceeding may be brought of equitable judicial discretion.
4.7. Borrower has delivered to Lender its unaudited balance sheet of the
Borrower and the related statements of income, retained earnings and cash flow
of Borrower (collectively "Financial Statements") for the nine month period
ending September 30, 1997. Such balance sheet and statement fairly present the
financial condition of the Borrower as of such date and the results of the
operations of the Borrower for the period ended on such date, and such statement
has been prepared in accordance with generally accepted accounting principles
consistently applied, and contain any disclosure that would normally be required
by financial statements prepared in accordance with generally accepted
accounting principles. Since the end of the period reflected in such financial
statements there has been no material adverse change in such condition or
operations.
4.8. Except as disclosed and described on Schedule 4.8, Borrower has filed
all applicable tax returns required to be filed by it, and has paid or made
provisions for the payment of all taxes which have become due pursuant to said
returns or pursuant to any assessment received by Borrower except such taxes, if
any, as are being contested in good faith and as to which adequate reserves have
been provided in accordance with generally accepted accounting principles, and
warrants that such returns properly reflect the United States, state and local
income and tax liability of the Borrower for the period covered thereby.
4.9. Except as disclosed and fully described on Schedule 4.9, there is no
action, suit or proceeding pending or, to the knowledge of the Borrower
threatened, against the Borrower or any of its property before any court,
governmental department, administrative agency or instrumentality which, if such
action, suit or proceeding were adversely determined, would materially affect
the financial condition or the results of operations of the Borrower or its
business or the ability of the Borrower to perform its obligations hereunder.
4.10. Except as disclosed and described on Schedule 4.10 hereto, Borrower
is not in default on or has otherwise delayed or postponed payment of any
accounts payable or other liabilities in excess of $25,000 outside the ordinary
course of business.
4.11. Each Loan shall be fully applied by Borrower solely for its working
capital needs or for the purchase of equipment or leasehold improvements,
consistent with Schedule 3.1(g) and the Cash Control System, and for no other
purpose.
4.12. No broker or finder acting on behalf of Borrower brought about the
obtaining, making or closing of this Loan Agreement and Borrower has no
obligation to pay any finder's or brokerage fees in connection with the
transactions contemplated herein.
4.13. As of the date of execution of this Loan Agreement, the aggregate
interest and other charges payable by Borrower to Lender under the terms of this
Loan Agreement do not exceed the maximum legal interest rate applicable to the
Loans.
5. COVENANTS.
Borrower hereby covenants and agrees that until satisfaction of all its
obligations, it shall:
5.1. Preserve and maintain its corporate existence and all of its rights,
privileges and franchises, and continue the conduct of its present business in
an orderly, efficient and regular manner; comply in all material respects with
all applicable laws, rules, regulations and orders of any governmental
authority, non-compliance with which would materially affect the ability of
Borrower to perform its obligations.
5.2. Make payments or commitments for payments only in strict compliance
with the Expense Plan and Cash Control System, or otherwise as authorized by
Lender.
5.3. Furnish Lender promptly with any financial information or statements,
and other current information regarding or relating to Borrower, as reasonably
requested by Lender, other than information relating to Borrower's proprietary
know-how and technology information.
5.4. Timely file any and all tax returns and tax filings required under any
governmental statute or regulation and timely pay and discharge, when due, all
tax obligations, and material obligations to third parties, except those
obligations being contested in good faith, and for which Borrower shall have
maintained, in accordance with generally accepted accounting principles,
adequate reserves for the payment of the same.
5.5. Notify Lender immediately upon receipt of notice of any lien,
attachment, administrative or judicial proceeding, pending or threatened claim,
dispute, litigation or governmental proceedings, material to the financial
condition or operations of Borrower, which for this purpose shall be any amount
in excess of $ 10,000; provide immediate written notice to Lender of any Default
or event which with the lapse of time or giving of notice or both would
constitute a Default.
5.6. Promptly and duly execute and deliver to Lender such further
documents, instruments and assurances and take such further action as Lender may
from time to time reasonably request in order to carry out the intent and
purpose of this Loan Agreement and to establish and protect the rights and
remedies created or intended to be created in favor of Lender hereunder.
5.7. Reimburse Borrower for its costs and reasonable attorneys' fees
incurred in enforcing its rights pursuant to the provisions of this Agreement.
6. DEFAULTS AND REMEDIES.
6.1. Any of the following shall constitute a default by Borrower hereunder
("Default"): (a) failure by Borrower to pay any amounts hereunder or under any
Note when due and such remains unremedied for a period of fifteen (15) days from
the due date; or (b) failure of Borrower to comply with any provisions or
perform any of its obligations arising under this Loan Agreement (other than
those referred to in clause (a) above), or if, but only if, such failure to
comply is remediable, it remains unremedied by Borrower for a period of ten (10)
days from notice to Borrower; or (c) any representations or warranties made or
given by Borrower in connection with this Loan Agreement were false or
misleading when made, in any material way; or (d) subjection of any of the
assets in an amount in excess of $10,000.00 of Borrower to attachment, levy,
execution, forfeiture or cancellation or other administrative or judicial
process which is not or cannot be removed with reasonable diligence within sixty
(60) days from the subjection thereof, or (e) commencement of any insolvency,
bankruptcy or similar proceedings, by or against Borrower, including any
assignment by Borrower for the benefit of creditors, and in the case of any
involuntary proceedings, such is not dismissed within ninety (90) days of
institution; or the inability of Borrower to pay its debts as they become due;
or (f) the liquidation or dissolution of Borrower or the commencement of any
acts relative thereto, or without the prior written consent of Lender, any sale
or other disposition of all or substantially all of the assets of Borrower, or
any merger or consolidation of Borrower, or the cessation of business by
Borrower; or (g) a default by Borrower under any agreement for borrowed money or
under any lease, except with regard to the lease of premises located at 16350
Park Ten Place, Houston, Texas 77084, whereby the holder of the obligation has
accelerated it prior to its stated maturity and such accelerated amount exceeds
$100,000.00, except as otherwise disclosed on Schedule 4.10; or (h) there shall
be a money judgment, in excess of $25,000.00 entered against Borrower which is
not fully covered by insurance or remains unvacated, unbonded, unstayed or
undischarged for more than sixty (60) days.
6.2. Upon any default, Lender, upon written notice to Borrower, may
exercise any one or more of the following remedies (which remedies shall be
cumulative to the extent permitted by law): (a) terminate any further obligation
of Lender hereunder (including any obligation to make further loans); (b)
declare the remaining unpaid principal balances of the Note, plus all accrued
but unpaid interest thereon, plus all other amounts due from Borrower hereunder,
immediately due and payable in full without notice or demand, whereupon such
shall become due and payable; (c) exercise any other right or remedy which may
be available to it under applicable law; or (d) require the Borrower to purchase
from Lender, and Borrower shall have the obligation to purchase from Lender
("Put") any, or all, or less than all, of any shares of common stock issued by
Borrower and owned by Lender at the price of $ 0.01 per share. Upon a default
any proceeds received from Borrower shall be applied by Lender to the
obligations, in the order of application as Lender shall elect.
7. NOTICES; CHANGES.
Notices, requests or other communications required hereunder to be sent to
either party shall be in writing and shall be by: (a) United States first class
mail, postage prepaid, and addressed to the other party at the address set forth
above (or to such other address as such party shall have designated by proper
notice), effective five days after deposit; (b) by personal or overnight
delivery, effective upon receipt.
8. GOVERNING LAW.
This Loan Agreement shall be governed and construed in accordance with the
laws of the State of California without giving effect to the principles of
conflict of laws thereof.
9. DISPUTE RESOLUTION.
9.1. Any controversy or claim between or among the parties arising out of
or relating to this Loan Agreement or any related agreements or instruments
("Subject Documents"), including any claim based on or arising from an alleged
tort, shall be submitted to and determined by arbitration before one (1)
arbitrator who shall be an attorney admitted to practice law in the state of
California, in accordance with Title 9 of the U.S. Code and the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") then in
effect, and shall be held in the county of San Francisco, CA. All statutes of
limitations which would otherwise be applicable shall apply to any arbitration
proceeding under this subparagraph 9.1. Judgment upon the award rendered may be
entered in any court having jurisdiction. This subparagraph 9.1 shall apply only
if, at the time of the proposed submission to AAA, none of the obligations to
Lender described in or covered by any of the Subject Documents are secured by
real property collateral or, if so secured, all parties consent to such
submission.
9.2. If the controversy or claim is not submitted to arbitration as
provided and limited in Section 9.1, but becomes the subject of a judicial
action, any party may elect to have all decisions of fact and law determined by
a referee in accordance with applicable state law. If such an election is made,
the parties shall designate to the court a referee or referees selected under
the auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The referee, or presiding referee of the panel, shall
be an active attorney or retired judge. Judgment upon the award rendered shall
be entered in the court in which such proceeding was commenced.
9.3. Except as provided herein, no provision of, or the exercise of any
rights under, Section 9.1, shall limit the right of any party to exercise self
help remedies such as setoff, or to obtain provisional or ancillary remedies
such as injunctive relief or the appointment of a receiver from a court having
jurisdiction before, during or after the pendency of any arbitration. The
institution and maintenance of an action for judicial relief or pursuit of
provisional or ancillary remedies or exercise of self help remedies shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitrators.
9.4. The parties understand and agree the arbitration will be their
exclusive form of resolving disputes between them regarding the issues covered
by this Agreement. BOTH PARTIES EXPRESSLY WAIVE THEIR ENTITLEMENT, IF ANY, TO
HAVE CONTROVERSIES BETWEEN THEM DECIDED BY A JURY OR COURT OF LAW.
10. MISCELLANEOUS.
This Loan Agreement or any part hereof, may not be assigned by Borrower
without the written consent of Lender and shall be binding upon and inure to the
benefit of the parties hereto, their legal representatives, permitted successors
and assigns. This Loan Agreement and/or the note or any part thereof may be
assigned by Lender without the consent of Borrower. No amendment hereunder shall
be effective unless in writing signed by the parties hereto and no waiver
hereunder shall be effective unless in writing, signed by the party to be
charged. No failure to exercise, no delay in exercising, and no single or
partial exercise on the part of Lender of any right, remedy, or power hereunder,
shall operate as a waiver thereof or preclude Lender from exercising any other
right, remedy or power hereunder. Any provision of this Loan Agreement or the
Note which is unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof or of the note. The
representations, warranties, obligations and indemnities of Borrower herein
shall survive the termination of this Loan Agreement to the extent required for
their full observance and performance. The obligation of each comaker (if any)
of this Loan Agreement or the Note shall be primary, joint and several and each
such comaker hereby irrevocably consents to any extension of time of payments
and/or the execution of any refinancing or restructuring agreements relative to
this Loan Agreement or the Note. In the event Borrower fails to meet any
obligation of it hereunder, Lender may at its option satisfy such obligation and
Borrower shall reimburse Lender on demand therefor. The captions in this Loan
Agreement are for convenience only and shall not define or limit any of the
terms hereof. This Loan Agreement may be executed in counterparts and all said
counterparts taken together shall be deemed to constitute one and the same
instrument.
THIS LOAN IS SECURED BY THE TERMS OF THAT CERTAIN SECURITY AGREEMENT OF
EVEN DATE BY AND BETWEEN BORROWER AND LENDER HEREUNDER, ATTACHED HERETO AS
EXHIBIT C.
IN WITNESS WHEREOF, the parties hereto have duly executed this Loan
Agreement as of the date first above written. Borrower acknowledges that this
Loan Agreement shall not be effective until accepted by Lender at its address
above.
LENDER: BORROWER:
IMATRON INC. POSITRON CORPORATION
By: By:
----------------------------- --------------------------------
Its: Its:
----------------------------- ---------------------------------
Attest: Attest:
By: By:
----------------------------- --------------------------------
Its: Its:
---------------------------- -------------------------------
<PAGE>
SCHEDULE 3.1(g)
Expense Plan
<TABLE>
<S> <C> <C> <C>
- -------------------------- --------------------------- ------------------------- ----------------------
Payroll $65,000 $89,000(2) $89,000(2)
- ------------------------------- --------------------------- ------------------------- ----------------------
AFCO (D&O/GL Ins.) 15,972.72(1) 16,000 16,000
- ------------------------------- --------------------------- ------------------------- ----------------------
Medical/Dental/Life 10,570.30(1) 11,500 11,500
- ------------------------------- --------------------------- ------------------------- ----------------------
Rent 4,800 4,800 4,800
- ------------------------------- --------------------------- ------------------------- ----------------------
Telephone 4,500 3,500 3,500
- ------------------------------- --------------------------- ------------------------- ----------------------
Shipping/Postage 2,500 3,000 2,000
- ------------------------------- --------------------------- ------------------------- ----------------------
Churchill (AP) 5,000 5,000
- ------------------------------- --------------------------- ------------------------- ----------------------
Consultants 7,000 7,000 7,000
- ------------------------------- --------------------------- ------------------------- ----------------------
Expenses/Travel 8,000 8,000 10,000
- ------------------------------- --------------------------- ------------------------- ----------------------
Pagenet 1,050 400 400
- ------------------------------- --------------------------- ------------------------- ----------------------
Supplies 1,000 1,000 1,000
- ------------------------------- --------------------------- ------------------------- ----------------------
Taxes/Licenses/ Professional 1,000 1,000 1,000
Fees
- ------------------------------- --------------------------- ------------------------- ----------------------
Installation (Imatron Japan) 7,500 -- --
- ------------------------------- --------------------------- ------------------------- ----------------------
Legal/Accounting/ Audit 30,000(1) 20,000 25,000
- ------------------------------- --------------------------- ------------------------- ----------------------
A/P 28,000 27,500 31,000
- ------------------------------- --------------------------- ------------------------- ----------------------
Personnel Costs 164,407.34(1)
- ------------------------------- --------------------------- ------------------------- ----------------------
Profutures Payment 50,000(1)
- ------------------------------- --------------------------- ------------------------- ----------------------
Miscellaneous 2,500 2,500 2,500
- ------------------------------- --------------------------- ------------------------- ----------------------
SUBTOTAL $408,800.36 $200,160 $204,660
- ------------------------------- --------------------------- ------------------------- ----------------------
Revenue from Service (average) $107,000 $107,000 $107,000
- ------------------------------- --------------------------- ------------------------- ----------------------
TOTAL $301,800.36 $93,200 $97,700
- ------------------------------- --------------------------- ------------------------- ----------------------
(1) Simultaneous with execution of loan agreement. These amounts will be
loaned to Positron to be used by Positron as stated in chart.
(2) Payroll Add On (2 Senior): $22,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 4.5
TITLE TO ASSETS
LOAN AGREEMENT
To the best of our present knowledge, the following two liens are presently in
effect, as acknowledged and discussed:
- ProFutures Bridge Capital Fund, L.P.
- Uro-Tech, Ltd.
<PAGE>
SCHEDULE 4.8
POSITRON CORPORATION
Schedule 4.8 - Tax Returns and Audits
Except as disclosed and described, all federal, state and local tax returns or
appropriate extension requests have been filed; all federal, state and local
taxes have been paid or due provision made; there are no delinquencies in the
payment of such tax or assessment or governmental charge; no notices of
deficiencies proposed or assessed has been received; Seller has not executed any
waiver of any statute of limitations on assessment or collection of any tax; no
tax returns have been audited; there are no tax liabilities; except as follows:
1. Property taxes in the approximate amount of $185,000, of which approximately
$80,000 relates to prior years.
2. State sales taxes in the State of Texas in the approximate amount of $4,000.
3. State sales taxes to the State of Florida in the approximate amount of
$12,000.
4. State sales taxes to the State of New York in the approximate amount of
$56,000.
<PAGE>
SCHEDULE 4.9
POSITRON CORPORATION
Schedule 4.9 - Litigation or Governmental Proceedings
Except as disclosed and described, there are no legal actions, suits,
arbitration or other legal, administrative or governmental proceedings or
investigations pending or threatened; Seller is aware of no facts likely to
result in or form a basis for such action; Seller is not in default with respect
to any judgment, order or decree or any court or governmental agency or
instrumentality; Seller is not threatened with any action or proceeding except
as follows:
1. We have been informed that Xin Xin intends to proceed with arbitration
relative to its contract with Positron Corporation for the purchase of two
POSICAM systems.
2. Numerous letters have been received from vendors threatening legal action
against the Company for its failure to pay outstanding trade payables.
3. The loan from ProFutures Bridge Capital is in default due to the failure of
the Company to pay the full $50,000 per month due on the loan. The Company's
payments have averaged approximately $45,000 per month. ProFutures has
threatened legal action.
4. All former and existing employees who are owed unpaid salaries, wages and
benefits have a claim against the Company. The amounts due could be collected
through legal action or by the Texas Workforce Commission.
5. Hadassah Medical Organization has threatened legal action if the Company does
not immediately replace its existing POSICAM system with a new system. To date
no formal legal action has been filed.
6. University Madrid PET Center has also threatened legal action if its existing
POSICAM is not upgraded to a newer machine that meets its expectations.
7. Nizar Mullani, a former director of the Company, claims that he is owed
consulting fees and royalties of approximately $150,000. The Company disputes
the amount of royalty actually owed to Mullani. Mullani has threatened legal
action. To date no formal action has been taken by Mr. Mullani.
8. Harris County, Texas has been awarded a default judgment against the Company
for its failure to pay property taxes in the approximate amount of $80,000.
9. Bowne of Dallas, Inc. received a default judgment against the Company in the
amount of $31,277.05.
10. Boxer Property (Landlord) has issued a notice for Positron Corporation to
vacate remaining space. Agreement has been reached for Positron to consolidate
its space and relocate to another facility as soon as possible.
<PAGE>
SCHEDULE 4.10
Defaults or Delays in Payments in excess of $25,000
Schedule intentionally omitted.
<PAGE>
EXHIBIT A
TO LOAN AGREEMENT
PROMISSORY NOTE
U.S.$500,000.00 May 1, 1998
San Francisco, California
The undersigned POSITRON CORPORATION, a corporation organized and validly
existing under the laws of the State of Texas, for value received, hereby
unconditionally promises to pay to the order of IMATRON INC. (the "Payee") at
389 Oyster Point Blvd., So. San Francisco, CA 94080, in lawful money of the
United States of America and in immediately available funds, the principal
amount of FIVE HUNDRED THOUSAND U.S. DOLLARS, or, if less, the aggregate unpaid
principal amount of all Loans (as more fully shown on the grid attached hereto
and made a part hereof), with interest on the principal amount hereof remaining
from time to time unpaid at such interest rates and payable at such times as
provided in the Loan Agreement. Notwithstanding the foregoing, Borrower hereby
authorizes Lender to record and adjust, on the grid attached hereto, the
principal amount of Loans, principal payments and balances by Borrower under the
Loan Agreement.
This Note evidences Loans by the Payee to the undersigned pursuant to the
Loan Agreement between the undersigned and the Payee dated as of April ____,
1998 (the "Loan Agreement") as from time to time may be amended, restated,
replaced, supplemented, substituted for or renewed, and the holder of this Note
is entitled to the benefits thereof. Each term defined in the Loan Agreement and
not otherwise defined herein shall have the same definition when used herein.
The principal hereof (together with any accrued but unpaid interest) shall
become forthwith due and payable as provided in the Loan Agreement. Payments
hereunder not made when due shall bear interest as provided in the Loan
Agreement. Rights of Borrower, if any, to prepay the Note are set forth in the
Loan Agreement.
All payments made pursuant to the terms of this Note shall be made free and
clear of, and without deduction for, withholding, setoff or counterclaim of any
kind.
Neither the failure on the part of the holder of this Note in exercising
any right or remedy nor any single or partial exercise or the exercise of any
other right or remedy shall operate as any waiver. No amendment hereunder shall
be effective unless in writing signed by the undersigned and holder of this Note
and no waiver hereunder shall be effective unless in writing, signed by the
party to be charged. The undersigned hereby waives demand for payment,
presentment, protest and notice of any kind in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby consents
to any extensions of time, renewals, releases of any party to this Note, waivers
or modifications that may be granted or consented to by the holder of this Note
in respect of the time of payment or any other matter. Anything contained in
this Note to the contrary notwithstanding, in the event that any payment of
interest hereunder shall exceed the legal limit, such amount in excess of such
limit shall be deemed a payment of principal hereunder.
The terms and provisions hereof shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the undersigned and
Payee. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT
OF LAWS THEREOF.
IN WITNESS WHEREOF, the undersigned has caused this Promissory Note to be
executed by its authorized representative, who certifies that he has all
necessary authority on behalf of the undersigned to execute this Promissory Note
and bind the undersigned to the terms hereof.
POSITRON CORPORATION
By:
--------------------------------
Its:
-------------------------------
ATTEST: By:
--------------------------------
Its:
-------------------------------
<PAGE>
GRID TO PROMISSORY NOTE DATED APRIL _____, 1998
ISSUED BY POSITRON CORPORATION TO IMATRON INC.
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------- -------------------- --------------------- --------------------- ---------------------
Amount of Unpaid Notation
Date Amount of Principal Principal Made
Advance Paid Balance By
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
- ---------------------- -------------------- --------------------- --------------------- ---------------------
</TABLE>
<PAGE>
EXHIBIT B
TO LOAN AGREEMENT
OFFICER & BORROWING CERTIFICATE
Reference is made to that certain Loan Agreement between Positron
Corporation ("Borrower") and Imatron Inc. ("Lender"), dated May 1, 1998 ("Loan
Agreement"). In connection therewith, Borrower pursuant to Section 3.1(i) of the
Loan Agreement does hereby request a loan in the amount of U.S. $ , such amount
to be paid by wire transfer in immediately available funds into Borrower's
account number at .
In connection with such request, and in my capacity as ____________________
of Borrower, I hereby represent and warrant to you the following:
(a) I am the _________________________ of Borrower and am authorized to
borrow on behalf of Borrower the above mentioned funds.
(b) The amount borrowed hereunder is in accordance with and will not exceed,
any limit in the Loan Agreement.
(c) No default or event which with the giving of notice or lapse of time or
both would constitute a Default under the Loan Agreement has occurred and is
continuing or would result from the requested borrowing.
(d) No material adverse change, other than as relates to the lease on
property located at 1304 Langham Creek Drive, #310, Houston Texas 77084 as
disclosed on Schedule 5.5 of the Loan Agreement has occurred since the date of
the Loan Agreement in the financial condition or operations of the Borrower.
(e) There is no judicial proceeding or regulatory action instituted by or
against the Borrower, or, to the best of my knowledge, any threatened proceeding
or action which may materially adversely affect (as defined in the Loan
Agreement) the business, property, operation, or financial condition of the
Borrower.
---------------------------------------
NAME
---------------------------------------
TITLE
<PAGE>
EXHIBIT C
TO LOAN AGREEMENT
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered as of the 1st day of May, 1998
by and between POSITRON CORPORATION ("Borrower"), a Texas corporation with its
principal place of business at 1304 Langham Creek Drive, Houston, Texas 77084
and IMATRON INC. ("Secured Party") a New Jersey corporation with its principal
place of business at 389 Oyster Point Blvd., So. San Francisco, CA 94080.
1. Definitions.
As used in this Security Agreement, the following terms shall have the
following meanings unless the context requires otherwise:
Loan Agreement means that certain Loan Agreement between Borrower and
Lender of even date herewith and pursuant to which this Agreement is given.
Collateral means all of Borrower's right, title and interest in and to the
following, whether now owned or existing or hereafter arising or acquired and
wheresoever located: accounts, accounts receivable and other rights of Borrower
to payment for goods sold or leased or for services rendered (except those
evidenced by instruments or chattel paper); computer hardware and software,
including but not limited to computer systems and units, drives, cables,
generators, accessories and all peripheral devices, software programs whether
now owned or licensed or leased or hereafter acquired by Borrower, all firmware
associated therewith, all documentation and all rights with respect to the
foregoing; copyrights, registered or unregistered, now or hereafter in force
throughout the world, and all applications, extensions and renewals; equipment
of every type whether owned or hereafter acquired and wherever located;
inventory and goods now owned or hereafter acquired held for sale or lease or to
be furnished under any contract or which are raw materials, work in process or
materials used or consumed in Borrower's business; licenses including all rights
under or interest in any trademark or service mark license agreements with any
other party, whether Borrower is licensee or licensor, together with any
goodwill connection with such agreements; patents including all letters patent
and applications, all patent licenses and all reissues, continuations,
extensions, renewals and the like, and all proceeds of and rights associated
with the foregoing; trade secrets, whether common law or statutory and all other
confidential or proprietary information and know-how; trademarks and service
marks now owned or existing or hereafter acquired or arising and all renewals,
income, royalties and rights associated therewith; general intangibles including
all rights, interests, choses in action, claims and other intangible property of
Borrower of every kind and nature now owned or hereafter acquired and however
and whenever arising; chattel paper, instruments and documents and all payments
thereunder; and all other property now owned or hereafter acquired.
Borrower means the owner of the Collateral.
Lien means any security interest, mortgage, deed of trust, pledge, lien,
attachment, claim, charge, encumbrance, agreement retaining title, or lessor's
interest covering the Collateral.
Obligations means Borrower's existing and future obligations under the Loan
Agreement and this Security Agreement.
Service Contract means each and every agreement, whether oral or in
writing, pursuant to which Borrower provides service under warranty to its
customers with respect to products manufactured and sold by Borrower to any of
its customers.
2. Grant of Security Interest. To secure prompt and complete payment,
observance and performance of all obligations and liabilities of Borrower under
the Loan Agreement, the Note and this Agreement:
a. Borrower hereby assigns and pledges to Secured Party, and hereby
grants to Lender, a lien and security interest in all of Borrower's right, title
and interest in and to the Collateral, subject only to the security interest of
ProFutures Bridge Capital Fund, L.P. ("ProFutures") as described in the certain
agreement(s) by and among Profutures, Secured Party and Borrower dated April
___, 1998 ("Lien Agreement"), attached to the Loan Agreement as Exhibit D, and
further subject to the security interest of Uro-Tech Ltd., and subordinated to
Secured Party pursuant to the Subordination Agreement by and between Secured
Party and Uro-Tech Ltd. dated as of April ___, 1998 ("Uro-Tech Lien Agreement")
attached to the Loan Agreement as Exhibit E.
b. Anything herein to the contrary notwithstanding, (i) Borrower shall
remain solely liable under the contracts and agreements included in the
collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement and any other
security documents executed in connection with this Agreement had not been
executed; (ii) the exercise by Lender of any of its rights hereunder shall not
release Borrower from any of its duties or obligations under the contracts and
agreements included in the Collateral; and, unless specifically accepted by
Lender in writing, (iii) Lender shall not have any responsibility, obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement or any other Security Document, nor shall Lender be
required or obligated, in any manner, to perform or fulfill any of Borrower's
obligations or duties thereunder, make any payment or make any inquiry as to the
nature or sufficiency of any payment received by Borrower or the sufficiency of
any performance by any party under any such contract or agreement, or present or
file any claim or take any action to collect or enforce any claim for payment
assigned thereunder.
3. Promises of Borrower. Borrower promises:
a. To perform the Obligations to Secured Party when they are due.
b. To preserve all rights, privileges, and franchises held by
Borrower's business.
c. To keep the Collateral in good repair.
d. To keep the Service Contracts listed on Schedule 5 hereto in full
force and effect and otherwise not to breach or otherwise not to default on any
of its obligations pursuant to the Service Contracts.
e. To give Secured Party notice of any litigation that may have a
material adverse affect on the Collateral or the Service Contracts.
f. Not to change its name or place of business, or to use a fictitious
business name, without first notifying Secured Party in writing.
g. Not to permit Liens on the Collateral, nor to assign its rights
under the Service Contracts to any third party, except as contemplated by the
ProFutures Lien Agreement and the Uro-Tech Lien Agreement.
h. To permit Secured Party, its representatives, and its agents to
inspect the Collateral, the Service Contracts and records relating to either the
Collateral or the Service Contracts at any reasonable time during regular
business hours, and to make copies of records pertaining to either the
Collateral and/or the Service Contracts, at reasonable times at Secured Party's
request.
i. To notify Secured Party promptly in writing of any default,
potential default, or any development that might have a material adverse affect
on the Collateral or the Service Contracts.
j. To execute and deliver to Secured Party all financing statements and
other documents that Secured Party requests, in order to maintain a first
perfected security interest in the Collateral, and to pay the costs of, or
incidental to, all recordings or filings of all financing statements and other
security documents.
k. To furnish Secured Party the reports, statements and schedules
further describing the Collateral and Service Contracts and such other reports
in connection with the Collateral and Service Contracts as Secured Party may
reasonably request, all in reasonable detail.
l. To maintain all such casualty and liability insurance covering the
Collateral as Secured Party may reasonably request and to cause Secured Party to
be named as a loss payee.
4. Appointment of Secured Party as Attorney-in-Fact. Borrower hereby
appoints Secured Party or any other person whom Secured Party may designate, as
Borrower's attorney-in-fact (exercisable only during the continuance of a
Default) with the following powers:
a. To perform any of Borrower's obligations under this Agreement in
Borrower's name or otherwise.
b. To prepare and file financing statements, continuation statements,
statements of assignment, termination statements, and the like, as necessary to
perfect, protect, preserve, or release Secured Party's interest in the
Collateral.
c. To endorse Borrower's name on instruments, documents, or other
forms of payment or security that come into Secured Party's possession.
d. To give notice of Borrower's right to payment, to enforce that
right, and to make extension agreements with respect to it.
e. To release persons liable on rights to payment, to compromise
disputes with those persons, and to surrender security, all as Secured Party
determines in its sole discretion when acting in good faith based on the
information known to it when it acts.
f. To take cash in payment of Obligations.
g. To verify information concerning rights to payment by inquiry in
its own name or in a fictitious name.
5. Borrower's Covenants, Warranties and Representations. Borrower
covenants, warrants, and represents as follows:
a. Borrower is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its organization, and has
all necessary authority to conduct its business wherever it is conducted.
b. Borrower has been authorized to execute and deliver this Agreement.
This Agreement is a valid and binding obligation of Borrower. Borrower will file
all appropriate financing statements pursuant to the applicable Uniform
Commercial Code and filings with the U.S. Patent and Trademark Office in order
to create perfected security interests against the Collateral in which Borrower
now has rights, consistent with the Pro-Futures Lien Agreement and the Uro-Tech
Lien Agreement.
c. Neither the execution and delivery of this Agreement, nor the
taking of any action in compliance with it, will (1) violate or breach any law,
regulation, rule, order, or judicial action binding on Borrower, any agreement
to which Borrower is party, Borrower's articles or incorporation or bylaws; or
(2) result in the creation of a lien against the Collateral except that created
by this Agreement.
d. Borrower owns and has possession of the Collateral, and the
Collateral is not subject to any Liens or adverse claims, except as disclosed
and set forth in Schedule 4.5 to the Loan Agreement.
e. All of the properties and assets owned by Borrower are owned free
and clear of any lien of any nature whatsoever, except as permitted by this
Agreement and/or by the arrangements contemplated by the Lien Agreement
("Permitted Liens") which for this purpose means: liens for taxes or other
governmental charges or levies, or claims of landlords, carriers, mechanics and
the like arising by operation of law for which sums are not yet payable or are
fully stayed and being contested; liens created by this Agreement, other Loan
documents and/or the Lien Agreements; deposits or pledges to secure public or
statutory obligations; inchoate liens arising under the Employee Retirement
Income Security Act of 1974 as amended to secure benefit plans from time to time
in effect; and rights reserve to or vested in an governmental or public
authority to control or regulate any property of Borrower or use such property
in a manner which does not materially impair the use of such property for the
purposes for which it is held by Borrower. The liens created and granted by the
Security Agreement and related security documents constitute valid perfected
liens on the Collateral, subject to no prior or equal lien except Permitted
Liens.
f. The Service Contracts listed on Schedule 5 constitute all Service
Contracts which currently exist by and between Borrower and its customers; all
such Service Contracts are legal, valid, binding, enforceable and in full force
and effect and are materially in the form of Service Contract previously
supplied to Lender as a sample of such Service Contracts; no party is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification, or
acceleration, and no such action is threatened.
6. Continuing Security Interest. This Agreement will terminate when (a)
Borrower completes performance of all obligations to Secured Party, including
without limitation the repayment of all indebtedness by Borrower to Secured
Party; and (b) Borrower has notified Secured Party in writing of the termination
and Secured Party acknowledges that Borrower has fulfilled its payment
obligations pursuant to the Loan Agreement and this Agreement. Borrower agrees
that until all liabilities hereunder have been fully satisfied, Secured Party's
security interest in and liens on and against the Collateral, and all proceeds
and products thereof, shall continue in full force and effect, and Borrower
shall perform any and all steps reasonably requested by Secured Party to
perfect, maintain and protect Secured Party's security interests in and liens on
and against the Collateral granted or purported to be granted hereby and by the
other security documents, or to enable Secured Party to exercise its rights and
remedies hereunder with respect to the Collateral.
7. Default. Borrower will be in default under this Agreement if:
a. A Default occurs under the Loan Agreement or Borrower fails to
perform any Obligation.
b. Borrower commits any material breach of this Agreement, or any
present or future rider or supplement to this Agreement.
c. Any warranty, representation, or statement, made by or on behalf of
Borrower in or with respect to the Loan Agreement or this Agreement, is false
when made in a material way.
d. There is a seizure or attachment of, or a levy on, the Collateral
or any material part of it.
e. There is a termination of any Service Contract, other than by
expiration or by the normal operation of its own terms.
f. Borrower ceases operations, is dissolved, terminates its existence,
does or fails to do anything that allows obligations in excess of $25,000 to
become due before their stated maturity.
8. Secured Party's Remedies. When an event of default occurs:
a. Secured Party may:
(i) Declare the Obligations immediately due and payable -without
demand, presentment, protest, or notice to Borrower, all of which Borrower
expressly waives.
(ii) Exercise all rights and remedies available to it pursuant to
this Agreement and/or all rights and remedies available to a secured creditor
after default, including but not limited to the rights and remedies of secured
creditors under the California Uniform Commercial Code.
9. No Waiver. No waiver by Secured Party of any breach or default will be a
waiver of any breach or default occurring later. A waiver will be valid only if
it is in writing and signed by the Secured Party.
10. Survival. Borrower's representations and warranties made in this
Agreement will survive its execution, delivery and termination.
11. Governing Law. This Security Agreement is hereby delivered in, and
shall be governed, interpreted and enforced in accordance with the laws, of the
State of California.
12. Dispute Resolution.
a. Any controversy or claim between or among the parties arising out
of or relating to this Security Agreement or any related agreements or
instruments ("Subject Documents"), including any claim based on or arising from
an alleged tort, shall be submitted to and determined by arbitration before one
(1) arbitrator who shall be an attorney admitted to practice law in the state of
California in accordance with Title 9 of the U.S. Code and the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") then in
effect, and shall be held in the county of San Francisco, CA. All statutes of
limitations which would otherwise be applicable shall apply to any arbitration
proceeding under this subparagraph 12(a). Judgment upon the award rendered may
be entered in any court having jurisdiction. This subparagraph 12(a) shall apply
only if, at the time of the proposed submission to AAA, none of the obligations
to Lender described in or covered by any of the Subject Documents are secured by
real property collateral or, if so secured, all parties consent to such
submission.
b. If the controversy or claim is not submitted to arbitration as
provided and limited in Section 12(a), but becomes the subject of a judicial
action, any party may elect to have all decisions of fact and law determined by
a referee in accordance with applicable state law. If such an election is made,
the parties shall designate to the court a referee or referees selected under
the auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The referee, or presiding referee of the panel, shall
be an active attorney or retired judge. Judgment upon the award rendered shall
be entered in the court in which such proceeding was commenced.
c. Except as provided herein, no provision of, or the exercise of any
rights under, Section 12, shall limit the right of any party to exercise self
help remedies such as setoff, or to obtain provisional or ancillary remedies
such as injunctive relief or the appointment of a receiver from a court having
jurisdiction before, during or after the pendency of any arbitration. The
institution and maintenance of an action for judicial relief or pursuit of
provisional or ancillary remedies or exercise of self help remedies shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitrators.
d. The parties understand and agree the arbitration will be their
exclusive form of resolving disputes between them regarding the issues covered
by this Agreement. BOTH PARTIES EXPRESSLY WAIVE THEIR ENTITLEMENT, IF ANY, TO
HAVE CONTROVERSIES BETWEEN THEM DECIDED BY A JURY OR COURT OF LAW.
13. Notices. Notices under this Agreement shall be given in the manner
provided in the Loan Agreement. Either party may change its address for service
of notice by notice to the other.
14. Counterparts. This Agreement may be executed in counterparts and
all said counterparts taken together shall be deemed to constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties to this Security Agreement have duly
executed it as of the date first above written.
BORROWER:
POSITRON CORPORATION
Tax ID No:
- ------------------------- By:
-------------------------------
Its:
------------------------------
SECURED PARTY:
IMATRON INC.
Tax ID No:
- ------------------------ By:
----------------------------------
Its:
----------------------------------
<PAGE>
EXHIBIT D
MODIFICATION AND CONSENT AGREEMENT BY AND AMONG
POSITRON CORPORATION
AND
PROFUTURES BRIDGE CAPITAL FUND, L.P.
dated as of April 28, 1998
SUBORDINATION AGREEMENT BY AND AMONG
IMATRON INC.,
PROFUTURES BRIDGE CAPITAL FUND, L.P.
AND
POSITRON CORPORATION
dated as of April 28, 1998
<PAGE>
MODIFICATION AND CONSENT AGREEMENT
----------------------------------
This Modification and Consent Agreement (the "Agreement") is entered into
this 28th day of April, 1998 by Positron Corporation, a Texas corporation
("Borrower") and ProFutures Bridge Capital Fund, L.P., a Delaware limited
partnership ("Lender").
FACTS
A. Lender and Borrower entered into a Loan and Security Agreement dated as
of November 14, 1996 and Promissory Note (the "Note") of even date therewith in
the original principal amount of $1,400,000.00 executed by Borrower and payable
to the order of Lender (together with certain riders, addenda and other
instruments, documents or agreements entered into in connection therewith and
any extensions, amendments replacements or modifications to any of the foregoing
being referred to as the "Loan Documents") pursuant to which Lender agreed to
extend the Loans and financial accommodations to the Borrower.
B. The Loans referenced in the Loan Documents matured on June 30, 1997 and
Borrower failed and has continued to fail to pay the outstanding principal and
interest on the Loans.
C. Lender has notified Borrower of its default under the Note and the Loan
Documents.
D. The Borrower has agreed to make a payment on the Note and requested that
the Lender modify the Loan Documents to, among other things, extend the Maturity
Date of the Note.
E. The Lender has agreed to modify the Loan Documents as set forth herein.
F. Any and all initially capitalized terms used herein shall have the
meaning ascribed to them in the Loan Documents unless specifically defined
herein.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and promises contained herein the parties hereto do hereby agree as follows:
1. Borrower and Lender hereby agree that as of April 20, 1998, the
outstanding principal balance due and owing under the Note is $840,706.76 plus
accrued interest to such date of $5,804.33.
2. Borrower does hereby agree that in addition to the principal and
interest due Lender as described in Section 1 above, the Borrower owes (i) an
additional $7,346.35 for collection costs and expenses of Lender through
December 9, 1997 and (ii) an additional but undetermined amount of additional
collection cost, attorney's fees and expenses of Lender incurred in connection
with Borrower's Default and the modification of the Loan Documents after
December 9, 1997 (all such costs and expenses being herein referenced to as the
"Lender Costs").
3. Lender and Borrower hereby modify certain terms of the Note and Loan
Agreement as follows:
(a) New subsections 2(a)(iii) and 2(a)(iv) are hereby added to the Note to
read as follows:
"(iii) From June 30, 1997 to November 30, 1997: 15% per annum;
and
(iv) From December 1, 1997 to the Maturity Date: 18% per
annum."
(b) The Maturity Date as defined in the Note and Loan Agreement is
hereby amended to be the earlier of (i) October 5, 1998 or (ii) the date Imatron
Inc. ("Imatron") notifies the Borrower that Imatron no longer commits to use its
best efforts to raise $8,000,000.00 in third party financing for the Borrower
over the eighteen (18) month period beginning April 1, 1998 or to take all
reasonable efforts to cause the placement and purchase of ten (10) Cardiology
Machines from the Borrower.
(C) Paragraph 4 of the Note is hereby amended to read in its entirety
as follows:
"4. Principal and interest are payable in monthly installments
until the Maturity Date; at that time the entire amount of principal
and accrued interest remaining unpaid will be due and payable. The
monthly installment due is the greater of (a) $50,000.00 for each of
the months of April, May, June and July, 1998 and $100,000.00 for each
of the months of August and September, 1998 or (b) the aggregate
amount received by Payee from BCPA (including the option purchase
price) under the BCPA Contract during the calendar month in which the
monthly installment is due. Maker shall pay to Payee an amount equal
to the payment received by Maker from BCPA under the BCPA Contract
each month prior to the Maturity Date; such payment shall be due not
later than one day after Maker receives the BCPA payment. If the
amount paid by Maker to Payee pursuant to the immediately preceding
sentence prior to the last day of each month is less than $50,000 for
each of the months of April, May, June and July, 1998 and $100,000.00
for each of the months of August and September, 1998, Maker shall pay
not later than the 5th day of the following month the difference
between such amount set forth above for such month and the amount
actually paid by Maker during such month. All amounts due hereunder
shall be paid to Payee at its address in the State of Colorado
specified in Section 1. Lender and Borrower agree that the BCPA
installment dated March 31, 1998 and deposited by Lender on April 6,
1998 shall be treated as a March 1998 payment."
4. The Loan Documents require the Lender consents to certain action of the
Borrower. In this regard, the Lender hereby consents to the following actions:
(a) Borrower is authorized to issue and sell for $100.00 to Imatron a
number of shares of the Borrower's common stock, $0.01 par value, equal to 51%
of the Borrower's outstanding voting securities on a fully diluted basis,
exclusive of out of the money warrants and/or options and/or convertible
securities, calculated as of the closing date. For purposes of this Section
4(a), the terms "closing date" and "out of the money" are as defined in
paragraph 1 of that certain Stock Purchase Agreement dated April 1998 by and
between Borrower and Imatron (the "Purchase Agreement").
(b) Borrower is authorized to borrow $500,000.00 from Imatron (the
"Imatron Loan") upon terms and conditions acceptable to the Board of Directors
of the Borrower.
(c) In connection with the Imatron Loan, the Borrower may grant
Imatron a subordinate lien on all the personal property of the Borrower;
provided that Imatron and Borrower execute a Subordination Agreement in the form
as that attached hereto as Exhibit A.
5. Notwithstanding anything contained in the Subordination Agreement to the
contrary, the Lender agrees that the proceeds received from the third party
subordinated financing, whether equity or debt, arranged by Imatron
("Financing") may be used and allocated as herein described. Financing in an
aggregate amount equal to the first $1,000,000 (the "Financing Threshold") shall
remain as working capital for the Borrower and shall not be required to be used
by the Borrower to repay any principal owing on the Note that is not past due;
provided such sums are not used to pay any principal or interest owing on the
Imatron Loan. The Borrower shall use one-half (1/2) of each dollar ($1.00)
received above the Financing Threshold to repay any and all principal (and,
thereafter, accrued interest) outstanding under the terms of the Note and
Borrower shall use the other one-half (1/2) of such dollar ($1.00) to repay any
and all amounts of principal and interest outstanding under the terms of the
Imatron Loan. The provisions of this paragraph 5 shall not be construed as a
modification of any of the other provisions of the Loan Agreement or the
Subordination Agreement, shall not relieve the Borrower's obligations to make
the monthly payments due under the Note from any source and shall not amend or
alter the Maturity Date or the Borrower's obligation to pay the Note on the
Maturity Date.
6. Borrower acknowledges that certain Events of Default have occurred (the
"Prior Defaults") and are continuing as of the date of this Agreement. In order
to allow the Borrower to consummate the Imatron Loan, the Lender agrees to waive
all Prior Defaults and not to pursue any remedies available under the Loan
Documents as a result of the Prior Defaults. The waiver of the Prior Defaults
and Lender's agreement not to pursue its remedies with respect to Prior Defaults
shall in no way be construed as a waiver or impairment of the Lender's interests
and right under the Loan Documents, including, but not limited to, Lender's
right to exercise any rights and remedies provided in the Loan Documents with
respect to Events of Default occurring at any time or from time to time after
the date of this Agreement, and such rights shall be cumulative and not
exclusive.
7. In order to induce the Lender to waive the Prior Defaults and execute
this Agreement the Borrower agrees to issue and deliver to Borrower simultaneous
with the execution of this Agreement a Stock Purchase Warrant for Common Stock
to purchase 1,150,000 shares of Common Stock, $0.01 par value, of the Borrower
at a purchase price of $0.25 per share (the "Warrant") in the form of Exhibit B
attached hereto and made a part hereof. In addition, simultaneously with the
execution of this Agreement, the Borrower shall deliver to Lender the sum of
$50,000 cash (the "Special Payment"). The Special Payment shall be used first to
pay all Lender Costs and, thereafter, applied to the Note. The portion of the
Special Payment applied to the Note is in addition to and shall not constitute
any portion of any scheduled monthly installments required by the terms of the
Note. Lender acknowledges that the Borrower does not currently have sufficient
shares of Common Stock for issuance upon exercise of the Warrants and the
Additional Warrants described herein.
8. Lender hereby agrees that the Borrower shall have the right and option
as described herein to redeem a portion of the shares of Common Stock that are
subject to the Warrant by payment of all or a portion of the outstanding
principal and interest on the Note as follows:
(i) If the Note is paid in full prior to May 31, 1998, the number of
shares of Common Stock, $0.01 par value, represented by the Warrant will be
reduced by 650,000 shares to 500,000 shares;
(ii) If the Note is paid in full prior to June 30, 1998, the number of
shares of Common Stock, $0.01 par value, represented by the Warrant will be
reduced by 500,000 shares to 650,000 shares;
(iii) If a portion of the Note, in excess of the scheduled monthly
payments, is repaid to Lender prior to May 31, 1998, the number of shares of
Common Stock, $0.01 par value, represented by the Warrant shall be reduced by
one (1) share of Common Stock, $0.01 par value, to a maximum of 650,000 shares
for each one dollar ($1.00) of principal (in excess of scheduled payments) that
the Note is repaid prior to May 31, 1998; and
(iv) If a portion of the Note, in excess of the scheduled monthly
payments, is repaid to Lender prior to June 30, 1998, the number of shares of
Common Stock, $0.01 par value, represented by the Warrant shall be reduced by
three-quarters (3/4) of a share of Common Stock, $0.01 par value, up to a
maximum of 500,000 shares (rounded down to the nearest share) for each one
dollar ($1.00) of principal (in excess of scheduled payments) that the Note is
repaid prior to June 30, 1998.
9. The Borrower and Lender hereby modify Section 6 of the Loan Agreement to
add the following Affirmative Covenants at the end of such Section
"L. BCPA Contract. Borrower shall notify Lender within five
(5) days of the execution of this Agreement of (i) BCPA's alleged
option purchase price for the Cardiology Machine that is subject to the
BCPA Contract as calculated by Borrower and (ii) the amount and terms
of payment credits available in Borrower's opinion to BCPA (in detail)
under the terms of the BCPA Contract. Borrower will use its best
efforts to cause BCPA to exercise its option to purchase the Cardiology
Machines in accordance with the BCPA Contract.
M. Increase in Authorized Shares. On or before the Maturity
Date of the Note, the Borrower shall cause its Articles of
Incorporation to be amended and its Certificate of Amendment duly filed
to increase the number of shares of common stock authorized to be
issued to am amount equal to (i) the outstanding number of shares plus
(ii) the number of shares which could be issued upon the exercise of
all outstanding warrants, options, contracts or commitments of any kind
entitling Person to purchase or otherwise acquire shares of common
stock of Borrower.
N. Notice of Imatron Termination. Borrower shall advise
Lender in writing within twenty-four (24) hours after Borrower's
receipt of notice (oral or written) from Imatron that Imatron no longer
intends to use its best efforts to assist the Borrower in obtaining
financing or no longer intends to use its best efforts to cause the
placement and purchase of ten (10) Cardiology Machines from the
Borrower."
10. Except as otherwise set forth herein this Agreement shall not impair,
limit, restrict or otherwise affect the obligations of Borrower to Lender under
the Loan Documents. Borrower hereby acknowledges, agrees and represents that (a)
Borrower is indebted to Lender pursuant to the terms of the Note as modified
hereby and Borrower agrees that the Loan Documents are valid and binding and are
in full force and effect according to their terms and conditions; (b) the Liens,
security interests and assignments created and evidenced by the Loan Documents
are, respectively, valid and subsisting liens, security interests and
assignments of the respective dignity and priority recited in the Loan
Documents; (c) Borrower has no claims, offsets, defenses or counterclaims
against Lender whether arising under the Loan Documents or otherwise; and (d)
Lender is not in default and no event has occurred which, with the passage of
time, giving of notice, or both, would constitute a default by Lender of
Lender's obligations under the Security Documents. To the extent Borrower now
has any claims, offsets, defenses or counterclaims against Lender or the
repayment of all or a portion of the Note, whether known or unknown, fixed or
contingent, the same are hereby forever irrevocably waived and released in their
entirety.
11. Lender has been advised that Borrower has amended or modified the BCPA
Contract. Lender has not and does not consent to any such amendments or
modifications and nothing in this Agreement shall constitute the Lender's
agreement and consent to be bound by the terms or conditions of any amendments
or modifications. The provisions of this Agreement shall not constitute Lender's
consent or agreement to the amount of the payment credits allegedly given by
Borrower to BCPA under any amendments to the BCPA Contract.
12. Lender and Borrower agree that, except as modified herein, all of the
terms and conditions of the Loan Documents are hereby ratified and reaffirmed.
13. The terms and conditions of this Agreement shall not be binding upon
Lender unless the Borrower satisfies or fulfills each of the following
conditions on or before May 1, 1998:
(a) Borrower's delivery to Lender of a certificate of an officer of
Borrower certifying that attached thereto is a true and correct copy of
resolutions of the Board of Directors of Borrower authorizing the execution of
this Agreement, the Subordination Agreement and the issuance of the Warrant;
(b) Borrower's delivery to Lender of a duly executed Warrant;
(c) Borrower's delivery to Lender of $50,000 cash;
(d) Borrower's delivery to Lender of a duly executed Subordination
Agreement;
(e) Delivery to Lender of the written consent from Uro-Tech, Ltd.
(together with any other required approvals or authorization) to the
transactions contemplated or described in this Agreement and a Subordination
Agreement in a form acceptable to Imatron;
(f) Delivery to Lender of evidence of the consummation of the loan
transaction between Borrower and Imatron and the receipt by Borrower of a
minimum of $200,000 in loan proceeds from Imatron; and
(g) Delivery to Lender of the two (2) agreements representing the
stock purchase warrants (each for 50,000 shares) previously granted to the
Lender (the "Additional Warrants").
POSITRON CORPORATION
By:
---------------------------------------
Gary Wood, Chairman
PROFUTURES BRIDGE CAPITAL FUND, L.P.
By: Bridge Capital Partners, Inc.,
General Partner
By:
<PAGE>
EXHIBIT A
SUBORDINATION AGREEMENT
<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is made and entered into as
of April 28, 1998, by and among IMATRON, INC., a _____________ company
("Subordinated Creditor"), PROFUTURES BRIDGE CAPITAL FUND, L.P., a Delaware
limited partnership ("Senior Creditor"), and POSITRON CORPORATION, a Texas
corporation ("Borrower").
RECITALS:
Senior Creditor and Borrower are parties to a certain Loan and Security
Agreement dated November 14, 1996 (as at any time amended, the "Loan
Agreement"), pursuant to which Senior Creditor made Loans to or for the benefit
of Borrower from time to time, secured by all or substantially all of the assets
of Borrower. Capitalized terms used in these Recitals and elsewhere in this
Agreement, unless otherwise defined, shall have the meanings ascribed to them in
the Loan Agreement as in effect on the date hereof.
Borrower and Subordinated Creditor are parties to the Subordinated Loan
Agreement dated as of April __, 1998 pursuant to which Subordinated Creditor has
agreed to loan $500,000 pursuant to the terms of a certain Promissory Note of
even date therewith (the "Subordinated Note"), on the terms and conditions set
forth in the Subordinated Loan Agreement and Subordinated Note and secured by
subordinate Liens on all or substantially all of the assets of the Borrower.
Senior Creditor and Subordinated Creditor desire to agree as to the
relative rights of payment and other rights under their respective financing
arrangements and to memorialize certain other agreements with respect to the
enforcement of their respective rights and remedies against the Borrower.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and in
consideration of the foregoing premises, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and the mutual
covenants herein, and to induce Senior Creditor to consent to the Subordinate
Debt by and between Subordinated Creditor and Borrower, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Definitions; Rules of Construction.
(a) In addition to such other terms as are elsewhere defined herein,
as used in this Agreement the following terms shall have the following meanings:
"Bankruptcy Code" shall mean title 11 of the United States
Code.
"Enforcement Expenses" shall mean all reasonable costs and
expenses incurred by Senior Creditor in connection with its enforcement of any
rights or remedies under the Senior Creditor Loan Documents, the collection of
any of the Senior Debt or the protection of, or realization upon, any Collateral
after the occurrence and during the continuance of a Senior Debt Default,
including, by way of example, reasonable attorneys' fees, court costs, appraisal
and consulting fees, auctioneer's fees, rent, storage, insurance premiums and
like items and whether or not such amounts are allowed as a claim against
Borrower under the Bankruptcy Code.
"Payment Default" shall mean a Senior Debt Default that
results from Borrower's failure to pay any of the Senior Debt on the due date
thereof (whether due at stated maturity, upon acceleration, on demand or
otherwise).
"Plan" shall mean a plan proposed in a proceeding under the
Bankruptcy Code for the reorganization or rehabilitation of Borrower, a
composition or extension of any of Borrower's Debts or a liquidation in whole or
in part of Borrower's assets.
"Reorganization Securities" shall mean (i) the securities of
Borrower (including senior securities) provided for by a plan of reorganization
of Borrower that has been proposed in a case under the Bankruptcy Code and
confirmed by final order of the bankruptcy court having jurisdiction over such
case, and (ii) shares of common stock or other equity securities, and debt
securities, the payment of which is subordinated, at least to the extent
provided in this Agreement with respect to the Subordinated Debt, to the payment
of all Senior Debt at the time outstanding and to the payment of all debt
securities issued in exchange therefor to Senior Creditor, which shares or other
equity or debt securities have been provided for by a plan of reorganization
which has been adopted or agreed to other than pursuant to a proceeding referred
to in clause (i) of this definition and which has been approved or agreed to by
Senior Creditor.
"Senior Creditor Loan Documents" shall mean and include (i)
the Loan Agreement, the other Loan Documents, and all other instruments or
agreements now or hereafter evidencing or securing the payment of the whole or
any part of the Senior Debt and (ii) all renewals, modifications, extensions,
refinancings, restructurings or replacements thereof.
"Senior Debt" shall mean (i) all liabilities, indebtedness
and obligations of Borrower now or hereafter existing under or with respect to
any of the Senior Creditor Loan Documents, whether such obligations are now or
hereafter existing and however and whenever made or incurred, and whether direct
or indirect, absolute or contingent, due or to become due, or secured or
unsecured, including all principal, interest and premium on, and all other
amounts payable in respect of, any of such obligations, and all indemnity
amounts, reimbursement obligations and other amounts owed by Borrower to Senior
Creditor thereunder, (ii) any and all loans made or other credit extended by
Senior Creditor to Borrower during the pendency of any insolvency proceeding of
Borrower, (iii) all interest at any time accrued with respect to the foregoing
(including any interest that accrues during the pendency of any bankruptcy case
of Borrower, whether or not Senior Creditor is authorized by Section 506 of the
Bankruptcy Code to collect such interest from Borrower), and (iv) all
Enforcement Expenses for which Borrower is now or hereafter becomes liable to
pay to Senior Creditor in connection with any of the foregoing under any
agreement or by applicable law.
"Senior Debt Default" shall mean an Event of Default under
(and as defined in) the Senior Creditor Loan Documents.
"Subordinated Debt" shall mean (i) all liabilities,
indebtedness and obligations of Borrower to Subordinated Creditor under or with
respect to any of the Subordinated Debt Documents, whether such liabilities,
indebtedness or obligations are now or hereafter existing and however and
whenever made or incurred, and whether direct or indirect, absolute or
contingent, due or to become due, or secured or unsecured, including all
principal, interest and premium on, and all other amounts payable in respect of,
the Subordinated Note, and all fees, charges, commitment or other fees,
indemnity amounts, enforcement expenses (including reasonable attorneys' fees)
and other amounts owing by Borrower to Subordinated Creditor under any of the
Subordinated Debt Documents; and (ii) all renewals, extensions, substitutions,
refundings, refinancings, restructurings or replacements of any such
liabilities, indebtedness or obligations (including all successive renewals,
extensions, substitutions, refundings, refinancings, restructurings or
replacements of such liabilities, indebtedness or obligations).
"Subordinated Debt Default" shall mean an Event of Default
under, and as defined in, the Subordinated Loan Agreement.
"Subordinated Debt Documents" shall mean and include the
Subordinated Loan Agreement, the Subordinated Note, and all other instruments
and agreements now or hereafter evidencing or securing the payment of the whole
or any part of the Subordinated Debt.
(b) The terms "herein," "hereof' and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements shall include any
and all modifications thereto and any and all restatements, extensions or
renewals thereof. All references to "including" and "include" shall be
understood to mean "including, without limitation."
2. Subordination.
(a) Except as otherwise provided in the Modification and Consent
Agreement of even date by and between Borrower and Senior Creditor (the
"Consent"), Subordinated Creditor hereby postpones and subordinates all of the
Subordinated Debt to the full and final payment and discharge of all of the
Senior Debt and Senior Creditor shall be entitled to receive payment in full of
all Senior Debt before any payment (other than a distribution of Reorganization
Securities) is made on account of or applied to any of Subordinated Debt.
(b) Subordinated Creditor hereby subordinates any security interest or
liens it now has or may hereafter acquire in the Collateral and other assets of
the Borrower to any security interest in or liens upon the Collateral or other
assets of Borrower which Senior Creditor has under the Senior Creditor Loan
Documents or otherwise.
(c) Each holder of Subordinated Debt, whether now outstanding or
hereafter created, incurred, assumed or guaranteed, shall be deemed to have
acquired the Subordinated Debt with full knowledge and subject to the terms and
provisions of this Agreement.
(d) In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all
or any part of the assets of the Borrower or the proceeds thereof to creditors
of the Borrower or upon any indebtedness of the Borrower, by reason of the
liquidation, dissolution or other winding up of the Borrower or the Borrower's
business, or in the event of any sale of assets of the Borrower or insolvency
proceeding involving the Borrower or its assets, then and in any such event any
payment or distribution of any kind or character, whether in cash, securities or
other property (excluding Reorganization Securities), which shall be payable or
deliverable upon or with respect to any of the Subordinated Debt shall be paid
or delivered directly to Senior Creditor for application as required by a
certain Inter-Creditor Agreement by and between Senior Creditor, Uro-Tech, Ltd.
and Boston Financial & Equity Corporation (the "Inter-Creditor Agreement") to
the Senior Debt (whether or not the same is then due) until all of the Senior
Debt has been fully paid and discharged. Each instrument evidencing Subordinated
Debt shall at all times bear a conspicuous legend that the Subordinated Debt
evidenced thereby is subordinated to the Senior Debt pursuant to this Agreement.
The books and records of Subordinated Creditor and any other holder of
Subordinated Debt shall be marked to evidence the subordination of all of the
Subordinated Debt to and in favor of the Senior Debt.
3. Warranties and Representations.
(a) Except as otherwise provided in the Consent, Subordinated Creditor
hereby represents and warrants that: (i) it has not relied nor will it rely on
any representation or information of any nature made by or received from Senior
Creditor relative to Borrower in deciding to execute this Agreement; (ii) no
part of the Subordinated Debt is evidenced by any instrument or writing except
the Subordinated Debt Documents; (iii) Subordinated Creditor is the lawful owner
of the Subordinated Debt; (iv) Subordinated Creditor has not heretofore assigned
or transferred any of the Subordinated Debt, or any interest therein; and (v)
Subordinated Creditor has not heretofore given any subordination in respect of
the Subordinated Debt.
(b) Subordinated Creditor hereby represents and warrants that it will
vote the shares of Capital Stock of the Borrower owned by Subordinated Creditor
in favor of any Amendment to the Articles of Incorporation of Borrower necessary
to increase the number of shares authorized to an amount equal to the
outstanding shares and the number of shares deliverable upon the exercise of all
outstanding options, warrants and other commitments to issue shares of
Borrower's Capital Stock.
(c) Each of the parties hereto represents and warrants to each of the
other parties hereto that this Agreement has been duly executed and delivered by
such party and is the valid and binding obligation of such party, enforceable
against such party in accordance with the terms hereof, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by principles of equity.
(d) Subordinated Creditor acknowledges that the Inter-Creditor
Agreement subordinates the Senior Creditor's priority in certain assets of the
Borrower.
(e) Subordinated Creditor agrees to copy the Senior Creditor with any
notices of default sent by Subordinated Creditor to the Borrower and with a copy
of any notices to Borrower advising Borrower that Subordinated Creditor will not
assist the Borrower in raising additional capital or purchasing ten (10)
Cardiology Machines from Borrower.
4. Negative Covenants. For so long as this Agreement is in effect, Borrower and
Subordinated Creditor agree with Senior Creditor that, except as otherwise
expressly provided in this Agreement and in the Consent: (a) Borrower shall not,
directly or indirectly, make any payment on account of any part of the
Subordinated Debt; (b) Subordinated Creditor shall not demand, collect or accept
from Borrower any payment on account of the Subordinated Debt or any part
thereof, or accelerate the maturity of the Subordinated Debt; (c) Subordinated
Creditor shall not exchange, set off, release, convert to equity or otherwise
discharge any part of the Subordinated Debt; (d) Subordinated Creditor shall not
enforce or apply any security, now or hereafter existing for the Subordinated
Debt; (e) Subordinated Creditor shall not hereafter give any subordination in
respect of any of the Subordinated Debt or transfer or assign any of the
Subordinated Debt; (f) Borrower shall not hereafter issue any instrument or
other writing evidencing any part of the Subordinated Debt other than the
Subordinated Debt Documents, and Subordinated Creditor will not receive any such
writing; (g) Subordinated Creditor shall not commence or join with any other
creditors of Borrower in commencing any bankruptcy, assignment for the benefit
of creditors or creditor's agreement; (h) Subordinated Creditor shall not
institute, or join as a party in the institution of, or assist in the
prosecution of, any action, suit or proceeding seeking a determination that the
security interest of Senior Creditor in any of the Collateral is invalid,
unperfected or avoidable, or is or should be subordinated to the interests of
any others; and (i) Subordinated Creditor otherwise shall not take or permit any
action inconsistent with Senior Creditor's priority position over Subordinated
Creditor that is created by this Agreement. Notwithstanding anything contained
herein to the contrary, the parties hereto agree that the Borrower or the
Subordinated Creditor, as the case may be, may take any of the actions
restricted in this Section 4 with the express written consent of the Senior
Creditor (which consent may be withheld at the sole discretion of the Senior
Creditor).
5. Payment and Remedy Bars.
(a) Until payment in full of the Senior Debt, no payment with respect
to the Subordinated Debt (include any payment due at maturity, whether by
acceleration or otherwise) shall be made by or on behalf of Borrower.
Notwithstanding the provisions of this Agreement, if the Borrower receives third
party subordinate financing from sources arranged by the Subordinated Creditor,
whether equity or debt ("Financing"), in an amount in excess of $1,000,000 in
the aggregate ("Financing Threshold") after the date of this Agreement, the
Senior Creditor hereby agrees that (provided that principal and interest on the
Senior Debt is not past due) one-half (1/2) of each dollar received above the
Financing Threshold from such Financing may be used to repay principal and
interest owing to the Subordinated Creditor; provided that a like amount is used
to pay principal and interest owing to the Senior Debt.
(b) The Subordinated Creditor agrees that until payment in full of the
Senior Debt, no holder of Subordinated Debt shall take any action to (x)
accelerate the maturity of, or demand as immediately due and payable, all or any
part of the Subordinated Debt, (y) commence, continue or participate in any
judicial, arbitral or other proceeding or any other enforcement action of any
kind against Borrower or any of such Borrower's assets (including any
involuntary proceeding under the Bankruptcy Code) seeking, directly or
indirectly, to enforce any of their rights or remedies, or to enforce any of the
obligations incurred by Borrower under or in connection with the Subordinated
Debt or the Subordinated Debt Documents, or (z) commence or pursue any judicial,
arbitral or other proceeding or legal action of any kind, seeking injunctive or
other equitable relief to prohibit, limit or impair the commencement or pursuit
by Senior Creditor of any of its rights or remedies under or in connection with
the Senior Creditor Loan Documents or otherwise available to Senior Creditor
under applicable law.
6. Turnover of Prohibited Transfers. If notwithstanding the provisions of this
Agreement any payment, distribution, Collateral or security (other than
Reorganization Securities), or the proceeds thereof, are received by any holder
of Subordinated Debt on account of or with respect to any of the Subordinated
Debt, such payment, distribution, Collateral or security (other than
Reorganization Securities) shall be held in trust for the benefit of, and shall
immediately be paid or delivered by such holder to the Senior Creditor in the
form received (except for the addition of any endorsement or assignment
necessary to effect a transfer of all rights therein to Senior Creditor) for
application to the Senior Debt and other Borrower debt in the order established
by the Inter-Creditor Agreement. Senior Creditor is irrevocably authorized to
supply any required endorsement or assignment which may have been omitted. Until
so delivered, Subordinated Creditor shall exercise its best efforts to ensure
that such payment, distribution or security shall not be commingled with other
funds or property of Subordinated Creditor.
7. Amendments to Documents.
(a) Senior Creditor and Borrower shall be authorized to amend any of
the Senior Creditor Loan Documents to which they are a party in accordance with
the terms thereof, and without prior notice to or the consent of any of the
holders of the Subordinated Debt.
(b) Without the prior written consent of Senior Creditor (which
consent may be given or withheld in Senior Creditor's sole discretion), no
provision of the Subordinated Debt Documents shall be amended, modified or
supplemented if the effect thereof would be to (i) advance the originally
scheduled dates for the payment of principal, interest or other sums payable in
respect of any Subordinated Debt, or modify in any manner adverse to Borrower
the dates for or premiums payable in connection with prepayments, (ii) impose on
Borrower prepayment charges, closing fees or other fees or (iii) impose on
Borrower any representations, warranties, covenants, events of default or other
provisions that are more restrictive or burdensome to Borrower than the terms
and provisions of the Subordinated Debt Documents as in effect on the date of
this Agreement.
8. Certain Waivers and Consents. Borrower and Subordinated Creditor each hereby
waives any defense based on the adequacy of a remedy at law which might be
asserted as a bar to the remedy of specific performance of this Agreement in any
action brought therefor by Senior Creditor. To the fullest extent permitted by
applicable law, Borrower and Subordinated Creditor each hereby further waives:
presentment, demand, protest, notice of protest, notice of default or dishonor,
notice of payment or nonpayment and any and all other notices and demands of any
kind in connection with all negotiable instruments evidencing all or any portion
of the Senior Debt; the right to require Senior Creditor to marshall any
Collateral or security, or to enforce any Lien that Senior Creditor may now or
hereafter have in any Collateral securing the Senior Debt or to pursue any claim
it may have against any guarantor of the Senior Debt, as a condition to Senior
Creditor's entitlement to receive any payment on account of the Senior Debt;
notice of the acceptance of this Agreement by Senior Creditor; and notice of any
credit made available to Borrower, extensions of time granted, amendments to the
Loan Agreement or the other Senior Creditor Loan Documents, or other action
taken in reliance hereon. Subordinated Creditor hereby consents and agrees that
Senior Creditor may, without in any manner impairing, releasing or otherwise
affecting the subordination provided for in this Agreement or any of Senior
Creditor's rights hereunder and without prior notice to or the consent of
Subordinated Creditor: release, renew, extend, compromise or postpone the time
of payment of any of the Senior Debt; substitute, exchange or release any or all
of the Collateral or decline or neglect to perfect Senior Creditor's Lien upon
any of the Collateral; add or release any Person primarily or secondarily liable
from any of the Senior Debt; amend or modify any of the Senior Creditor Loan
Documents or waive any Senior Debt Default; and increase or decrease the amount
of the Senior Debt or the rate of interest or the amount of any other charges
payable in connection therewith.
9. Subrogation. Provided that the Senior Debt has been indefeasibly paid and
discharged and any commitment that Senior Creditor may have under the Senior
Creditor Loan Documents to make loans or extend other credit has been terminated
or expired, the holders of Subordinated Debt shall be subrogated (without any
representation by or recourse to Senior Creditor) to the rights of Senior
Creditor to receive payments or distributions of cash, property or securities
payable or distributable on account of the Senior Debt, to the extent that the
Senior Creditor would be entitled to have such payments and distributions paid
over to or for its benefit; and for the purpose of such subrogation, no payment
or distribution to Senior Creditor of any cash, property or securities to which
the holders of Subordinated Debt would otherwise be entitled except for the
provisions of this Agreement, and no payment pursuant to the provisions of this
Agreement to Senior Creditor by the holders of Subordinated Debt, shall, as
between Borrower and its creditors other than Senior Creditor and the holders of
Subordinated Debt, be deemed to be a payment by Borrower to or on account of any
Subordinated Debt, it being understood that the provisions of this Agreement are
solely for the purpose of defining the relative rights of Senior Creditor, on
the one hand, and the holder of Subordinated Debt, on the other. In no event,
however, shall any holder of Subordinated Debt have any rights or claims against
Senior Creditor for any impairment of Subordinated Creditor's subrogation rights
that might result from Senior Creditor's release of any Lien upon any
Collateral, forgiveness, compromise, extension or discharge of any Senior Debt,
release of Borrower, or vote to accept or reject any Plan.
10. Statement of Account. Subordinated Creditor agrees to render to Senior
Creditor from time to time upon Senior Creditor's request therefor a statement
of Borrower's account with Subordinated Creditor and Borrower agrees to afford
Senior Creditor access to the books and records of Borrower in order that Senior
Creditor may make a full examination of the state of accounts of Borrower with
Subordinated Creditor
11. Validity of Subordinated Debt. The provisions of this Agreement
subordinating the Subordinated Debt to the Senior Debt are solely for the
purpose of defining the relative rights of Senior Creditor and Subordinated
Creditor and shall not impair, as between Subordinated Creditor and Borrower,
the obligation of Borrower, which is unconditional and absolute, to pay the
Subordinated Debt in accordance with its terms except as payment thereof may be
postponed in accordance with this Agreement.
12. Indulgences Not Waivers. Neither the failure nor any delay on the part of
Senior Creditor to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver thereof or give rise to an estoppel, nor be construed
as an agreement to modify the terms of this Agreement, nor shall any single or
partial exercise of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing.
13. Duration. This Agreement shall become effective when executed by Borrower
and Subordinated Creditor and accepted by Senior Creditor in Denver, Colorado,
and, when so accepted, shall constitute a continuing agreement of subordination,
and shall remain in effect until all of the Senior Debt has been paid in full in
immediately available funds. Senior Creditor may, without notice to Subordinated
Creditor, extend or continue credit and make other financial accommodations to
or for the account of Borrower in reliance upon this Agreement. The provisions
of this Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time payment of any Senior Debt is rescinded or otherwise must
be returned by Senior Creditor, all as if any such payment had not been made.
14. Default and Enforcement. If at any time any holder of Subordinated Debt
fails to comply with any provision of this Agreement that is applicable to such
holder, Senior Creditor may demand specific performance of this Agreement,
whether or not Borrower itself has complied with the terms hereof, and may
exercise any other remedy available at law or equity. Without limiting the
generality of the foregoing, if any holder of Subordinated Debt, in violation of
this Agreement, shall institute or participate in any action, suit or proceeding
against Borrower, then Borrower may interpose as a defense or dilatory plea this
Agreement and Senior Creditor is irrevocably authorized to intervene and to
interpose such defense or plea in its or Borrower's name. If any holder of
Subordinated Debt attempts to assert or enforce any Lien with respect to any
Collateral in violation of this Agreement, Borrower or Senior Creditor (in
Borrower's or Senior Creditors name) may by virtue of this Agreement restrain
such enforcement.
15. Litigation; Jurisdiction and Venue. Borrower, Senior Creditor, Subordinated
Creditor and each other holder of Subordinated Debt each hereby irrevocably
consents to the jurisdiction of the courts of the State of Colorado and of any
federal court located in the State of Colorado, in connection with any action or
proceeding arising out of or relating to this Agreement. In any such litigation,
Borrower, Subordinated Creditor, each other holder of Subordinated Debt and
Senior Creditor each hereby waives personal service of any summons, complaint or
other process, and agrees that the service thereof may be made by certified mail
direct to Borrower, Subordinated Creditor and Senior Creditor at their
respective places of business set forth in Section 16 hereof, and, in the case
of any other holder of Subordinated Debt, at the last known address for such
holder. Within 30 days after such mailing, the party so served shall appear and
answer to such summons, complaint or other process. Should the party so served
fail to appear or answer within said 30-day period, then such party failing to
appear or answer shall be deemed in default and judgment may be entered against
such party for the amount or other relief as demanded in any summons, complaint
or other process so served. In the alternative, in its sole discretion, any
party may effect service upon any other party in any other form or manner
permitted by applicable law. The choice of forum set forth herein shall not be
deemed to preclude the enforcement of any judgment obtained in such forum or the
taking of any action under this Agreement to enforce the same in any appropriate
jurisdiction, or the commencement by Senior Creditor or Subordinated Creditor,
in its sole discretion, of any action or suit in any jurisdiction where any
Collateral may be found to repossess or foreclose upon any such Collateral.
16. Notices. Except as otherwise provided herein, whenever any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by the other party, or whenever any
party desires to give or serve upon any other party any communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier of actual
receipt and three (3) days after deposit in the United States Mail, registered
or certified mail, return receipt requested, with proper postage prepaid, (b)
upon transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
16), (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when hand-delivered, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number set forth below or to such other address (or facsimile number) as may be
substituted by notice given as herein provided:
(a) If to Senior Creditor: ProFutures Bridge Capital Fund, L.P.
S. Roslyn Street, Suite 350
Englewood, Colorado 80111
Attention: James H. Perry
Facsimile: (303) 721-1190
With copies to:
Goins, Underkofler, Crawford & Langdon, LLP
Elm Street, Suite 3300
Dallas, Texas 75201
Attention: John O. Langdon
Facsimile: (214) 969-5902
(b) If to Subordinated Creditor: Imatron, Inc.
Oyster Point Blvd. South
San Francisco, CA 94080
Attention: Mr. S. Lewis Meyers, President
Facsimile: (415) 871-0418
(c) If to Borrower: Positron Corporation
Park Ten Place
Houston, Texas 77084
Attention: President
Facsimile: (281) 492-2961
The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any person (other than Senior Creditor, Subordinated Lender or
Borrower) designated above to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
17. Entire Agreement. This Agreement constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, inducements or
conditions, whether express or implied, oral or written. Neither this Agreement
nor any portion or provision hereof may be changed, waived or amended orally or
in any manner other than by an agreement in writing signed by Senior Creditor,
Borrower and Subordinated Creditor.
18. Additional Documentation. Borrower and Subordinated Creditor shall execute
and deliver to Senior Creditor such further instruments and shall take such
further action as Senior Creditor may reasonably request from time to time in
order to carry out the provisions and intent of this Agreement.
19. Successors and Assigns. This Agreement shall inure to the benefit of Senior
Creditor, its successors and assigns, and shall be binding upon both Borrower
and Subordinated Creditor and their respective successors and assigns; provided,
however, that neither Subordinated Creditor nor any subsequent holder of any
Subordinated Debt shall assign or transfer to any Person any part of the
Subordinated Debt.
20. Defects Waived. This Agreement is effective notwithstanding any defect in
the validity or enforceability of any instrument or document at any time
evidencing or securing the whole or any part of the Senior Debt.
21. Governing Law. The validity, construction and enforcement of this Agreement
shall be governed by the internal laws of the State of Colorado.
22. Severability. The provisions of this Agreement are independent of and
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any other
provision hereof, and that this Agreement shall be construed as if such invalid
or unenforceable provision had never been contained herein.
23. Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
24. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH, THIS AGREEMENT OR THE TRANSACTIONS HEREUNDER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed, sealed and delivered on the day and year first above written.
SUBORDINATED CREDITOR:
IMATRON, INC.,
a New Jersey corporation
By:
Name:
Title:
SENIOR CREDITOR:
PROFUTURES BRIDGE CAPITAL FUND, L.P.,
a Delaware limited partnership
By: Bridge Capital Partners, Inc.
its General Partner
By:
James H. Perry, President
BORROWER:
POSITRON CORPORATION,
a Texas corporation
By:
Name:
Title:
<PAGE>
EXHIBIT B
WARRANT
NOTICE THIS WARRANT AND THE UNDERLYING SHARES ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AS SET FORTH HEREIN
POSITRON CORPORATION
Right to Purchase 1,150,000 Shares
(Subject to adjustment)
Stock Purchase Warrant for Common Stock
POSITRON CORPORATION (hereinafter called the "Company"), a Texas
corporation, hereby certifies that, for value received,
PROFUTURES BRIDGE CAPITAL FUND, L.P.
or registered assigns (the "Holder"), is entitled to purchase from the Company
at any time or from time to time during the Exercise Period (as hereinafter
defined) an aggregate of One Million One Hundred Fifty Thousand (1,150,000)
fully paid and non-assessable shares, subject to adjustment as provided below,
of the Common Stock, $.01 par value (the "Common Stock") of the Company, on the
payment therefor of the purchase price (subject to adjustment as stated herein)
which shall be equal to $0.25 (the "Exercise Price") for each share of the
Common Stock so purchased, upon the surrender of this Warrant duly signed by the
registered Holder hereof at the time of exercise, accompanied by payment of the
purchase price, upon the terms and subject to the conditions hereinafter set
forth.
I. EXERCISE OF WARRANT. This Warrant shall be exercisable during the period
beginning April 1, 1998 and ending at 5:00 p.m. (Houston time) on March 31, 2008
(the "Exercise Period"). During the Exercise Period, this Warrant may be
exercised, in whole or in part at any time as follows:
The Holder shall surrender this Warrant to the Company at its
then principal office or that of the duly authorized and acting transfer agent
for its Common Stock, together with an exercise form substantially in the form
of the exercise form on the last page of this Warrant signifying the Holder's
election to exercise this Warrant and specifying the number of shares of Common
Stock to be purchased, duly signed, together with the purchase price of the
Common Stock in the form of a certified or bank cashier's check payable to the
order of the Company in an amount equal to the aggregate exercise price,
adjusted as provided herein, for the number of shares of Common Stock being
purchased. Notwithstanding the foregoing provisions, in no event may this
Warrant be exercised by any Holder who is not an accredited investor as such
term is defined in Rule 501(a) of Regulation D under the Act.
II. DELIVERY OF STOCK CERTIFICATE ON EXERCISE. As soon as practicable after the
exercise of this Warrant and payment of the purchase price, the Company will
cause to be issued in the name of and delivered to the registered Holder hereof
or its assigns, or such Holder's nominee or nominees, a certificate or
certificates for the number of full shares of Common Stock of the Company to
which such Holder shall be entitled upon such exercise (and in the case of a
partial exercise, a Warrant of like tenor for the unexercised portion remaining
subject to exercise prior to the expiration of the Exercise Period set forth
herein or, at the Holder's option, this Warrant shall be returned to the Holder
with an appropriate notation made hereon). For all corporate purposes, such
certificate or certificates shall be deemed to have been issued and such Holder
or such Holder's designee to be named therein shall be deemed to have become a
holder of record of such shares of Common Stock as of the date the duly executed
exercise form pursuant to this Warrant, together with full payment, is received
by the Company as aforesaid. No fraction of a share or scrip certificate for
such fraction shall be issued upon the exercise of this Warrant; in lieu
thereof, the Company will pay or cause to be paid to such Holder cash equal to a
like fraction at the prevailing market price for such share as determined by the
Company.
III. NET ISSUE EXERCISE. In lieu of exercising this Warrant, the Holder may
elect to receive shares of Common Stock equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election, in which
event the Company shall issue to the Holder a number of shares using the
following formula:
X = Y (A- B)
A
Where X = The number of shares to be issued to Holder Y = The number of shares
then purchasable under this Warrant A = The fair market value of one
share B = The Exercise Price (as adjusted to the date of such
calculations
<PAGE>
For purposes of this provision, the fair market value of the shares of Common
Stock of the Company shall mean the average of the closing bid and asked prices
of the shares quoted in the Over-The-Counter Market Summary or the closing price
quoted in any exchange or quotation system on which the shares are listed,
whichever is applicable, as published in the Wall Street Journal for the ten
(10) trading days prior to the date of determination of fair market value. If
the shares are not traded Over-The-Counter or on an exchange or quotation
system, the fair market value shall be the price per share which the Company
could obtain from a willing buyer for shares sold by the Company from authorized
but unissued shares, as such price shall be agreed by the Company and the
Holder.
IV. ANTIDILUTION PROVISIONS.
A. Dividends. Except as otherwise provided in this Warrant, in the
event that a dividend shall be declared upon the Common Stock of the Company
payable in shares of said stock, the number of shares of Common Stock covered by
this Warrant shall be adjusted by adding thereto the number of shares which
would have been distributable thereon if such shares had been outstanding on the
date fixed for determining the shareholders entitled to receive such stock
dividend. If at any time the Company shall pay any dividend or make any
distributions upon its Common Stock other than a dividend payable in shares of
said stock or shall offer to the holders of its Common Stock for subscription or
purchase by them any shares of any class or any other rights, the Company shall
cause notice thereof to be mailed to the Holder at its address appearing on the
registry books of the Company at least thirty days prior to the record date as
of which holders of shares shall participate in such dividend, distribution or
subscription rights, specifying such date.
B. Reorganizations/Consolidation/Mergers. Except as otherwise provided
in this Warrant, in the event that the outstanding shares of Common Stock of the
Company shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or, of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then there shall be substituted for the shares
of Common Stock covered by this Warrant, the number and kind of shares of stock
or other securities which would have been substituted therefor if such shares
had been outstanding on the date fixed for determining the shareholders entitled
to receive such changed or substituted stock or other securities.
C. Other Changes.
1. Upon each adjustment of the Exercise Price pursuant to
Paragraph IV.D., the Holder shall thereafter (until another such adjustment) be
entitled to purchase, at the adjusted Exercise Price in effect on the date
purchase rights under this Warrant are exercised, the number of shares of Common
Stock, calculated to the nearest full share, determined by (a) multiplying the
number of shares of Common Stock purchasable hereunder immediately prior to the
adjustment of the Exercise Price by the Exercise Price in effect immediately
prior to such adjustment, and (b) dividing the product so obtained by the
adjusted Exercise Price in effect on the date of such exercise.
2. In the event there shall be any change, other than
specified elsewhere in this Warrant, in the number or kind of outstanding shares
of Common Stock of the Company or of any stock or other securities into which
such Common Stock shall be changed or for which it shall have been exchanged,
and if such change equitably requires an adjustment in the number or kind of
shares covered by this Warrant, such adjustment shall be made by the Board of
Directors of the Company and the Holder.
D. Purchase Price Adjustments. The Exercise Price shall be subject to
adjustment as follows:
1. In case the Company shall issue any shares of Common Stock
(i) by way of split-up of outstanding shares of Common Stock, or (ii) by way of
dividends payable in Common Stock, the Exercise Price thereafter shall be
immediately adjusted and the adjusted Exercise Price shall be equal to the
quotient determined by dividing (A) the product of the total number of shares of
Common Stock outstanding immediately prior to such issuance multiplied by the
Exercise Price in effect immediately prior to such issuance by (B) the total
number of shares of Common Stock outstanding immediately after such issuance.
2. No reorganization of the Company and no consolidation or
merger thereof with or into any other corporation or corporations and no
conveyance of all or substantially all of the assets of the Company to any other
corporation shall be made unless, as a part of such reorganization,
consolidation or merger or conveyance arrangements shall be made whereby the
Holder of this Warrant shall thereafter be entitled to convert the same into a
warrant or warrants for any stock, securities or other assets given in exchange
for the Common Stock of the Company on such reorganization, or in connection
with such consolidation, merger or conveyance, in such amount and with an
Exercise Price for such value (but not below the par value of the securities
subject to the new warrant) as would, at the time, have been given in exchange
for the Common Stock. The Company shall not increase the par value per share of
any stock or securities issuable under the Warrant to an amount more than $0.01
per share.
3. In case the Company, by reclassification of its Common
Stock or by amendment to its Certificate of Incorporation, shall reduce the
number of shares of such Common Stock outstanding, the Exercise Price thereafter
shall be immediately adjusted, and the adjusted Exercise Price shall be
determined by multiplying the number of shares of Common Stock outstanding
immediately before such reduction by the then Exercise Price and the resulting
product shall be divided by the reduced number of shares of Common Stock
outstanding, and the quotient resulting from such division (or the par value of
the Common Stock, whichever is higher) shall be the Exercise Price after such
adjustment, until a further adjustment of the Exercise Price of the Common Stock
shall be required to be made by reason of a further reduction of the number of
shares of such Common Stock outstanding.
4. If the Company at any time or from time to time after the
date of this Warrant issues any additional shares of Common Stock for a
consideration per share less than the Exercise Price in effect immediately prior
to the issuance of such additional shares, or without consideration (other than
pursuant to a transaction covered by Paragraphs IV.D.1. or 3. above) then, and
thereafter successively upon each such issuance, but only if the following
calculation shall result in a reduction of the Exercise Price, the Exercise
Price in effect immediately prior to the issuance of such additional shares
shall forthwith be reduced to a price determined by dividing (a) an amount equal
to (i) the total number of shares of Common Stock outstanding immediately
following the last previous adjustment of the Exercise Price pursuant to this
Paragraph IV.D. (or on the date of this Warrant if there shall have been no
previous adjustment) multiplied by the Exercise Price in effect immediately
prior to such issuance, plus (ii) the consideration, if any, received or deemed
to have been received by the Company upon such issuance and upon the issuance of
any Common Stock issued subsequent to the last previous adjustment of the
Exercise Price pursuant to this Paragraph IV.D. (or subsequent to the date of
this Warrant if there shall have been no such previous adjustment), by (b) the
total number of shares of Common Stock outstanding immediately after the
issuance of such additional shares. Without limiting the foregoing this
Paragraph IV.D. applies to the issuance of shares pursuant to the exercise of
warrants issuable by the Company pursuant to the Agreement to Issue Warrants of
even date herewith between the Company and ProFutures Bridge Capital Fund, L.P.
E. No Fractional Shares. No adjustment or substitution provided for in
this Warrant shall require the Company to issue or to sell a fractional share
and the total adjustment or substitution with respect to this Warrant shall be
limited accordingly.
F. Calculation. Upon each adjustment of the Exercise Price and upon
each change in the number of shares of Common Stock deliverable upon the
exercise of this Warrant, and in the event of any change in the rights of the
holder by reason of other events hereinabove set forth, the Company shall
forthwith give written notice thereof to the holder in the form of a
certificate, executed by its President or one of its Vice Presidents, stating
the adjusted Exercise Price and the new number of shares so deliverable, or
specifying the other shares of stock, securities or assets and the amount
thereof so deliverable and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
G. Exempt Transactions. Notwithstanding any provision contained herein
to the contrary, no adjustment shall be made to the Exercise Price or the number
of shares of Common Stock purchasable hereunder in respect of (a) any options,
warrants or other securities outstanding as of the date hereof that are
exercisable or exchangeable for or convertible into shares of common Stock, (b)
options that may hereafter be granted in accordance with any employee stock
option plan in effect as of the date hereof, (c) the issuance after the date
hereof of any additional shares of Series A 8% Cumulative Convertible Redeemable
Preferred Stock or Series B 8% Cumulative Convertible Redeemable Preferred Stock
as dividend in respect of any such outstanding preferred stock, (d) the issuance
of any securities to General Electric Company (or its affiliates) in order to
fund in all or in part the acquisition of assets pursuant to the Acquisition
Agreement (herein so called) dated July 15, 1996 between the Company and General
Electric Company, as such agreement is amended from time to time, or the
issuance of any securities to finance in all or in part the acquisition by the
Company of such assets, or (e) the issuance of any shares of Common Stock upon
the exercise, conversion or exchange or any of the securities described in any
one or more of clauses (a), (b), (c) or (d) above.
V. REGISTRATION RIGHTS.
A. Certain Definitions. As used in this Warrant, the following terms shall
have the following respective meanings:
1. Act means the Securities Act of 1933 or any similar
federal statute, and the rules and regulations of the Commission issued under
the Act, as they each may, from time to time, be in effect.
2. Commission means the Securities and Exchange Commission,
or any other federal agency at the time administering the Act.
3. Exchange Act means the Securities Exchange Act of 1934 or
any similar federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
4. Intentionally Deleted.
5. Registration Statement means a registration statement
filed by the Company with the Commission for a public offering and sale of
securities of the Company (other than a registration statement on Form S-8 or
Form S-4, or their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation or any registration
statement filed to register the issuance of securities, the proceeds of which
are to fund or finance in all or in part the Company's acquisition of assets
pursuant to the GE Acquisition Agreement).
6. Registrable Shares means the shares of Common Stock
issuable upon exercise of this Warrant, and any other shares of Common Stock of
the Company issued in respect of such shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, anti-dilution provisions, or
similar events); provided, however, that shares of Common Stock which are
Registrable Shares shall cease to be Registrable Shares upon (a) any sale
pursuant to a Registration Statement or Rule 144 under the Act, or (b) at such
time that such shares of Common Stock may be sold pursuant to Rule 144(k) under
the Act.
7. Selling Holders means the holders of Registerable Shares
that are registered by the Company pursuant to this Warrant.
8. Demand Registration Date means July 31, 1997.
B. Registration on Request.
1. At any time after the Demand Registration Date, upon the
written request of one or more persons holding 75% or more of the Registrable
Shares (the "Initiating Holders") that the Company effect the registration under
the Act of the offer and sale of all or part of such Initiating Holders'
Registrable Shares, the Company promptly will give written notice of such
requested registration to all of the other holders of Registrable Shares, and
thereupon the Company will effect, at the earliest possible date, the
registration under the Act of (i) the Registrable Shares which the Company has
been so requested to register by such Initiating Holders, and (ii) all other
Registrable Shares which the Company has been requested to register by the other
holders of the Registrable Shares by written request given to the Company within
30 days after the giving of such written notice by the Company, all to the
extent requisite to permit the public disposition of the Registrable Shares so
to be registered. The Company shall be required to effect only one registration
pursuant to this Paragraph V.B.
2. Whenever the Company shall effect a registration pursuant
to this Paragraph V.B., no securities other than Registrable Shares shall be
included among the securities covered by such registration unless Selling
Holders of greater than 50% of the Registrable Shares to be included in such
registration shall have consented in writing to the inclusion of such other
securities.
3. Registrations under this Paragraph V.B. shall be on such
appropriate registration form of the Commission as shall be reasonably selected
by the Company, subject, however, to Paragraph V.A.5.
4. At the election of Selling Holders of greater than 75% of
the Registrable Shares to be included in such registration, the offering of
Registrable Shares pursuant to this Paragraph V.B. shall be in the form of an
underwritten offering. The underwriter or underwriters of each underwritten
offering of the Registrable Shares so to be registered shall be selected by the
Selling Holders of at least 75% of the Registrable Shares to be included in such
registration and shall be reasonably acceptable to the Company.
5. The Company may postpone for up to 120 days the filing or
effectiveness of a Registration Statement for a registration under this
Paragraph V.B if the Company reasonably believes that such registration will
have a material adverse effect on the Company or any transaction contemplated by
it. The Company may postpone such filing or effectiveness only once after any
request for registration pursuant to this Paragraph V.B.
C. Piggy-Back Registration.
1. Intentionally Deleted.
2. Whenever the Company proposes to file a Registration
Statement at any time and from time to time, it will, prior to such filing, give
written notice to the Holder of its intention to do so and, upon the written
request of the Holder given within 20 days after the Company provides such
notice, the Company shall cause all Registrable Shares which the Company has
been requested by the Holder to register to be registered under the Act to the
extent necessary to permit their sale or other disposition in accordance with
the intended method of distribution proposed in such registration; provided that
the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Paragraph without obligation to the Holder. No
registration effected under this Paragraph V.C. shall relieve the Company of its
obligation to effect a registration upon request under Paragraph V.B.
3. No person may participate in any Registration Statement
filed pursuant to this Paragraph V.C. unless such person (a) agrees to sell such
person's Registrable Shares on the basis provided in any underwriting
arrangements approved by the Company, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements; provided, however, that no such person shall be required to make
any representations or warranties in connection with any such registration other
than representations and warranties as to (i) such person's ownership of his or
its Registrable Shares to be sold or transferred free and clear of all liens,
claims and encumbrances, (ii) such person's power and authority to effect such
transfer, and (iii) such matters pertaining to compliance with securities laws
as may be reasonably requested; provided further, however, that the obligation
of such person to indemnify pursuant to any such underwriting arrangements shall
be several, not joint and several, among such persons selling Registrable
Shares, and the liability of each such person will be in proportion to, and
provided further that such liability will be limited to, the net amount received
by such person from the sale of his or its Registrable Shares pursuant to such
registration; and provided, further, that no Selling Holder shall be required to
agree to any lock-up period in excess of 120 days.
4. Unless the managing underwriter otherwise agrees, each of
the Company and the Holders agrees, and the Company agrees, in connection with
any underwritten registration, to use its reasonable efforts to cause is
affiliates to agree, not to effect any public sale or private offer or
distribution of any Common Stock or Common Stock equivalent during the ten
business days prior to the effectiveness under the Securities Act of any
underwritten registration and during such time period after the effectiveness
under the Securities Act of any underwritten registration (not to exceed 120
days) (except, if applicable, as part of such underwritten registration) as the
Company and the managing underwriter may agree.
5. If the Registrable Shares requested to be included in the
Registration Statement by the Holder pursuant to a registration effected
pursuant to Paragraph V.C.2. differ from the type of securities proposed to be
registered by the Company and the managing underwriter advises the Company that
due to such differences the inclusion of such Registrable Shares would
materially and adversely affect the price or success of the offering (a
"Material Adverse Effect"), then (i) the number of such Holder's Registrable
Shares to be included in the Registration Statement shall be reduced to an
amount which, in the judgment of the managing underwriter, would eliminate such
Material Adverse Effect or (ii) if no such reduction would, in the judgment of
the managing underwriter, eliminate such Material Adverse Effect, then the
Company shall have the right to exclude all such Registrable Shares from such
registration statement provided no other securities of such type are included
and offered for the account of any other person in such Registration Statement.
Any partial reduction in number of Registrable Shares to be included in the
Registration Statement pursuant to clause (i) of the immediately preceding
sentence shall be effected pro rata based on the ratio which such Holder's
requested shares bears to the total number of shares requested to be included in
such Registration Statement by all persons who have requested that their shares
be included in such Registration Statement. If the Registrable Shares requested
to be included in the Registration Statement pursuant to a registration effected
pursuant to Paragraph V.C.2. are of the same type as the securities being
registered by the Company and the managing underwriter advises the Company that
the inclusion of such Registrable Shares would cause a Material Adverse Effect,
the Company will be obligated to include in such Registration Statement, as to
each Holder, only a portion of the shares such Holder has requested to be
registered equal to the ratio which such Holder's requested shares bears to the
total number of shares requested to be included in such registration statement
by all persons (other than (i) the Company, if such registration has been
initiated by the Company for securities to be offered by the Company and (ii) by
persons exercising their right to cause a Demand Registration) who have
requested that their shares be included in such Registration Statement. It is
acknowledged by the Holder, that pursuant to the foregoing provision, the
securities to be included in such registration shall be allocated (x) first, to
the Company, if such registration has been initiated by the Company for
securities to be offered by the Company, (y) second, to securities offered by
persons exercising their right to cause a Demand Registration, if such
registration is a Demand Registration and (z) third, to the Holder and all other
persons requesting securities to be included therein in accordance with the
above described ratio. If as a result of the provisions of this Paragraph V.C.5.
any Holder shall not be entitled to include all Registrable Securities in a
registration that such Holder has requested to be so included, such Holder may
withdraw such Holder's request to include Registrable Shares in such
Registration Statement. As used herein, the term "Demand Registration" shall
mean a registration of Common Stock under the Act requested by a person pursuant
to a contractual right of such person to demand that the Company initiate such a
registration. This Paragraph V.C.5. does not apply to a registration effected
pursuant to Paragraph V.C.1.
D. Registration Procedures. If and whenever the Company is required by the
provisions of this Warrant to effect the registration of any of the Registrable
Shares under the Act, the Company shall:
1. File with the Commission a Registration Statement with
respect to such Registrable Shares and cause that Registration Statement to
become and remain effective;
2. As soon as reasonably practicable prepare and file with
the Commission any amendments and supplements to the Registration Statement and
the prospectus included in the Registration Statement as may be necessary to
keep the Registration Statement effective until 180 days from the effective
date;
3. As soon as reasonably practicable furnish to the Selling
Holders such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act, and such
other documents as the Selling Holders may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the Selling Holders;
4. As soon as reasonably practicable register or qualify the
Registrable Shares covered by the Registration Statement under the securities or
Blue Sky laws of such states as any Selling Holder shall reasonably request, and
do any and all other acts and things that may be necessary or desirable to
enable the Selling Holder to consummate the public sale or other disposition in
such states of the Registrable Shares; provided, however, that the Company shall
not be required in connection with this Paragraph V.D.4. to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction; and
5. Obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily covered in
public issuances of securities, in each case addressed to the Selling Holders.
If the Company has delivered a preliminary or final prospectus to the
Selling Holders and after having done so the prospectus is amended to comply
with the requirements of the Act, the Company shall promptly notify the Selling
Holders and, if requested, the Selling Holders shall immediately cease making
offers of Registrable Shares and return all prospectuses to the Company. The
Company shall promptly provide the Selling Holders revised prospectuses and,
following receipt of the revised prospectuses, the Selling Holders shall be free
to resume making offers of the Registrable Shares.
E. Allocation of Expenses. The Company will pay all Registration Expenses
of all registrations under this Warrant. For purposes of this Warrant, the term
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Paragraph V., including without limitation, all registration
and filing fees, exchange listing fees, printing expenses, the fees and
disbursements of counsel for the Company and the fees and disbursements of one
counsel selected by all of the Selling Holders, the fees and disbursements of
the Company's accountants, state Blue Sky fees and expenses, and the expense of
any special audits incident to or required by any such registration, but
excluding underwriting discounts, selling commissions and the fees and expenses
of the Selling Holders' own counsel (other than the counsel selected to
represent all of the Selling Holders).
F. Indemnification.
1. In the event of any registration of any of the
Registrable Shares under the Act pursuant to this Agreement, the Company will
indemnify and hold harmless each of the Selling Holders, each of its directors,
officers or partners and each other person, if any, who controls such seller
within the meaning of the Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which such seller or controlling
person may become subject under the Act, the Exchange Act, Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
and the Company will reimburse such seller and each such controlling person for
any legal or any other expenses reasonably incurred by such seller or
controlling person in connection with investigating or defending any such loss,
claim, damage or liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any untrue statement or omission
made in such Registration Statement, preliminary prospectus or prospectus, or
any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of a Selling
Holder or controlling person specifically for use in the preparation thereof.
2. In the event of any registration of any of the Holder's
Registrable Shares under the Act pursuant to this Agreement, each Selling Holder
will indemnify and hold harmless the Company, each of its directors and officers
and each person, if any, who controls the Company within the meaning of the Act
or the Exchange Act, against any losses, claims, damages or liabilities, joint
or several, to which the Company, such directors and officers or controlling
persons may become subject under the Act, Exchange Act, Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made, not misleading,
if the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of a Selling
Holder, specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided, however,
that the obligations of the Selling Holder hereunder shall be limited to an
amount equal to the proceeds realized by such Selling Holder from the
Registrable Shares sold as contemplated herein.
3. Each party entitled to indemnification under this
Paragraph (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further than the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Paragraph. The Indemnified
Party may participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expense if representation of
such Indemnified Party by the counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
G. Information by Holder. The Selling Holders shall furnish to the Company
such information regarding the Selling Holders and the distribution proposed by
the Selling Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Paragraph.
H. Time. If a request for registration is made pursuant to Paragraph V.B.,
and if for any reason (including because of a postponement by the Company
pursuant to paragraph V.B.5., but excluding because of a default by the Selling
Holders with respect to any obligation of theirs hereunder pertaining such
registration) a Registration Statement is not effective with respect to such
Registrable Shares within 120 days after the request for registration is made,
the number of shares of Common Stock covered by this Warrant shall be increased,
and the Exercise Price shall be reduced, as provided in Paragraph IV. as if the
Company on the 121st day after the request for registration declared and paid a
dividend upon the Common Stock of 4/10ths of one share of Common Stock for each
share of Common Stock then outstanding.
I. Suspension of Dispositions. Each Selling Holder agrees that, upon
receive of any notice (a "Suspension Notice") from the Company of the happening
of any event which makes any statement made in a registration statement or
related prospectus untrue or which requires the making of any changes in such
registration statement, prospectus or documents so that they will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and, such Holder will forthwith discontinue disposition of
Registrable Shares until such Holder's receipt of the copies of the supplemented
or amended prospectus, or until it is advised in writing (the "Advice") by the
Company that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the prospectus, and, if so directed by the Company, such Holder will deliver to
the Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Shares current at the
time of receipt of such notice. The Company shall use its commercially
reasonable efforts and take such actions as are reasonably necessary to remedy
the Advice as promptly as practicable.
VI. LOST STOLEN, DESTROYED OR MUTILATED WARRANT. Upon receipt by the Company of
evidence satisfactory (in the exercise of reasonable discretion) to it of the
ownership of and the loss, theft or destruction or mutilation of the Warrant,
and (in the case or loss, theft or destruction) of indemnity satisfactory (in
the exercise of reasonable discretion) to it, and (in the case of mutilation)
upon the surrender and cancellation thereof, the Company will issue and deliver,
in lieu thereof, a new Warrant of like tenor.
VII. RESTRICTIONS. TRANSFER AND TRANSFER
A. Owner of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided below.
B. Transfer of Warrant. The Company agrees to maintain at its then
principal place of business books for the registration of and the registration
of transfers of the Warrant, and, subject to the provisions of subsections C and
D below, this Warrant and all rights hereunder are transferable, in whole or in
part, on said books at said office, upon surrender of this Warrant at said
office, together with a written assignment of this Warrant duly executed by the
Holder hereof or its duly authorized agent or attorney and funds sufficient to
pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and payment the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and this Warrant shall promptly be
canceled.
C. Restrictions on Transfer. Neither this Warrant nor the shares of
Common Stock issuable on exercise of this Warrant have been registered under the
Securities Act of 1933 or any other securities laws (the "Acts"). Therefore, in
order, among other things, to insure compliance with the Acts, notwithstanding
anything else in the Warrant to the contrary, the Holder of this Warrant,
including any successive Holder, agrees by accepting this Warrant as follows:
This Warrant and the shares of Common Stock which may be purchased upon the
exercise hereof, may not be sold, transferred, pledged or hypothecated in the
absence of (i) an effective registration statement or post-effective amendment
thereto for such Warrant, or shares of Common Stock of the Company,
respectively, under the Acts, or (ii) an opinion of counsel reasonably
satisfactory to the Company that registration is not required under such Acts.
In no event may this Warrant be transferred to any person who is not an
accredited investor as such term is defined in Rule 501(a) of Regulation D under
the Act.
D. Legend on Shares. Each certificate for shares of Common Stock
initially issued upon exercise of this Warrant, unless at the time of exercise
such Shares are registered under the Acts, shall bear the following legend (and
any additional legend required under said acts or otherwise):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state
securities acts (the "Acts") and cannot be transferred except
(i) pursuant to a registration statement effective under the
Acts, or (ii) pursuant to an exemption from the registration
requirements of the Acts."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Acts of
the securities represented thereby) shall also bear such legend unless, in the
opinion of such counsel as shall be approved by the Company, the securities
represented thereby need no longer be subject to the transfer restrictions
contained in this Warrant. The transfer and transfer restriction provisions of
this Warrant shall be binding upon all subsequent Holders of the Warrant.
VIII. RESERVATION OF SHARES. The Company covenants that during the Exercise
Period it will reserve from its authorized and unissued common stock a
sufficient number of shares to provide for the delivery of stock pursuant to the
exercise of this Warrant.
IX. MISCELLANEOUS. This Warrant does not confer upon the Holder any rights of a
stockholder of the Company, including, without limitation, any right to vote or
to consent to or receive notice as a stockholder of the Company; provided,
however, that this Paragraph is subject to Paragraph VI.
X. HEADINGS. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect the meaning hereof.
Dated: April 28, 1998
POSITRON CORPORATION
ATTEST:
By:
Authorized Representative
By:
Title:
Title:
<PAGE>
EXERCISE OF WARRANT AND DECLARATION
To:
Pursuant to the provisions of the Stock Purchase Warrant dated April 28,
1996, the undersigned Holder hereby exercises the right to purchase shares of
the Common Stock
of______________________________________________________________ (the "Company")
and delivers to the Company herewith the sum of $______________ (in cash or by
certified or official bank check payable to the order of the Company) in payment
in full for those shares.
The undersigned hereby declares and represents to the Company that the
undersigned is an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D under the Securities Act of 1933 (the "Act") and has such
knowledge, sophistication and experience in financial and business matters so as
to be capable of evaluating the merits and risks of the acquisition of the
securities into which the Warrant is exercisable.
The undersigned hereby declares and represents to the Company that the
intention of this exercise is to acquire the aforementioned shares for
investment only and not for resale or with a view to distribution, except as the
same may be made in compliance with all applicable securities laws. The
undersigned has been advised that the shares being issued to the undersigned are
not being registered under the Securities Act of 1933 (the "Act") on the grounds
that this transaction is exempt under Section 4 of and/or Regulation D
promulgated under that Act as not involving any public offering. As a result of
not being registered under the Act, the undersigned has been advised that these
shares may not be sold or offered for sale in the absence of an effective
registration statement as to the securities under the Act and any other
applicable securities acts or an opinion of counsel satisfactory to the Company
that such registration is not required.
You will kindly forward a certificate or certificates for the shares
purchased hereby and, if such shares shall not include all of the shares as
provided in said Warrant, a new Warrant of like tenor and date for the balance
of the shares issuable thereunder shall be delivered to the undersigned at the
address shown below.
Dated:_______________ __________________________________
Holder
Address:
-----------------------------------
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<PAGE>
EXHIBIT E
CONSENT TO SENIOR LOAN AND SECURITY AGREEMENT
BY AND AMONG
POSITRON CORPORATION
AND URO-TECH LTD.
dated as of April 28, 1998
SUBORDINATION AGREEMENT BY AND AMONG
URO-TECH, LTD.
IMATRON INC.
AND
POSITRON CORPORATION
dated as of April 28, 1998
CONSENT TO SENIOR LOAN AND SECURITY AGREEMENT
This Consent (the "Consent") is entered into this 28th day of April,
1998 by Positron Corporation, a Texas corporation ("Borrower") and Uro-Tech
Ltd., a Texas limited partnership ("Lender").
RECITALS
A. Lender and Borrower entered into a Loan and Security Agreement
dated as of November 14,1995 and Promissory Note (the "Note") of even date
therewith in the original principal amount of $1,000,000.00 executed by Borrower
and payable to the order of Lender (together with certain addenda and other
instruments, documents or agreements entered into in connection therewith and
any extensions, amendments replacements or modifications to any of the foregoing
being referred to as the "Loan Documents") pursuant to which Lender agreed to
extend Loans and financial accommodations to the Borrower.
B. The Parties mutually agree that it is in their mutual interest to
modify certain terms of the Note and Loan Documents to enable Borrower to
obtain additional financing and other support from Imatron Inc., a New Jersey
corporation ("Imatron").
C. Any and all initially capitalized terms used herein shall have the
meaning ascribed to them in the Loan Documents unless specifically defined
herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and promises contained herein the parties hereto do hereby agree as
follows:
1. Lender hereby consents to the following actions:
(a) Borrower is authorized to issue and sell to Imatron shares
of the Borrower's common stock, $0.01 par value, for $100.00, pursuant to that
certain Stock Purchase Agreement by and between Borrower and Imatron dated April
____, 1998.
(b) Borrower is authorized to borrow $500,000.00 from Imatron
(the "Imatron Loan") upon terms and conditions acceptable to the Board of
Directors of the Borrower.
(c) In connection with the Imatron Loan, the Borrower may
grant to Imatron a lien on all the personal property of the Borrower, which lien
is senior to Lender's lien on such property, and Lender agrees to subordinate
its interest in Borrower's property pursuant to a Subordination Agreement in the
form as that attached hereto as Exhibit A.
2. Borrower acknowledges that certain Events of Default have occurred
(the "Prior Defaults") and are continuing as of the date of this Agreement. In
order to allow
<PAGE>
the Borrower to consummate the Imatron Loan, the Lender agrees to waive
all Prior Defaults and not to pursue any remedies available under the Loan
Documents as a result of the Prior Defaults. The waiver of the Prior Defaults
and Lender's agreement not to pursue its remedies with respect to Prior Defaults
shall in no way be construed as a waiver or impairment of the Lender's interests
and right under the Loan Documents, including, but not limited to, Lender's
right to exercise any rights and remedies provided in the Loan Documents with
respect to Events of Default occurring at any time or from time to time after
the date of this Agreement, and such rights shall be cumulative and not
exclusive.
3. Except as otherwise set forth herein, this Agreement shall not
impair, limit, restrict or otherwise affect the obligations of Borrower to
Lender under the Loan Documents. Borrower hereby acknowledges, agrees and
represents that (a) Borrower is indebted to Lender pursuant to the terms of the
Note as modified hereby and Borrower agrees that the Loan Documents are valid
and binding and are in full force and effect according to their terms and
conditions; (b) except as modified or deemed to be modified by the Subordination
Agreement attached hereto, the Liens, security interests and assignments created
and evidenced by the Loan Documents are, respectively, valid and subsisting
liens, security interests and assignments of the respective dignity and priority
recited in the Loan Documents; (c) Borrower has no claims, offsets, defenses or
counterclaims against Lender whether arising under the Loan Documents or
otherwise; and (d) Lender is not in default and no event has occurred which,
with the passage of time, giving of notice, or both, would constitute a default
by Lender of Lender's obligations under the Security Documents.
4. Lender and Borrower agree that, except as modified herein and in
the Subordination Agreement, all of the terms and conditions of the Loan
Documents are hereby ratified and reaffirmed.
5. The terms and conditions of this Agreement shall not be binding
upon Lender until Borrower's satisfaction or fulfillment of the following
matters:
(a) Borrower's delivery to Lender and to Imatron of a
certificate of an officer of Borrower certifying that attached thereto is a true
and correct copy of resolutions of the Board of Directors of Borrower
authorizing the execution of this Agreement and of the Subordination Agreement;
(b) Borrower's delivery to Lender and to Imatron of a duly
executed Subordination Agreement;
(c) Delivery to Imatron of the written consent from ProFutures
Bridge Capital Fund, a Texas limited partnership, (together with any other
required approvals or authorization to the transactions contemplated or
described in this Agreement).
POSITRON CORPORATION,
a Texas corporation
By:_______________________________
Gary B. Wood, Chairman
URO-TECH LTD.,
a Texas Limited Partnership
By:_______________________________
Title:____________________________
<PAGE>
EXHIBIT A
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is made and entered into as
of April 28, 1998, by and among URO-TECH, LTD., a Texas limited partnership
("Subordinated Creditor"), IMATRON INC., a California corporation ("Senior
Creditor"), and POSITRON CORPORATION, a Texas corporation ("Borrower").
RECITALS:
Senior Creditor and Borrower intend to execute a certain Loan Agreement, a
certain Security Agreement, and related agreements, all dated May 1, 1998 (as at
any time amended, the "Loan Agreement"), pursuant to which Senior Creditor will
make Loans to or for the benefit of Borrower from tune to time, secured by all
or substantially all of the assets of Borrower. Capitalized terms used in these
Recitals and elsewhere in this Agreement, unless otherwise defined, shall have
the meanings ascribed to them in the Loan Agreement as in effect on the date
hereof.
Borrower and Subordinated Creditor are parties to a Loan and Security
Agreement dated as of November 14, 1995 ("Subordinated Loan Agreement") pursuant
to which Subordinated Creditor from time to time made loans up to an amount of
$1,500,000 to and for the benefit of Borrower, on terms set forth in the
Subordinated Loan Agreement and related Promissory Note, and secured by
subordinate Liens on all or substantially all of the assets of Borrower.
As an inducement to Senior Creditor to conclude its Loan to Borrower,
and for the benefit of both Borrower and Subordinated Creditor, the parties wish
to agree herein as to the relative rights of payment and other rights under
their respective financing arrangements, and further wish to agree and to
memorialize certain other agreements with respect to the enforcement of their
respective rights and remedies against the Borrower.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and in
consideration of the foregoing premises, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and the mutual
covenants herein, intending to be legally bound hereby, agree as follows:
A. Definitions; Rules of Construction.
1. In addition to such other terms as are elsewhere defined herein, as
used in this Agreement the following terms shall have the following meanings:
"Bankruptcy Code" shall mean title 11 of the United States Code.
"Enforcement Expenses" shall mean all reasonable costs and expenses
incurred by Senior Creditor in connection with its enforcement of any rights or
remedies under the Senior Creditor Loan Documents, the collection of any of the
Senior Debt or the protection of, or realization upon, any Collateral after the
occurrence and during the continuance of a Senior Debt Default, including, by
way of example, reasonable attorneys' fees, court costs, appraisal and
consulting fees, auctioneer's fees, rent, storage, insurance premiums and like
items and whether or not such amounts are allowed as a claim against Borrower
under the Bankruptcy Code.
"Payment Default" shall mean a Senior Debt Default that results from
Borrower's failure to pay any of the Senior Debt on the due date thereof
(whether due at stated maturity, upon acceleration, on demand or otherwise).
"Plan" shall mean a plan proposed in a proceeding under the Bankruptcy
Code for the reorganization or rehabilitation of Borrower, a composition or
extension of any of Borrower's Debts or a liquidation in whole or in part of
Borrower's assets.
"Reorganization Securities" shall mean (i) the securities of Borrower
(including senior securities) provided for by a plan of reorganization of
Borrower that has been proposed in a case under the Bankruptcy Code and
confirmed by final order of the bankruptcy court having jurisdiction over such
case, and (ii) shares of common stock or other equity securities, and debt
securities, the payment of which is subordinated, at least to the extent
provided in this Agreement with respect to the Subordinated Debt, to the payment
of all Senior Debt at the time outstanding and to the payment of all debt
securities issued in exchange therefor to Senior Creditor, which shares or other
equity or debt securities have been provided for by a plan of reorganization
which has been adopted or agreed to other than pursuant to a proceeding referred
to in clause (i) of this definition and which has been approved or agreed to by
Senior Creditor.
"Senior Creditor Loan Documents" shall mean and include (i) the Loan
Agreement, the Security Agreement, the other Loan Documents, and all other
instruments or agreements now or hereafter evidencing or securing the payment of
the whole or any part of the Senior Debt and (it) all renewals, modifications,
extensions, refinancings, restructurings or replacements thereof.
"Senior Debt" shall mean (i) all liabilities, indebtedness and
obligations of Borrower now or hereafter existing under or with respect to any
of the Senior Creditor Loan Documents, whether such obligations are now or
hereafter existing and however and whenever made or incurred, and whether direct
or indirect, absolute or contingent, due or to become due, or secured or
unsecured, including all principal, interest and premium on, and all other
amounts payable in respect of, any of such obligations, and all indemnity
amounts, reimbursement obligations and other amounts owed by Borrower to Senior
Creditor thereunder, (ii) any and all loans made or other credit extended by
Senior Creditor to Borrower during the pendency of any insolvency proceeding of
Borrower, (iii) all interest at any time accrued with respect to the foregoing
(including any interest that accrues during the pendency of any bankruptcy case
of Borrower, whether or not Senior Creditor is authorized by Section 506 of the
Bankruptcy Code to collect such interest from Borrower), and (iv) all
Enforcement Expenses for which Borrower is now or hereafter becomes liable to
pay to Senior Creditor in connection with any of the foregoing under any
agreement or by applicable law.
"Senior Debt Default" shall mean an Event of Default under (and as
defined in) the Senior Creditor Loan Documents.
"Subordinated Debt" shall mean (i) all liabilities, indebtedness and
obligations of Borrower to Subordinated Creditor under or with respect to any of
the Subordinated Debt Documents, whether such liabilities, indebtedness or
obligations are now or hereafter existing and however and whenever made or
incurred, and whether direct or indirect, absolute or contingent, due or to
become due, or secured or unsecured, including all principal, interest and
premium on, and all other amounts payable in respect of, flee Subordinated Note,
and all fees, charges, commitment or other fees, indemnity amounts, enforcement
expenses (including reasonable attorneys' fees) and other amounts owing by
Borrower to Subordinated Creditor under any of the Subordinated Debt Documents;
and (ii) all renewals, extensions, substitutions, refundings, refinancings,
restructurings or replacements of any such liabilities, indebtedness or
obligations (including all successive renewals, extensions, substitutions
refundings, refinancings, restructurings or replacements of such liabilities,
indebtedness or obligations).
"Subordinated Debt Default" shall mean an Event of Default under, and
as defined in, the Subordinated Loan Agreement.
"Subordinated Debt Documents" shall mean and include the Subordinated
Loan and Security Agreement, the related Promissory Note, and all other
instruments and agreements now or hereafter evidencing or securing the payment
of the whole or any part of the Subordinated Debt.
2. The terms "herein," "hereof' and "hereunder' and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements shall include any
and all modifications thereto and any and all restatements, extensions or
renewals thereof. All references to "including" and "include" shall be
understood to mean "including, without limitation."
B. Subordination.
1. Subordinated Creditor hereby postpones and subordinates all of the
Subordinated Debt to the full and final payment and discharge of all of the
Senior Debt and Senior Creditor shall be entitled to receive payment in full of
all Senior Debt before any payment (other than a distribution of Reorganization
Securities) is made on account of or applied to any of Subordinated Debt.
2. Subordinated Creditor hereby subordinates any security interest or
liens it now has or may hereafter acquire in the Collateral and other assets of
the Borrower to any security interest in or liens upon the Collateral or other
assets of Borrower which Senior Creditor has under the Senior Creditor Loan
Documents or otherwise.
3. Each holder of Subordinated Debt, whether now outstanding or
hereafter created, incurred, assumed or guaranteed, shall be deemed to have
acquired the Subordinated Debt with full knowledge and subject to the terms and
provisions of this Agreement.
4. In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all
or any part of the assets of the Borrower or the proceeds thereof to creditors
of the Borrower or upon any indebtedness of the Borrower, by reason of the
liquidation, dissolution or other winding up of the Borrower or the Borrower's
business, or in the event of any sale of assets of the Borrower or insolvency
proceeding involving the Borrower or its assets, then and in any such event any
payment or distribution of any kind or character, whether in cash, securities or
other property (excluding Reorganization Securities), which shall be payable or
deliverable upon or with respect to any of the Subordinated Debt shall be paid
or delivered directly to Senior Creditor for application to the Senior Debt
(whether or not the same is then due) until all of the Senior Debt has been
fully paid and discharged. Each instrument evidencing Subordinated Debt shall at
all times bear a conspicuous legend that the Subordinated Debt evidenced thereby
is subordinated to the Senior Debt pursuant to this Agreement. The books and
records of Subordinated Creditor and any other holder of Subordinated Debt shall
be marked to evidence the subordination of all of the Subordinated Debt to and
in favor of the Senior Debt.
C. Warranties and Representations.
1. Subordinated Creditor hereby represents and warrants that: (i) it
has not relied nor will it rely on any representation or information of any
nature made by or received from Senior Creditor relative to Borrower in deciding
to execute this Agreement; (ii) no part of the Subordinated Debt is evidenced by
any instrument or writing except the Subordinated Debt Documents; (iii)
Subordinated Creditor is the lawful owner of the Subordinated Debt; (iv)
Subordinated Creditor has not heretofore assigned or transferred any of the
Subordinated Debt, or any interest therein; and (v) Subordinated Creditor has
not heretofore given any subordination in respect of the Subordinated Debt.
2. Each of the parties hereto represents and warrants to each of the
other parties hereto that this Agreement has been duly executed and delivered by
such party and is the valid and binding obligation of such party, enforceable
against such party in accordance tenth the terms hereof, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by principles of equity.
3. Subordinated Creditor acknowledges that this Subordination
Agreement is deemed to amend that certain Inter-Creditor Agreement by and among
Borrower, Subordinated Creditor, ProFutures Bridge Capital Fund, L.P. and Boston
Financial & Equity Corporation ("Inter-Creditor Agreement") in terms of the
order of perfection of security interests and liens, and subordinates
Subordinated Creditor's priority in certain assets of the Borrower, as currently
set forth in the Inter-Creditor Agreement, to Senior Creditor's priority in
certain assets of the Borrower, as set forth in this Agreement.
4. Subordinated Creditor agrees to copy the Senior Creditor with any
notices of default sent by Subordinated Creditor to the Borrower.
D. Negative Covenants. For so long as this Agreement is in effect,
Borrower and Subordinated Creditor agree with Senior Creditor that, except as
otherwise expressly provided in this Agreement: (a) Borrower shall not, directly
or indirectly, make any payment on account of any part of the Subordinated Debt;
(b) Subordinated Creditor shall not demand, collect or accept from Borrower any
payment on account of the Subordinated Debt or any part hereof, or accelerate
the maturity of the Subordinated Debt; (c) Subordinated Creditor shall not
exchange, set off, release, convert to equity or otherwise discharge any part of
the Subordinated Debt; (d) Subordinated Creditor shall not enforce or apply any
security, now or hereafter existing for the Subordinated Debt; (e) Subordinated
Creditor shall not hereafter give any subordination in respect of any of the
Subordinated Debt or transfer or assign any of the Subordinated Debt; (f)
Borrower shall not hereafter issue any instrument or other writing evidencing
any part of the Subordinated Debt other than the Subordinated Debt Documents,
and Subordinated Creditor will not receive any such writing; (g) Subordinated
Creditor shall not commence or join with any other creditors of Borrower in
commencing any bankruptcy, assignment for the benefit of creditors or creditor's
agreement; (h) Subordinated Creditor shall not institute, or join as a party in
the institution of, or assist in the prosecution of, any action, suit or
proceeding seeking a determination that the security interest of Senior Creditor
In any of the Collateral is invalid, unperfected or avoidable, or is or should
be subordinated to the interests of any others; and (i) Subordinated Creditor
otherwise shall not take or permit any action inconsistent with Senior
Creditor's priority position over Subordinated Creditor that is created by this
Agreement. Notwithstanding anything contained herein to the contrary, the
parties hereto agree that the Borrower or the Subordinated Creditor, as the case
may be, may take any of tile actions restricted in this Section 4 with flee
express written consent of the Senior Creditor (which consent may be withheld at
the sole discretion of the Senior Creditor).
E. Payment and Remedy Bars.
1. Until payment in full of the Senior Debt, no payment with respect to
the Subordinated Debt (include any payment due at maturity, whether by
acceleration or otherwise) shall be made by or on behalf of Borrower.
2. The Subordinated Creditor agrees that until payment in full of the
Senior Debt, no holder of Subordinated Debt shall take any action to (x)
accelerate the maturity of, or demand as immediately due and payable, all or any
part of the Subordinated Debt, (y) commence, continue or participate in any
judicial, arbitral or other proceeding or any other enforcement action of any
kind against Borrower or arty of such Borrower's assets (including any
involuntary proceeding; under the Bankruptcy Code) seeking, directly or
indirectly, to enforce any of their rights or remedies, or to enforce any of the
obligations incurred by Borrower under or in connection with the Subordinated
Debt or the Subordinated Debt Documents, or (z) continence or pursue any
judicial, arbitral or other proceeding or legal action of any kind, seeking
injunctive or other equitable relief to prohibit, limit or impair the
commencement or pursuit by Senior Creditor of any of its rights or remedies
under or in connection win the Senior Creditor Loan Documents or otherwise
available to Senior Creditor under applicable law.
F. Turnover of Prohibited Transfers. If notwithstanding the provisions
of this Agreement any payment, distribution, Collateral or security (other than
Reorganization Securities), or the proceeds thereof, are received by any holder
of Subordinated Debt on account of or with respect to any of the Subordinated
Debt, such payment, distribution, Collateral or security (other than
Reorganization Securities) shall be held in trust for the benefit of, and shall
immediately be paid or delivered by such holder to the Senior Creditor in the
form received (except for the addition of any endorsement or assignment
necessary to effect a transfer of all rights therein to Senior Creditor) for
application to the Senior Debt and other Borrower debt in the order established
by the Inter-Creditor Agreement. Senior Creditor is irrevocably authorized to
supply any required endorsement or assignment which may have been omitted. Until
so delivered, Subordinated Creditor shall exercise its best efforts to ensure
that such payment, distribution or security shall not be commingled with other
funds or property of Subordinated Creditor.
G. Amendments to Documents.
1. Senior Creditor and Borrower shall be authorized to amend any of
the Senior Creditor Loan Documents to which they are a party in accordance with
the terms thereof, and without prior notice to or the consent of any of the
holders of the Subordinated Debt.
2. Without the prior written consent of Senior Creditor (which consent
may be given or withheld in Senior Creditor's sole discretion), no provision of
the Subordinated Debt Documents shall be amended, modified or supplemented if
the effect thereof would be to (i) advance the originally scheduled dates for
the payment of principal, interest or other sums payable in respect of any
Subordinated Debt, or modify in any manner adverse to Borrower the dates for or
premiums payable in connection with prepayments, (ii) impose on Borrower
prepayment charges, closing fees or other fees or (iii) impose on Borrower any
representations, warranties, covenants, events of default or other provisions
that are more restrictive or burdensome to Borrower than the terms and
provisions of the Subordinated Debt Documents as in effect on the date of this
Agreement.
H. Certain Waivers and Consents. Borrower and Subordinated Creditor
each hereby waives any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance of this
Agreement in any action brought therefor by Senior Creditor. To the fullest
extent permitted by applicable law, Borrower and Subordinated Creditor each
hereby further waives: presentment, demand, protest, notice of protest, notice
of default or dishonor, notice of payment or nonpayment and any and all other
notices and demands of any kind in connection with all negotiable instruments
evidencing all or any portion of the Senior Debt; the right to require Senior
Creditor to marshal any Collateral or security, or to enforce any Lien that
Senior Creditor may now or hereafter have in any Collateral securing the Senior
Debt or to pursue any claim it may have against any guarantor of the Senior
Debt, as a condition to Senior Creditor's entitlement to receive any payment on
account of the Senior Debt; notice of the acceptance of this Agreement by Senior
Creditor; and notice of any credit made available to Borrower, extensions of
time granted, amendments to the Loan Agreement, the Security Agreement or the
other Senior Creditor Loan Documents, or other action taken in reliance hereon.
Subordinated Creditor hereby consents and agrees that Senior Creditor may,
without in any manner impairing, releasing or otherwise affecting the
subordination provided for in this Agreement or any of Senior Creditor's rights
hereunder and without prior notice to or the consent of Subordinated Creditor:
release, renew, extend, compromise or postpone the time of payment of any of the
Senior Debt; substitute, exchange or release any or all of the Collateral or
decline or neglect to perfect Senior Creditor's Lien upon any of the Collateral;
add or release any Person primarily or secondarily liable from any of the Senior
Debt; amend or modify any of the Senior Creditor Loan Documents or waive any
Senior Debt Default; and increase or decrease the amount of the Senior Debt or
the rate of interest or the amount of any other charges payable in connection
therewith
I. Subrogation. Provided that the Senior Debt has been indefeasibly
paid and discharged and any commitment that Senior Creditor may have under the
Senior Creditor Loan Documents to make loans or extend other credit has been
terminated or expired, the holders of Subordinated Debt shall be subrogated
(without any representation by or recourse to Senior Creditor) to the rights of
Senior Creditor to receive payments or distributions of cash, property or
securities payable or distributable on account of the Senior Debt, to the extent
that the Senior Creditor would be entitled to have such payments and
distributions paid over to or for its benefit; an for the purpose of such
subrogation, no payment or distribution to Senior Creditor of any cash, property
or securities to which the holders of Subordinated Debt would otherwise be
entitled except for the provisions of this Agreement, and no payment pursuant to
the provisions of this Agreement to Senior Creditor by the holders o
Subordinated Debt, shall, as between Borrower and its creditors other than
Senior Creditor and the holders of Subordinated Debt, be deemed to be a payment
by Borrower to or on account of any Subordinated Debt, it being understood that
the provisions of this Agreement are solely for the purpose of defining the
relative rights of Senior Creditor, on the one hand, and the holder of
Subordinated Debt, on the other. In no event, however, shall any holder of
Subordinated Debt have any rights or claims against Senior Creditor for any
impairment of Subordinated Creditor's subrogation rights that might result from
Senior Creditor's release of any Lien upon any Collateral, forgiveness,
compromise, extension or discharge of any Senior Debt, release of Borrower, or
vote to accept or reject any Plan.
J. Statement of Account. Subordinated Creditor agrees to render to
Senior Creditor from time to time upon Senior Creditor's request therefor a
statement of Borrower's account with Subordinated Creditor and Borrower agrees
to afford Senior Creditor access to the books and records of Borrower in order
that Senior Creditor may make a full examination of the state of accounts of
Borrower with Subordinated Creditor.
K. Validity of Subordinated Debt. The provisions of this Agreement
subordinating the Subordinated Debt to the Senior Debt are solely for the
purpose of defining the relative rights of Senior Creditor and Subordinated
Creditor and shall not impair, as between Subordinated Creditor and Borrower,
the obligation of Borrower, which is unconditional and absolute, to pay the
Subordinated Debt in accordance with its terms except as payment thereof may be
postponed in accordance with this Agreement.
L. Indulgences Not Waivers. Neither the failure nor any delay on the
part of Senior Creditor to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an estoppel, nor be
construed as an agreement to modify the terms of this Agreement, nor shall any
single or partial exercise of any right, remedy, power or privilege with respect
to any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver by a party hereunder
shall be effective unless it is in writing and signed by the party snaking such
waiver, and then only to the extent specifically stated in such writing.
M. Duration. This Agreement shall become effective when executed by
Borrower and Subordinated Creditor and accepted by Senior Creditor in So. San
Francisco, CA and, when so accepted, shall constitute a continuing agreement of
subordination, and shall remain in effect until all of the Senior Debt has been
paid in full in immediately available funds. Senior Creditor may, without notice
to Subordinated Creditor, extend or continue credit and make other financial
accommodations to or for the account of Borrower in reliance upon this
Agreement. The provisions of this Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time payment of any Senior Debt is
rescinded or otherwise must be returned by Senior Creditor, all as if any such
payment had not been made.
N. Default and Enforcement. If at any time any holder of Subordinated
Debt fails to comply with any provision of this Agreement that is applicable to
such holder, Senior Creditor may demand specific performance of this Agreement,
whether or not Borrower itself has complied with the terms hereof, and may
exercise any other remedy available at law or equity. Without limiting the
generality of the foregoing, if any holder of Subordinated Debt, in violation of
this Agreement, shall institute or participate in any action, suit or proceeding
against Borrower, then Borrower may interpose as a defense or dilatory plea this
Agreement and Senior Creditor is irrevocably authorized to intervene and to
interpose such defense or plea in its or Borrower's name. If any holder of
Subordinated Debt attempts to assert or enforce any Lien with respect to any
Collateral in violation of this Agreement, Borrower or Senior Creditor (in
Borrower's or Senior Creditors name) may by virtue of this Agreement restrain
such enforcement.
O. Litigation; Jurisdiction and Venue. Borrower, Senior Creditor,
Subordinated Creditor and each other holder of Subordinated Debt each hereby
irrevocably consents to the jurisdiction of the courts of the State of
California and of any federal court located in the State of California, in
connection with any action or proceeding arising out of or relating to this
Agreement. In any such litigation, Borrower, Subordinated Creditor, each other
holder of Subordinated Debt and Senior Creditor each hereby waives personal
service of any summons, complaint or other process, and agrees that the service
thereof may be made by certified mail direct to Borrower, Subordinated Creditor
and Senior Creditor at then respective places of business set forth in Section
16 hereof, and, in the case of any other holder of Subordinated Debt, at the
last known address for such holder. Within 30 days after such mailing, the party
so served shall appear and answer to such summons, complaint or other process.
Should the party so served fail to appear or answer within said 30-day period,
then such party failing to appear or answer shall be deemed in default and
judgment may be entered against such party for the amount or other relief as
demanded in any summons, complaint or other process so served. In the
alternative, in its sole discretion, any party may effect service upon any other
party in any other form or mariner permitted by applicable law. The choice of
forum set forth herein shall not be deemed to preclude the enforcement of any
judgment obtained in such forum or the taking of any action under this Agreement
to enforce the same in any appropriate jurisdiction, or the commencement by
Senior Creditor or Subordinated Creditor, in its sole discretion, of any action
or suit in any jurisdiction where any Collateral may be found to repossess or
foreclose upon any such Collateral.
P. Notices. Except as otherwise provided herein, whenever any notice,
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by the other party, or
whenever any party desires to give or serve upon any other party any
communication with respect to this Agreement, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be deemed to have been validly served, given or delivered (a) upon the
earlier of actual receipt and three (3) days after deposit in the United States
Mail, registered or certified mail, return receipt requested, with proper
postage prepaid, (b) upon transmission, when sent by telecopy or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this Section 16), (c) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid or (d) when hand-delivered,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number set forth below or to such other address (or
facsimile number) as may be substituted by notice given as herein provided:
(a) If to Senior Creditor: Imatron Inc.
389 Oyster Point Blvd.
So. San Francisco, CA 94080
Attention: S. Lewis Meyer
Facsimile: (650) 871-0418
With copies to:
Severson & Werson, P.C.
One Embarcadero Center, Suite 2600
San Francisco, CA 94111
Attention: Roger S. Mertz, Esq.
Facsimile: (415) 956-0439
If to Subordinated Creditor:
(b) If to Subordinated Lender: Uro-Tech Ltd.
1500 Three Lincoln Center
5430 LBJ Freeway
Dallas, Texas 75240
Attention: Gary B. Wood, Ph.D.
Facsimile: (214)_________
(c) If to Borrower: Positron Corporation
1304 Langham Creek Drive, Suite 310
Houston, Texas 77084
Attention: Howard R. Baker
Facsimile: (281) 492-2961
The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any person (over than Senior Creditor, Subordinated Lender or
Borrower) designated above to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
17. Entire Agreement. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements or conditions, whether express or implied, oral or written Neither
this Agreement nor any portion ox provision hereof may be changed, waived or
amended orally or in any manner other than by an agreement in writing signed by
Senior Creditor, Borrower and Subordinated Creditor.
18. Additional Documentation. Borrower and Subordinated Creditor shall
execute and deliver to Senior Creditor such further instruments and shall take
such further action as Senior Creditor may reasonably request from tune to time
in order to carry out the provisions and intent of this Agreement.
19. Successors and Assigns. This Agreement shall inure to the benefit
of Senior Creditor, its successors and assigns, and shall be binding upon both
Borrower and Subordinated Creditor and their respective successors and assigns;
provided, however, that neither Subordinated Creditor nor any subsequent holder
of any Subordinated Debt shall assign or transfer to any Person any part of the
Subordinated Debt.
20. Defects Waived. This Agreement is effective notwithstanding any
defect in the validity or enforceability of any instrument or document at any
time evidencing or securing the whole or any part of the Senior Debt.
21. Governing Law. The validity, construction and enforcement of this
Agreement shall be governed by the internal laws of the State of California.
22. Severability. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason be
held invalid or unenforceable, it is the intent of the parties that such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provision hereof, and that this Agreement shall be construed as if
such invalid or unenforceable provision had never been contained herein.
23. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties to this Agreement on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
24. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING
IN-CONTRACT, TORT, OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH, THIS AGREEMENT OR THE TRANSACTIONS HEREUNDER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed, sealed and delivered on the day and year first above written.
SUBORDINATED CREDITOR:
URO-TECH LTD.,
a Texas limited partnership
By:______________________________________
Name:____________________________________
Title:___________________________________
SENIOR CREDITOR:
IMATRON INC.
a California corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
BORROWER:
POSITRON CORPORATION,
a Texas corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
EXHIBIT 7.2
STOCK PURCHASE AGREEMENT
with Schedules and Exhibits
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made this 1st day of
May, 1998 by and between POSITRON CORPORATION, a Texas corporation with
principal offices located at 1304 Langham Creek Drive, Houston, Texas 77084
("SELLER") and IMATRON INC., a New Jersey corporation with principal offices
located at 389 Oyster Point Blvd., So. San Francisco, CA 94080 ("BUYER").
WHEREAS, Seller wishes to issue and sell to Buyer certain shares of its
common stock ("Shares") in exchange for certain consideration; and
WHEREAS, Buyer wishes to purchase such certain shares of common stock
issued by and from Seller pursuant to certain terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements, the Seller and Buyer hereby agree as follows:
AGREEMENT
1. Sale and Purchase of Shares. On the closing date as set forth in
Section 3 ("Closing Date"), Seller shall deliver to Buyer, for the consideration
set forth in Section 2 hereof, the greater of Nine Million (9,000,000) shares of
Seller's common stock or whatever number of common shares in excess of 9,000,000
common shares constitutes fifty-one percent (51%) of Seller's outstanding voting
securities on a fully diluted basis, exclusive of out of the money warrants,
and/or options, and/or convertible securities, calculated as of the Closing
Date. For this purpose, "out of the money" shall mean warrants and/or options
and /or convertible securities in which the purchase price of the underlying
common stock for which the warrant or the option may be exercised or the
security converted exceeds the fair market value of the underlying common stock
by more than 10%, as determined by averaging the bid and asked prices of the
common stock during the last ten (10) trading days immediately prior to the
Closing Date.
2. Consideration. In consideration of the purchase of the Shares on the
Closing Date, Buyer hereby agrees to pay the following consideration:
(a) The affirmative covenants of Buyer as described in
Section 10 herein.
(b) Payment of One Hundred U.S. Dollars ($100.00), payable at
Closing.
3. Closing. The closing of the sale to, and purchase by, Buyer of the
Shares shall take place at the offices of Imatron Inc. at the hour of 10:00
a.m., on the first business day after all conditions precedent shall have been
met or waived, or on such other day or at such other time or place as the Seller
and Buyer shall agree.
At the Closing, Seller will deliver to Buyer certificates representing
the Shares being purchased by Buyer, registered in its name.
4. Restriction on Transfer of Securities.
4.1. Restrictions. The Shares are transferable only pursuant
to (a) a public offering registered under the Securities Act of 1933, as amended
(the "Securities Act"), (b) Rule 144 (or any similar rule then in effect)
adopted under the Securities Act, if such rule is available, and (c) subject to
the conditions elsewhere specified in this Section 4, any other legally
available means of transfer.
4.2. Each certificate representing Shares will be endorsed
with the following legend:
(a) Legend
"The securities evidenced hereby may not be
transferred without (i) the opinion of counsel satisfactory to
the Company that such transfer may be lawfully made without
registration under the Securities Act of 1933 and all
applicable state securities laws or (ii) such registration."
(b) Stop Transfer Order. A stop transfer order shall be
placed with the Seller's transfer agent preventing transfer of any of the
securities referred to in paragraph (a) above pending compliance with the
conditions set forth in any such legend.
4.3. Removal of Legend. Any legend endorsed on a certificate
or instrument evidencing a security pursuant to Section 4.2 hereof shall be
removed, and Seller shall issue a certificate or instrument without such legend
to the holder of such security, (a) in accordance with Section 4.2(a) hereof,
(b) if such security is being disposed of pursuant to registration under the
Securities Act and any applicable state acts or pursuant to Rule 144 or any
similar rule then in effect, or (c) if such holder provides Seller with an
opinion of counsel satisfactory to it to the effect that a sale, transfer,
assignment, offer, pledge or distribution for value of such security may be made
without registration and that such legend is not required to satisfy the
applicable exemption from registration.
5. Representations and Warranties by Seller. Except as disclosed and
described in Schedule 5 hereto, Seller represents and warrants to Buyer that:
5.1. Organization, Standing, Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, and has the requisite corporate power and authority to own its
properties and to carry on its business in all material respects as it is now
being conducted. Seller has, or at the Closing Date will have, the requisite
corporate power and authority to issue the Common Shares, and to otherwise
perform its obligations under this Agreement. The copies of the Articles of
Incorporation and Bylaws of the Company delivered to Buyer or its agents prior
to the execution of this Agreement are true and complete copies of the duly
and legally adopted Articles of Incorporation and Bylaws of Seller in effect
as of the date of this Agreement.
5.2. Qualification. Seller is duly qualified or licensed as a
foreign corporation in good standing in each jurisdiction wherein the nature
of its activities or of its properties owned or leased makes such
qualification or licensing necessary and failure to be so qualified or
licensed would have a material adverse impact on its business.
5.3. Financial Statements. Attached hereto as Exhibit A are:
(a) a balance sheet at September 30, 1997, together with the related
statements of operations and cash flow, and changes to shareholders' equity
for the 9 month period then ended, and (b) a draft of a balance sheet at
December 31, 1997 (the "Balance Sheet Date"), and the related statements of
operations and cash flow for the quarter then ended, prepared by Seller. Such
financial statements (i) are true and correct and in accordance with the books
and records of Seller, (ii) present fairly the financial condition of Seller
at the balance sheet dates and the results of its operations for the periods
therein specified, and (iii) have, in all material respects, been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods, except that the balance sheet at
December 31, 1997 and related statements of operations and cash flow is in
draft form and does not contain footnotes. Specifically, but not by way of
limitation, the balance sheets or notes thereto disclose all of the debts,
liabilities and obligations of any nature (whether absolute, accrued or
contingent and whether due or to become due) of Seller at December 31, 1997
and at the Balance Sheet Date which, individually or in the aggregate, are
material and which in accordance with generally accepted accounting principles
would be required to be disclosed in such balance sheets, and the omission of
which would, in the aggregate, have a material adverse impact on Seller. The
balance sheets include appropriate reserves for all taxes and other
liabilities accrued at such date but not yet payable.
5.4. Tax Returns and Audits. Except as disclosed and
described on Schedule 5.4 hereto, all required federal, state and local tax
returns or appropriate extension requests of Seller have been filed, and all
federal, state and local taxes required to be paid with respect to such
returns have been paid or due provision for the payment thereof has been made.
Except as disclosed and described on Schedule 5.4, Seller is not delinquent in
the payment of any such tax or in the payment of any assessment or
governmental charge, Seller has not received notice of any tax deficiency
proposed or assessed against it, and Seller has not executed any waiver of any
statute of limitations on the assessment or collection of any tax. None of
Seller's tax returns has been audited by governmental authorities in a manner
to bring such audits to the Seller's attention. Seller does not have any tax
liabilities except those reflected in Schedule 5.4 hereto and those incurred
in the ordinary course of business since the Balance Sheet Date.
5.5. Litigation; Governmental Proceedings. Except as
disclosed and described on Schedule 5.5 hereto: there are no legal actions,
suits, arbitrations or other legal, administrative or governmental proceedings
or investigations pending or, to the knowledge of Seller, threatened against
Seller, its properties, assets or business; Seller is not aware of any facts
which are likely to result in or form the basis for any such action, suit or
other proceeding; Seller is not in default with respect to any judgment, order
or decree of any court or any governmental agency or instrumentality; Seller
has not been threatened with any action or proceeding under any business or
zoning ordinance, law or regulation.
5.6. Compliance with Applicable Laws and Other Instruments.
The business and operations of Seller have been and are being conducted in
accordance with all applicable laws, rules and regulations of all governmental
authorities. Subject to shareholder approval of appropriate amendments to the
Articles of Incorporation as contemplated by this Agreement, and except with
respect to existing registration rights of holders of certain securities
issued by Seller, as disclosed and described on Schedule 5.6, neither the
execution nor delivery of, nor the performance of or compliance with, this
Agreement nor the consummation of the transactions contemplated hereby will
conflict with, or, with or without the giving of notice or passage of time,
result in any breach of, or constitute a default under, or result in the
imposition of any lien or encumbrance upon any asset or property of Seller
pursuant to, any applicable law, administrative regulation or judgment, order
or decree of any court or governmental body, any agreement or other instrument
to which Seller is a party or by which it or any of its properties, assets or
rights is bound or affected, and will not violate the Articles of
Incorporation or Bylaws of Seller. Seller is not in violation of its Articles
of Incorporation or its Bylaws.
5.7. Common Shares. The Common Shares, when issued and paid
for pursuant to the terms of this Agreement, will be duly authorized, validly
issued and outstanding, fully paid, nonassessable and free and clear of all
pledges, liens, encumbrances and restrictions. The Common Shares, when issued,
will contain no undisclosed interest, present or future, and Seller does not
know, and at Closing will not know, of any assertion of such an interest. The
Common Shares will be genuine, and Seller has no knowledge of any fact which
would impair the validity thereof.
5.8. Capital Stock. The currently authorized capital
stock of Seller is as follows:
SECURITY AUTHORIZED ISSUED COMMON SHARE EQUIVALENT RESERVED
Common 15,000,000 5,128,990 5,128,990
Series A Preferred 5,450,000 1,595,005 1,614,705
Series B Preferred 35,000 25,000 632,721
All of the outstanding shares of capital stock of Seller have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
disclosed and described in Schedule 5.8, neither the offer nor the issuance or
sale of the Common Shares as contemplated by this Agreement constitutes an
event, under any anti-dilution provisions of any securities issued or issuable
by Seller or any agreements with respect to the issuance of securities by
Seller, which will either increase the number of shares issuable pursuant to
such provisions or decrease the consideration per share to be received by Seller
pursuant to such provisions. All outstanding securities of Seller have been
issued in full compliance with an exemption or exemptions from the registration
and prospectus delivery requirements of the Securities Act and from the
registration and qualification requirements of all applicable state securities
laws. Seller is not a party or subject to any agreement or understanding, and to
Seller's knowledge, there is no agreement or understanding between any persons
or entities or by a director of Seller, which affects or relates to the voting
or giving of written consents with respect to any security of Seller.
5.9. Warrants, Options, Exchange Rights and Conversion
Rights. Except as otherwise disclosed and described in Schedule 5.9 hereto or as
contemplated by this Agreement, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, calls, contracts, demands,
commitments, Convertible Securities (as hereinafter defined) or other agreements
or arrangements of any character or nature whatever, under which Seller is or
may be obligated to issue capital stock or other securities of any kind
representing an ownership interest or contingent ownership interest in Seller.
Except as otherwise disclosed and described in Schedule 5.9 hereto or as
contemplated by this Agreement, there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
Seller.
5.10. No Brokers or Finders. No person, firm or corporation
has or will have, as a result of any act or omission of Seller, any right,
interest or valid claim against or upon the Seller or Buyer for any commission,
fee or other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement. Seller will
indemnify and hold Buyer harmless against any and all liability with respect to
any such commission, fee or other compensation which may be payable or
determined to be payable in connection with the transactions contemplated by
this Agreement.
5.11. Composition of the Board of Directors. As of the
Execution Date, the complete Board of Directors of Seller consists of those
persons, including vacant positions, as set forth on Schedule 5.11.
6. Representations and Warranties of Buyer. Buyer represents and
warrants that:
6.1. Investment Intent. The Common Shares being acquired
hereunder are being purchased for Buyer's own account and not with the view to,
or for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act. Buyer understands that the Common
Shares have not been registered under the Securities Act or any applicable state
laws by reason of their issuance or contemplated issuance in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act and such laws, and that the reliance of Seller and others upon
this exemption is predicated in part upon this representation and warranty.
Buyer further understands that the Common Shares may not be transferred or
resold without (a) registration under the Securities Act and any applicable
state securities laws, or (b) an exemption from the requirements of the
Securities Act and applicable state securities laws.
6.2. Accredited Investor. The state in which Buyer's
principal office is located is set forth in Buyer's address as set forth in this
Agreement. Buyer qualifies as an accredited investor within the meaning of Rule
501 under the Securities Act. Buyer has such knowledge and experience in
financial and business matters that Buyer is capable of evaluating the merits
and risks of the investment to be made hereunder by Buyer.
6.3. Acts and Proceedings. This Agreement has been duly
authorized by all necessary action on the part of Buyer, has been duly executed
and delivered by Buyer, and is a valid and binding agreement upon the part of
Buyer.
6.4. No Brokers or Finders. No person, firm or corporation
has or will have, as a result of any act or omission by Buyer, any right,
interest or valid claim against Seller for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement. Buyer will indemnify and
hold Seller harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined to be
payable as a result of the actions of Buyer in connection with the transactions
contemplated by this Agreement.
7. Conditions of Buyer's Obligation. Buyer's obligation to purchase and
pay for the Common Shares on the Closing Date is subject to the fulfillment
prior to or on the Closing Date of the conditions set forth below. In the event
that any such condition is not satisfied to Buyer's satisfaction, then Buyer
shall not be obligated to proceed with the purchase of such Common Shares nor
otherwise with any further of its obligations pursuant to this Agreement.
7.1. No Errors. etc. The representations and
warranties of Seller under this Agreement shall be true in all material
respects as of the Closing Date with the same effect as though made on and as
of the Closing Date.
7.2. Compliance with Agreement. Seller shall have performed
and complied in all material respects with all agreements or conditions required
by this Agreement to be performed and complied with by it prior to or as of the
Closing Date.
7.3. Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Common Shares shall have been
obtained.
7.4. Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory in
form and substance to Buyer and its counsel.
7.5. Resignation of Officers and Appointment of Chief
Executive Officer. Seller will obtain and deliver to Buyer the resignations of
each of the officers of Seller, including but not limited to its chief executive
officer, effective as of the Closing Date, and simultaneously therewith shall
cause the appointment of a chief executive officer and such other officers as
are designated by Buyer. Seller acknowledges that the officers' resignations
pursuant to this Section 7.5 will not constitute resignation by any such
employee from employment by Seller, unless specifically so indicated, and
further that such resignation pursuant to this Section 7.5 will not be deemed a
breach of any employment agreement which might be in effect between Seller and
such employee. Seller further acknowledges that delivery and acceptance of such
resignation does not otherwise modify the terms of any employment agreement
which may be in effect, nor is it intended to effect Seller's ability to
negotiate mutually acceptable changes in future to any employment agreement
which may be currently in effect.
7.6. Special Shareholders' Meeting. Promptly following
execution of this Agreement, Seller shall take, with the assistance of Buyer as
set forth in this Agreement, all such actions as may be necessary and shall
cause the convening of a Special Meeting of Shareholders as promptly as possible
to amend the Articles of Incorporation to authorize an increase in its
authorized common stock in such an amount as to fully effectuate the provisions
of this Agreement, taking into account such obligations as Seller may currently
have or may be expected to have in the foreseeable future in light of its
business plan. It is the reasonable expectation of the parties that the
appropriate number of authorized shares resulting from such amendment will be
not less than 100,000,000 common shares.
7.7. Board Resignations. (a) Upon request of Buyer at any
time between execution of this Agreement and the Closing Date, to be effective
upon the Closing Date, Seller will obtain and deliver to Buyer the resignations
of at least three of the four members of its Board of Directors, as reflected on
Schedule 5.11 to this Agreement. (b) Immediately upon Closing, Seller will cause
a sufficient number of directors' resignations to be effective and thereupon
will cause the nominees of Buyer to be elected as directors of Seller in place
of the resigned directors or otherwise to fill vacancies on the Board, so that,
following such action, the nominees of Buyer will constitute a majority of the
members of the Board then in office.
8. Conditions of Seller's Obligation. Seller's obligation to sell the
Common Shares to Buyer on the Closing Date is subject to the fulfillment prior
to or on the Closing Date of the conditions set forth below. In the event that
any such condition is not satisfied, Seller shall not be obligated to proceed
with the sale of such Common Shares.
8.1. Shareholder Authorization. The shareholders shall have
authorized an increase in the number of authorized shares of common stock
sufficient to fully effectuate the purposes of this Agreement.
8.2. No Errors, etc. The representations and warranties of
Buyer under this Agreement shall be true in all material respects as of the
Closing Date with the same effect as though made on and as of the Closing Date.
8.3. Compliance with Conditions. Buyer shall have performed
and complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Closing Date.
9. Seller Affirmative Covenants. Seller covenants and agrees that:
9.1. Corporate Existence. Seller will maintain and cause each
Subsidiary (as hereinafter defined) to maintain its corporate existence in good
standing and comply with all applicable laws and regulations of the United
States or of any state or states thereof or of any political subdivision thereof
and of any governmental authority where failure to so comply would have a
material adverse impact on Seller or its business or operations.
9.2. Books of Account and Reserves. Seller will, and will
cause each of its Subsidiaries to, keep books of record and account in which
full, true and correct entries are made of all of its and their respective
dealings, business and affairs, in accordance with generally accepted accounting
principles. Seller will employ certified public accountants selected by the
Board who are "independent" within the meaning of the accounting regulations of
the Commission, and have annual audits made by such independent public
accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as will
enable them to give such reports or opinions with respect to the financial
statements of Seller and its Subsidiaries as will satisfy the requirements of
the Commission in effect at such time with respect to certificates and opinions
of accountants.
9.3. Furnishing of Financial Statements and Information.
Seller will deliver to Buyer:
(a) as soon as practicable, but in any event within 45 days after the close
of each quarterly period, unaudited consolidated balance sheets of Seller and
its Subsidiaries as of the end of such period, together with the related
consolidated statements of operations and cash flow for such period, setting
forth the budgeted figures for such period prepared and submitted in connection
with Seller's annual business plan and in comparative form figures for the
corresponding quarterly period of the previous fiscal year, all in reasonable
detail and certified by an authorized accounting officer of Seller, subject to
year-end adjustments;
(b) as soon as practicable, but in any event within 90 days after the end
of each fiscal year, a consolidated balance sheet of Seller and its
Subsidiaries, as of the end of such fiscal year, together with the related
consolidated statements of operations, shareholders' equity and cash flow for
such fiscal year, setting forth in comparative form figures for the previous
fiscal year, all in reasonable detail and duly certified by Seller's independent
public accountants (except for the fiscal year ended 1997, for which certified
materials will be supplied as soon as practicable following Closing), which
accountants shall have given Seller an opinion, unqualified as to the scope of
the audit, regarding such statements;
(c) with reasonable promptness, such other financial data relating to the
business, affairs and financial condition of Seller and any Subsidiaries as is
available to Seller and as from time to time Buyer may reasonably request; and
(d) at least 20 days prior to the earlier of (i) the execution of any
agreement relating to any merger or consolidation of Seller or any of its
Subsidiaries with another corporation, or a plan of exchange involving the
outstanding capital stock of Seller or any of its Subsidiaries, or the sale,
transfer or other disposition of all or substantially all of the property,
assets or business of Seller or any of its Subsidiaries to another corporation,
or (ii) the holding of any meeting of the shareholders of Seller for the purpose
of approving such action, written notice of the terms and conditions of such
proposed merger, consolidation, plan of exchange, sale, transfer or other
disposition.
9.4. Indemnification Rights. For a period of not less than
six (6) years from the Closing Date, unless otherwise required by law, Seller
will maintain provisions in its articles of incorporation and by-laws with
respect to indemnification of directors and officers, whether then current or
former, that are no less favorable than as currently set forth in its articles
of incorporation and by-laws. Further, for a period of not less than six (6)
years from the Closing Date, unless otherwise required by law, Seller will
continue to provide indemnification of its directors and officers, whether then
current or former, to the fullest extent permissible under Texas law.
10. Buyer's Affirmative Covenants. Upon execution of this Agreement,
Buyer agrees as follows:
10.1. Special Shareholders' Meeting. In connection with
Special Shareholders' Meeting to be called pursuant to Section 7.6 herein, Buyer
agrees to assist Seller as reasonably requested and agreed in preparing
materials and soliciting proxies in connection with obtaining approval of its
shareholders to increase its authorization to issue common stock in connection
with the transaction contemplated by this Agreement. As part of Buyer's
obligations hereunder, Buyer agrees reimburse Seller for expenses incurred in
preparing materials and soliciting proxies, not in excess of the amounts set
forth in Schedule 10.1, and further to furnish Seller, within reasonably
sufficient time to be reviewed and included in the materials to be mailed to
shareholders in connection with the Special Shareholders' Meeting, the names of
Buyer's nominees for election to the Board, together with information with
respect to each nominee equivalent to the information required to be disclosed
to stockholders with respect to director nominees pursuant to Regulation 14A of
the Securities and Exchange Act and such other similar information that Seller
may thereafter reasonably request. It is understood that Seller may refuse to
cause the nomination and election as a director of Seller of any nominee
proposed by Buyer if (i) the information described above is not timely furnished
by Buyer or (ii) if, having been furnished, it is the reasonable judgment of
Seller and its counsel that the election of such nominee would not be in the
best interests of Seller or might tend to subject Seller to liability therefor.
The foregoing notwithstanding, Buyer and Seller agree to cooperate and use their
mutual best efforts for the purpose of preparing for and conducting the Special
Shareholders' Meeting as promptly as possible following the Execution Date.
10.2. Orders for Product. As soon as practicable following
the Closing Date, but not later than eight (8) months from the Execution Date,
Buyer will take all reasonable efforts to cause the placement of ten (10)
product orders, in the aggregate including any orders currently under
discussion, from Buyer's affiliate in Japan over a period of thirty-six (36)
months from the placement of the first order.
10.3. Additional Equity. As soon as practicable following the
Closing Date, Buyer will use its best efforts to arrange for additional third
party equity financing for Seller, to be contributed to Seller over a period of
no greater than eighteen (18) months from the Closing Date, and in an aggregate
amount not less than Eight Million U.S. Dollars ($8,000,000) ("Equity
Financing"). The parties specifically acknowledge and anticipate that this
Equity Financing will involve and/or cause a substantial dilution of existing
shareholders, including but not limited to Buyer.
11. Negative Covenants. Seller will not, without the prior approval of
a majority of all of the members of the Board of Directors: (a) guarantee,
endorse or otherwise be or become contingently liable, or permit any Subsidiary
to guarantee, endorse or otherwise become contingently liable, in connection
with the obligations, securities or dividends of any person, firm, association
or corporation, other than Seller or any of its Subsidiaries, except that Seller
and any Subsidiary may endorse negotiable instruments for collection in the
ordinary course of business; or (b) make or permit any Subsidiary to make loans
or advances to any person (including without limitation to any officer, director
or shareholder of Seller or any Subsidiary), firm, association or corporation,
except loans and advances to Seller and its wholly-owned Subsidiaries and
advances to suppliers and employees made in the ordinary course of business; or
(c) purchase or invest, or permit any Subsidiary to purchase or invest, in the
stock or obligations of any other person, firm or corporation, other than a
wholly-owned Subsidiary; or (d) pay, or permit any Subsidiary to pay,
compensation, whether by way of salaries, bonuses, participations in pension or
profit sharing plans, fees under management contracts or for professional
services or fringe benefits to any officer in excess of amounts fixed by the
Board of Directors prior to any payment to such officer.
12. Registration of Stock. Subject to the provisions of the several
registration rights agreements and /or other agreements containing registration
rights provisions, to which Seller is a party, all as disclosed and described on
Schedule 12 hereto, Seller agrees as follows:
12.1. Rights to Registration. (a) If, at any time during the
period commencing on the effective date of this Agreement and ending ten (10)
years thereafter, Seller shall determine to register under the Securities Act of
1933, as amended, any shares of Stock to be offered for cash by it or others,
pursuant to a registration statement on Form S-1 (or its equivalent), Seller
will (i) promptly give written notice to Buyer of its intention to file such
registration statement and (ii) at Seller's expense (which shall include,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent accountants for Seller, and fees
and expenses incident to compliance with state securities law, but shall not
include fees and disbursements of counsel for Buyer) include among the
securities covered by the registration statement such portions of the Shares
then held by Buyer as shall be specified in a written request to Seller within
thirty (30) days after the date on which Seller gave the notice described in
(a)(i) above. (b) Upon receipt of such written request and of the shares of
Stock specified in the request (any shareholder requesting registration being
individually called a "Selling Shareholder"), Seller shall: (i) use its
reasonable best efforts to effect the registration, qualification or compliance
of the Shares under the Securities Act and under any other applicable federal
law and any applicable securities or blue sky laws of jurisdictions within the
United States; (ii) furnish each Selling Shareholder such number of copies of
the prospectus contained in the registration statement filed under the
Securities Act (including preliminary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as the Selling
Shareholder may reasonably request in order to facilitate the disposition of the
Stock covered by the registration statement; and (iii) notify each Selling
Shareholders, at any time when a prospectus relating to the Stock covered by
such registration statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus forming a
part of such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
at the request of the Selling Shareholders prepare and furnish to the Selling
Shareholders any reasonable number of copies of any supplement to or amendment
of such prospectus as may be necessary so that, as thereafter delivered to
purchasers of the Stock, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
12.2. Registration of Underwritten Offering. If the offering
of securities to be registered by Seller is underwritten, each Selling
shareholder shall sell the Stock to or through the underwriter(s) of the
securities being registered for the account of Seller or others upon the same
terms applicable to Seller or others, and if the managing underwriter(s)
reasonably determine that all or any portion of the shares of Stock held by the
Selling Shareholders should not be included in the registration statement, then
notwithstanding anything to the contrary in this Section, the determination of
such underwriter(s) shall be conclusive; provided however that if such
underwriter(s) determine that some but not all of the Stock of the Selling
Shareholders shall be included in the registration statement, the number of
shares of Stock owned by each Selling Shareholder to be included in the
registration statement will be proportionately reduced in accordance with the
respective written requests given as provided above.
12.3. Indemnification. In the event that Shares purchased
pursuant to this Agreement are included in a registration statement under this
Section 11, Seller will indemnify and hold harmless each Selling Shareholder and
each other person, if any, who controls such Selling shareholder within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such Selling Shareholder or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement pursuant to which the Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or arise out
of or are based upon the failure by Seller to file any amendment or supplement
thereto that was required to be filed under the Securities Act, and will
reimburse such Selling Shareholder and each such controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding the foregoing, Seller will not be liable in any such case to the
extent that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or omission made in such registration statement,
preliminary prospectus, final prospectus or amendment or supplement in reliance
upon and in conformity with written information furnished to Seller through an
instrument duly executed by or on behalf of any Selling Shareholder specifically
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, or amendment or supplement.
It shall be a condition precedent to the obligation of Seller to take
any action pursuant to this Section that seller shall have received an
undertaking satisfactory to it from each Selling Shareholder to indemnify and
hold harmless Seller (in the same manner and to the same extent as set forth in
this Section), each director of Seller, each officer who shall sign such
registration statement, and any persons who control Seller within the meaning of
the Securities Act, with respect to any statement or omission from such
registration statement, preliminary prospectus, or any final prospectus
contained therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to Seller through an instrument duly executed by the indemnifying
party specifically for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, or amendment or supplement.
Promptly following receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to above in this Section
11.3, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in connection with
the defense thereof.
12.4. Binding provisions. The provisions of this Section 11
shall be binding on the successors of Seller. No Shareholder may assign the
provisions of this Section 11 or all or any part of its or their rights or
obligations hereunder, except that in the event of a merger or consolidate in
which the Seller is not the survivor, the Seller shall assign and transfer, and
successor shall assume, the provisions of this Section 11.
12.5. Conflicts. To the extent that Seller's compliance with
the obligations set forth in Sections 12.1 through 12.4 above would conflict
with or otherwise cause a breach of or default under any of its existing
obligations pursuant to the agreements set forth on Schedule 12 attached hereto,
Seller's failure to comply with those obligations shall not be deemed a breach
of this Agreement.
13. Remedies Cumulative, and not Waived. (a) No right, power or remedy
conferred upon any party shall be exclusive, and each such right, power or
remedy shall be cumulative and in addition to every other right, power or
remedy, whether conferred hereby or by any such security or now or hereafter
available at law or in equity or by statute or otherwise. (b) No course of
dealing between the parties or the holder of any Shares purchased pursuant to
this Agreement, and no delay in exercising any right, power or remedy conferred
hereby or by any such security or now or hereafter existing at law or in equity
or by statute or otherwise, shall operate as a waiver of or otherwise prejudice
any such right, power or remedy; provided, however, that this Section 13 shall
not be construed or applied so as to negate the provisions and intent of any
statute which is otherwise applicable.
14. Changes. Waivers. etc. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
15. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered, or
mailed first-class postage prepaid, registered or certified mail, or via
overnight delivery with by a service providing evidence of receipt to the
addresses below:
If to Buyer: Imatron Inc.
389 Oyster Point Blvd.
South San Francisco, CA 94080
Attn: Mr. S. Lewis Meyer, President
Telephone: (415) 583-9964
Facsimile: (415) 871-0418
Copy to: Roger S. Mertz, Esq.
Severson & Werson, P.C.
One Embarcadero Center
Suite 2600
San Francisco, CA 94111
Telephone: (415) 398-3344
Facsimile: (415) 956-0439
If to Seller: Positron Corporation
1304 Langham Creek Drive, Suite 310
Houston, Texas 77084
Attn: President
Telephone: (281) 492-7100
Facsimile: (281) 492-2961
Copy to: Michael D. Wortley, Esq.
Vinson & Elkins
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Telephone: (214) 220-7700
Facsimile: (214) 999-7732
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by first class mail, three days after posting, or if
sent via overnight delivery, when received as evidenced by an appropriate
receipt.
16. Survival of Representations and Warranties, etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by Buyer or on
its behalf, and the sale and purchase of the Common Shares. All statements
contained in any certificate, instrument or other writing delivered by or on
behalf of Seller pursuant hereto or in connection with or contemplation of the
transactions herein contemplated (other than legal opinions) shall constitute
representations and warranties by Seller hereunder, and not by the individual
officer who signed the certificate, instrument or writing by or on behalf of
Seller.
17. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be enforceable by the
holder or holders at the time of any of the Common Shares. The former, current
and hereafter appointed officers and directors referenced in Section 9.4 above
are intended and deemed to be third party beneficiaries of Section 9.4, and are
entitled to enforce its provisions.
18. Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
19. Choice of Law. It is the intention of the parties that the laws of
California shall govern the validity of this Agreement, the construction of its
terms and the interpretation of the rights and duties of the parties.
20. Counterparts. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. Severability. In the event that any part of this Agreement is
determined by a court of competent jurisdiction to be unenforceable, the balance
of the Agreement shall remain in full force and effect.
IN WITNESS WHEROF, the parties execute this Agreement as of the date
first written above.
SELLER: BUYER:
POSITRON CORPORATION IMATRON INC.
By: /s/ Gary B. Wood By: /s/ S. Lewis Meyer
Its: Chief Executive Officer Its: President/CEO
ATTEST: ATTEST:
By: /s/ Howard R. Baker By: /s/ Gary H. Brooks
Its: Executive Vice President Its: CFO
<PAGE>
EXHIBIT A
FINANCIAL STATEMENTS
[9/30/97 10Q previously filed with SEC by Positron not reprinted here]
<PAGE>
SCHEDULES
DISCLOSURE SCHEDULES
TO
STOCK PURCHASE AGREEMENT BETWEEN
POSITRON CORPORATION
AND
IMATRON INC.
<PAGE>
POSITRON CORPORATION
Schedule 5.4--Tax Returns and Audits
Except as disclosed and described, all federal, state and local tax returns or
appropriate extension requests have been filed; all federal, state and local
taxes have been paid or due provision made; there are no delinquencies in the
payment of such tax or assessment or governmental charge; no notices of
deficiencies proposed or assessed has been received; Seller has not executed any
waiver of any statute of limitations on assessment or collection of any tax; no
tax returns have been audited; there are no tax liabilities, except as follows:
1. Property taxes in the approximate amount of $185,000, of which
approximately $80,000 relates to prior years.
2. State sales taxes in the State of Texas in the approximate amount
of $4,000.
3. State sales taxes to the State of Florida in the approximate amount
of $12,000.
4. State sales taxes to the State of New York in the approximate
amount of $56,000.
<PAGE>
POSITRON CORPORATION
Schedule 5.5--Litigation or Governmental Proceedings
Except as disclosed and described, there are no legal actions, suits,
arbitration, or other legal, administrative or governmental proceedings or
investigations pending or threatened; Seller is aware of no facts likely to
result in or form a basis for such action; Seller is not in default with respect
to any judgment, order or decree or any court or governmental agency or
instrumentality; Seller is not threatened with any action or proceeding except
as follows:
1. We have been informed that Xin Xin intends to proceed with arbitration
relative to its contract with Positron Corporation for the purchase of two
POSICAM systems.
2. Numerous letters have been received from vendors threatening legal action
against the Company for its failure to pay outstanding trade payables.
3. The loan from ProFutures Bridge Capital is in default due to the failure of
the Company to pay the full $50,000 per month due on the loan. The Company's
payments have averaged approximately $45,000 per month. ProFutures has
threatened legal action.
4. All former and existing employees who are owed unpaid salaries, wages and
benefits have a claim against the Company. The amounts due could be collected
through legal action or by the Texas Workforce Commission.
5. Hadassah Medical Organization has threatened legal action if the Company
does not immediately replace its existing POSICAM system with a new system. To
date no formal legal action has been filed.
6. University Madrid PET Center has also threatened legal action if its
existing POSICAM is not upgraded to a newer machine that meets its expectations.
7. Nizar Mullani, a former director of the Company, claims that he is owed
consulting fees and royalties of approximately $150,000. The Company disputes
the amount of royalty actually owed to Mullani. Mullani has threatened legal
action. To date no formal action has been taken by Mr. Mullani.
8. Harris County, Texas has been awarded a default judgment against the Company
for its failure to pay property taxes in the approximate amount of $80,000.
9. Bowne of Dallas, Inc. received a default judgment against the Company in the
amount of $31,277.05.
10. Boxer Property (Landlord) has issued a notice for Positron Corporation to
vacate remaining space. Agreement has been reached for Positron to consolidate
its space and relocate to another facility as soon as possible.
<PAGE>
POSITRON CORPORATION
Schedule 5.6--Compliance With Laws and Other Instruments
Disclosure of any existing registration rights of holders of certain securities
issued by Seller. Further, except as disclosed and described, the execution,
delivery and performance of the transactions contemplated by the Agreement will
not conflict with, result in a breach of, constitute, agreement or instrument to
which Seller is a party or by which it or any of its properties or assets is
bound, nor violate its Articles or Bylaws, except as follows:
A. 93 Registration Rights
A. Covers "Registrable Securities" consisting of:
(i) 353,531 shares of Common Stock issued upon
conversion of the Series E Preferred Stock;
(ii) Warrants issued in the 93 Placement and shares of
Common Stock issuable upon exercise of the Warrants
(the Warrants are currently exercisable for 527,743
shares of Common Stock at $5.51 per share);
Upon the registration of the Warrants pursuant to an
exercise of a demand right or piggyback right, the
terms and provisions of such Warrants are to be
amended to be identical or substantially identical to
the terms and provisions as then existing for the
Redeemable Warrants.
B. Demand Rights:
(i) exercisable by 30% of holders of Registrable
Securities (calculated assuming exercise of
Warrants);
(ii) have 2 demand rights exercisable as follows:
a. one demand right is exercisable commencing
day 180 (measured from the
effective date) and ending day 270;
b. The second demand right is exercisable
commencing day 271 and ending 5 years from
the effective date, if exercised prior to
the second anniversary of the effective date
and not as a part of a firm commitment
underwriting, unless waived by Josephthal,
Lyon & Ross, such demand right is limited to
the offering during any 90-day period of:
1. 200,000 shares of Common Stock
2. Warrants exercisable for 200,000
shares of Common Stock
3. 200,000 shares of Common Stock
issuable upon the exercise of
the registered Warrants.
c. Unless waived by JL&R, the demand rights
individually or in the aggregate may not be
exercised prior to day 390 in a manner to
exceed:
1. 325,000 shares of Common Stock
2. Warrants exercisable for 325,000
shares of Common Stock
3. 325,000 shares of Common Stock
issuable upon the exercise of
the registered warrants
C. Piggyback Rights:
(i) Have 3 piggyback rights that become exercisable after
day 390.
B. General Registration Rights
A. Covers Common Stock held by certain shareholders other than
Common Stock received as a part of the 93 Placement.
B. Demand Rights
(i) exercisable by 30% of the holders of "Registrable
Securities"
(ii) Have 2 demand rights exercisable as follows:
a. The demand rights are exercisable commencing
day 570 and ending the 5th anniversary of the
effective date;
C. Piggyback Rights
(i) Have 3 piggyback rights
(ii) Cut back provisions give priority to the Underwriter,
the Company and then to the 93 registration rights if
the 93 holders are exercising a demand right.
D. Overall Restriction
(i) Unless waived by JL&R any exercise of a demand right
or piggyback right prior to the 2nd anniversary of
the effective date and not as a part of a firm
commitment underwriting is limited to the offering
during any 90-day period of 200,000 shares of Common
Stock.
C. Other Registration Rights
A. One holders has piggyback rights for 977 shares of Common
Stock.
Note: The Underwriter warrants from the IPO were exchanged for
Series A Preferred Stock.
<PAGE>
POSITRON CORPORATION
Schedule 5.8--Capital Stock
Except as disclosed and described, neither the offer nor issuance or sale of
additional stock as contemplated will constitute an event under any
anti-dilution provisions of any securities issued or issuable or any agreements
with respect to issuance of Seller which will increase the number of shares
issuable pursuant to such provisions or decrease the consideration per share to
be received by the Seller, except as described in Footnotes 6 and 7 to the
Company's Annual Report on Form 10 KSB for the Year Ended December 31, 1996.
See attached capital structure.
<PAGE>
Section 5.8 requirements:
- --------------------- ------------ ------------ -------------- ---------------
COMMON
SECURITY AUTHORIZED ISSUED EQUIVALENT RESERVED
- --------------------- ------------ ------------ -------------- ---------------
- --------------------- ------------ ------------ -------------- ---------------
Common Stock 15,000,000 5,128,990 5,128,990 9,871,010
- --------------------- ------------ ------------ -------------- ---------------
- --------------------- ------------ ------------ -------------- ---------------
Series A Preferred
Stock 5,450,000 1,595,005 1,595,005
- --------------------- ------------ ------------ ------------- ----------------
- --------------------- ------------ ------------ ------------- ----------------
Series B Preferred
Stock 25,000 25,000 625,000
- --------------------- ------------ ------------ ------------- ----------------
<PAGE>
POSITRON CORPORATION
Schedule 5.9--Warrants, Options, Exchange Rights and Conversion Rights
Except as disclosed and described, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, calls, contracts,
demands, or commitments, convertible securities, or other agreements or
arrangements under which Seller may be obligated to issue capital stock or other
securities. Further, except as disclosed and described, there are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of Seller's capital stock, except as described in Footnotes 6 and 7 to the
Company's Annual Report on Form 10 KSB for the Year Ended December 31, 1996.
See attached "Capital Structure, as of January 31, 1998."
<PAGE>
Capital Structure
as of January 31, 1998
Pre-Imatron Post-Imatron
Common stock 5,128,990 5,128,990
Series A Preferred stock (A) 1,703,258 2,917,197
Series B Preferred stock (G) 667,415 1,113,825
Preferred stock dividends (C) 203,000 0
Shares issued to Imatron (L) 12,000,000
ProFutures warrants 1,500,000 2,503,242
Shares issued in private placement 0 0
---------- -----------
Total "in-the-money" shares 9,202,663 23,663,254
--------- ----------
(F) 635,276 635,276
Stock options
Series A Preferred stock warrants (B) 1,621,940 2,696,042
Series B Preferred stock warrants (H) 105,955 176,105
(J) 67,500 67,500
UroTech warrant
BF&E warrant (K) 45,000 45,000
Redeemable warrants (D) 5,737,573 10,038,228
1993 warrants (E) 527,743 923,318
----------- ----------
Total "out-of-the-money" shares
8,740,987 14,581,469
----------- ----------
Total shares 17,943,650 38,244,723
----------- ----------
If all "out-of-the-money" shares exercise approximately $38,900,000 will come to
the Company.
<PAGE>
POSITRON CORPORATION
Footnotes
A. Series A Convertible Preferred Stock converts into common stock one for
one. Dividends are payable semi-annually at 8%. Initially convertible
at $1.33 per share; $1.31 after giving effect to the Series A Preferred
Stock dividends; $.86 after giving effect to the issuance of shares to
Imatron; $.75 after giving effect to the issuance of shares at $.50;
and, $.68 after giving effect to the issuance of shares at $.375.
B. Series A Preferred Stock warrants, convertible into common stock one
for one at $1.33 per share initially; $1.29 after ratcheting effect for
shares issued to Imatron; $1.04 after ratcheting to give effect to $8
million raised at $.50 per share; and, $.94 after ratcheting to give
effect to $8 million raised at $.375 per share.
C. Series A Preferred Stock dividends accumulated dividends since issuance
of preferred stock.
D. Prior to issuance of shares to Imatron at $.01 per share the strike
price of the warrant is $5.51; subsequent to issuance of the
aforementioned shares the strike price is $3.61 per share. $2.48 after
ratcheting to give effect to $8 million raised at $.50 per share; and,
$2.21 after ratcheting to give effect to $8 million raised at $.375 per
share. Expire 12/3/98.
E. 1993 warrants have same provisions as the Redeemable Warrants.
F. Employees' stock options generally exercisable at $2.65 per option.
G. Series B Convertible Preferred Stock converts into common stock one for
one. Initially convertible at $1.33 per share; $1.31 after giving
effect to the Series A Preferred Stock dividends; $.86 after giving
effect to the issuance of shares to Imatron; $.75 after giving effect
to the issuance of shares at $.50, and, $.68 after giving effect to the
issuance of shares at $.375.
H. Series B Preferred Stock warrants, convertible into common stock one
for one at $1.33 per share initially; $1.29 after ratcheting effect for
shares issued to Imatron; $1.04 after ratcheting to give effect to $8
million raised at $.50 per share; and, $.94 after ratcheting to give
effect to $8 million raised at $.375 per share.
I. Ten-year warrants expiring in 2006, exercisable 200,000 at $2.40 and
100,000 at $1.91.
J. Uro-Tech warrants exercisable at $2.00 until 2/7/00.
K. BF&E warrants exercisable at $2.00 until 2/7/00.
L. Shares issued to give Imatron at least 51% control.
<PAGE>
SCHEDULE 5.9
Warrants, Options, Exchange and/or Conversion Rights
Except as disclosed and described, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, calls, contract,
demands, or commitments, convertible securities, or other agreements or
arrangements under which Seller may be obligated to issue capital stock or other
securities. Further, except as disclosed and described, there are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of Seller's capital stock.
Rate of Adjusted Price
Number Conversion (if Following
Security Outstanding Exercise Price applicable) Transaction
- -------- ----------- -------------- -------------- --------------
Series A ----------- -------------- -------------- --------------
Series B ----------- -------------- -------------- --------------
Series A
Warrants ----------- -------------- -------------- --------------
Series B
Warrants ----------- -------------- -------------- --------------
1987 Employee
SOP ----------- -------------- -------------- --------------
1994 Employee
SOP ----------- -------------- -------------- --------------
1993 Warrants ----------- -------------- -------------- --------------
Redeemable
Warrants ----------- -------------- -------------- --------------
UroTech
Warrants ----------- -------------- -------------- --------------
Boston
Financial
Warrants ----------- -------------- -------------- --------------
ProFutures
Warrants ----------- -------------- -------------- --------------
K. Lance Gould ----------- -------------- -------------- --------------
Gary Wood ----------- -------------- -------------- --------------
<PAGE>
POSITRON CORPORATION
Schedule 5.11--Board of Directors
Name Age Position
---- --- --------
Gary B. Wood, Ph.D. 47 Director and Chairman of the Board
K. Lance Gould, M.D. 57 Director
John H. Laragh, M.D. 69 Director
Ronald B. Schilling, Ph.D. 56 Director
<PAGE>
Schedule 10.1
to
Stock Purchase Agreement
In connection with the Special Shareholders' Meeting to be called pursuant to
Section 7.6, Buyer will reimburse Seller for expenses incurred in preparing
materials and soliciting proxies up to $50,000.
<PAGE>
Schedule 12
Provisions of registration rights agreements or other agreements containing
registration rights provisions to which Seller is a party.
See Schedule 5.6
