EXHIBIT 10.38
LOAN AGREEMENT
ss.1. Parties
1.1. This Agreement is made and entered into as of December 20, 1999 (the
"Effective Date"), by and between Surgical Safety Products, Inc., and Thomson
Kernaghan & Co. Ltd.
ss.2. Definition and Accounting Terms
2.1. Definitions. As used in this Agreement:
(a) "Affiliate" means any Person (i) that directly or indirectly
controls, or is controlled by, or is under common control with the
Borrower or a Subsidiary; or (ii) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of
voting stock of the Borrower or any Subsidiary; or (iii) five percent
(5%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or a Subsidiary.
(b) "Agent" means Thomson Kernaghan & Col. Ltd., a corporation
incorporated under the laws of Ontario, for itself and as agent for
the Lenders.
(c) "Agent's Fee" shall have the meaning ascribed in paragraph 10.12
of this Agreement.
(d) "Agent's Principal Office" means the Agent's principal office at
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇.
(e) "Agent's Warrant" shall have the meaning ascribed in paragraph
6.2(a) of this Agreement.
(f) "Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
(g) "Borrower" means Surgical Safety Products, Inc., a corporation
incorporated under the laws of the U.S. state of New York.
(h) "Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Toronto are authorized or
required to close under the laws of the province of Ontario.
(i) "Capital Lease" means all leases that have been or should be
capitalized on the books of the lessee in accordance with GAAP.
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(j) "Closing Date" means December 22, 1999, or such other date as the
Agent, the Borrower and the Parent may agree in writing to be the
Closing Date.
(k) Code" means the US Internal Revenue Code of 1986, as amended from
time to time, and the regulations and published interpretations
thereof.
(l) "Collateral" means all property that is subject to the Lien
granted by the Security Agreement;
(m) "Commitment" means the Agent's obligation to make Loans to the
Borrower pursuant to Section 2.01 in the amounts referred to therein.
(n) "Common Stock" means the Borrower's common stock, US$.001 par
value.
(o) "Commonly Controlled Entity" means an entity, whether or not
incorporated, that is under common control with the Borrower, within
the meaning of Section 414(b) or 414(c) of the Code.
(p) "Control" (whether or not capitalized) means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
(q) "Conversion Shares" means the shares of Common Stock into which
the Notes are convertible.
(r) "Debt" means (i) indebtedness or liability for borrowed money;
(ii) obligations evidenced by bonds, debentures, notes or other
similar instruments; (iii) obligations for the deferred purchase price
of property or services (including trade obligations); (iv)
obligations under Capital Leases; (v) obligations under letters of
credit; (vi) obligations under acceptance facilities; (vii) all
guaranties, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in
any Person or entity, or otherwise to assure a creditor against loss;
and (viii) all obligations secured by any Liens, whether or not the
obligations have been assumed.
(s) "Default" means any of the events specified in paragraph 9.1,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition has been satisfied.
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(t) "Effective Date" means the date set forth in paragraph 1.1 of this
Agreement.
(u) "Escrow Agreement" shall have the meaning ascribed in paragraph
6.2(d) of this Agreement.
(v) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published
interpretations thereof.
(w) "Event of Default" means any of the events specified in Section
9.01, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
(x) "Exchange Act" means the United States of America. Securities
Exchange Act of 1934, as amended.
(y) "GAAP" means generally accepted accounting principles in the U.S.
(z) "Lenders" means Thomson Kernaghan & Co., Ltd., and Persons that
purchase participations in the Loans from Thomson Kernaghan & Co. Ltd.
(aa) "Lenders' Warrant" shall have the meaning ascribed in paragraph
6.2(a) of this Agreement.
(bb) "Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), or preference, priority, or other security
agreement or preferential arrangement, charge or encumbrance of any
kind or nature whatsoever (including without limitation any
conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement, charge or
similar notice under the law of any jurisdiction to evidence any of
the foregoing.
(cc) "Loan" shall have the meaning ascribed in paragraph 3.1 of this
Agreement.
(dd) "Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Lenders' Warrant, the Agent's Warrant, the Registration
Rights Agreement, and the Escrow Agreement.
(ee) Multiemployer Plan" means a Plan described in Section 4001(a)(3)
of ERISA.
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(ff) "Notes" shall have the meaning ascribed in paragraph 3.4 of this
Agreement.
(gg) "PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
(hh) "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
(ii) "Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is an "employer" as defined in Section 3(5) of ERISA.
(jj) "Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
(kk) "Registration Rights Agreement" shall have the meaning ascribed
in paragraph 6.2(b) of this Agreement.
(ll) "Reportable Event" means any of the events set forth in Section
4043 of ERISA.
(mm) "SEC" means the Securities and Exchange Commission of the United
States of America.
(nn) "Securities Act" means the United States of America Securities
Act of 1933, as amended.
(oo) "Security Agreement" means a Security Agreement in substantially
the form of Exhibit B to be delivered by the Borrowerunder the terms
of this Agreement.
(pp) "Subsidiary" means a corporation of which shares of stock having
ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of that corporation are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
the Borrower.
(qq) "Termination Date" means November 30, 2002.
(rr) "U.S." means the United States of America.
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(ss) "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
(tt) "Warrants" means the Lenders' Warrant and the Agent's Warrant.
2.2. Singular and Plural Terms. As used in this Agreement, terms defined in
the singular have the same meaning when used in the plural, and terms defined in
the plural have the same meaning when used in the singular.
2.3. Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP. All financial data
submitted pursuant to this Agreement shall be prepared in accordance with GAAP.
2.4. Currency. All currency described or otherwise referred to in the Loan
Documents is the currency of the United States of America.
ss.3. Amount and Terms of the Loans
3.1. The Loans. The Agent agrees on the terms and conditions set forth in
this Agreement to make loans (each a "Loan" and collectively the "Loans") to the
Borrower from time to time during the period from the date of this Agreement up
to but not including the Termination Date, up to a maximum principal amount of
Five Million Dollars in the currency of the United States of America (US$
5,000,000). The initial Loan shall be in the principal amount of $650,000.
Unless the Agent otherwise agrees, the aggregate amount of Loans made in any
90-day period shall not exceed $500,000.
3.2. Notice and Manner of Borrowing. The Borrower shall give the Agent at
least five (5) Business Days' notice of any Loans under this Agreement,
specifying the date and amount thereof. Not later than 2:00 P.M. Toronto time,
on the date of such Loan and upon fulfillment of the applicable conditions set
forth in Section 4, the Agent will make such Loan available to the Borrower in
immediately available funds by wire transfer to the Borrower's account at a
commercial bank. The Borrower shall give the Agent written wiring instructions
for such transfer, specifying the name, address and ABA routing number for the
Bank, and the Borrower's account number to be credited with the Loan proceeds.
3.3. Interest. The Borrower shall pay interest to the Agent on the
outstanding and unpaid principal amount of the Loan at the rate of eight percent
(8%) per year, calculated on the basis of a year of 360 days comprised of twelve
30-day months. Interest shall be payable upon any prepayment of principal and at
maturity, at the Agent's Principal Office.
3.4. The Notes. The Borrower's obligation to repay each Loan shall be
evidenced by its promissory note (each a "Note" and collectively the "Notes") in
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substantially the form of Exhibit A attached to this Agreement with blanks
appropriately filled in and payable to the order of the Agent. Each Note shall
be dated the date on which the Agent advances the Loan proceeds to the Borrower,
and each of the Notes shall be due and payable on the Termination Date. At any
time prior to their respective payment in full, all or any part of the principal
and interest of the Notes may, at the option of the Agent or other holder, be
converted into Common Stock, at a price per share equal to the lower of (i)
$0.8203125 or (ii) 75% of the closing bid price on Conversion Date, as defined
in the Note; provided however, that the conversion price per share shall in no
event be less than $0.375 per share.
3.5. Collateral. The Notes, together with all of the Borrower's other
obligations under this Agreement, shall be secured by a Security Agreement in
the form of Exhibit B hereto executed by the Borrower.
3.6. Prepayments. The Borrower may prepay the Notes, in whole or in part,
at any time with the Agent's consent. The Borrower may prepay the Notes in
whole, or in part in increments of $500,000 or less with accrued interest to the
date of such prepayment on the amount prepaid, without the Agent's consent,
provided that: (i) the Borrower gives the Agent not less than 10 Business Days'
prior written notice of its intention to do so, which notice shall specify the
amount being prepaid and the prepayment date; (ii) a registration statement
under the Securities Act shall be in effect registering the issuance and resale
of the Conversion Shares and the Warrant Shares; (iii) the average closing bid
price of the Common Stock for the 20 trading days preceding the notice shall be
in excess of $1.00; and the average daily trading volume for the Common Stock
for the 20 trading days preceding the notice shall be in excess of 20,000. The
Agent may convert all or any part of the Notes being prepaid at any time prior
to receipt of the prepayment.
3.7. Method of Payment. The Borrower shall make each payment under this
Agreement and under the Notes at the Agent's Principal Office not later than
2:00 P.M., Toronto time on the date when due in lawful currency of the United
States of America and in immediately available funds. Whenever any payment to be
made under this Agreement or under the Notes shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest due on the Loan.
3.8. Use of Proceeds. The Borrower shall use the proceeds of the Loan
solely for the following purposes: (a) to pay the Agent's Fee; (b) to pay the
fees and expenses of the Agent's counsel in the negotiation and preparation of
this Agreement; (c) to repay the Borrower's promissory note dated November 30,
1999, in the principal amount of $50,000, plus interest, payable to the order of
Thomson Kernaghan & Co. Limited, and (d) for the Borrower's working capital
purposes. The Borrower hereby authorizes the Agent to withhold the amounts
necessary to repay that note, the Agent's Fee and such fees and expenses of its
counsel from the proceeds of the Loans.
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ss.4. Conditions Precedent.
4.1. Condition Precedent to Initial Loan. The obligation of the Agent to
make the initial Loan to the Borrower is subject to the condition precedent that
the Agent shall have received on or before the day of the Loan each of the
following, in form and substance satisfactory to the Agent and its counsel:
(a) Note. A Note for the principal amount of the initial Loan duly executed
by the Borrower;
(b) Security Agreement. A Security Agreement duly executed by the Borrower;
together with an undertaking by the Borrower to (i) file within the time
proscribed by law for perfecting the Agent's security interest in the
Collateral, and deliver to the Agent acknowledgment copies of the Financing
Statements (UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions necessary or, in the opinion of the Agent, desirable to
perfect the security interest created by the Security Agreement, and (ii)
certified copies of Request for Copies or Information (Form UCC-11)
identifying all of the financing statements on file with respect to the
Borrower in all jurisdictions referred to under (i), including the
Financing Statement filed by the Agent against the Borrower, indicating
that no party claims an interest in any of the Collateral except as set
forth on Schedule 5.1(o);
(c) Evidence of all corporate action by the Borrower. Certified (as of the
Effective Date) copies of all corporate action taken by the Borrower,
including resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of the Loan Documents and each other document to
be delivered pursuant to this Agreement;
(d) Incumbency and signature certificate of the Borrower. A certificate
(dated as of the Effective Date) of the Secretary of the Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign the Loan Documents and any other documents to be
delivered by the Borrower under this Agreement;
(e) Lenders' Warrant. The Lenders' Warrant;
(f) Agent's Warrant. The Agent's Warrant;
(g) Registration Rights Agreement. The Registration Rights Agreement;
(h) Escrow Agreement. The Escrow Agreement; and
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(i) Opinion of counsel for the Borrower. A favorable opinion of counsel for
the Borrower, in substantially the form of Exhibit C hereto, and as to such
other matters as the Agent may reasonably request.
4.2. Conditions Precedent to All Loans. The obligation of the Agent to make
each Loan (including the initial Loan) shall be subject to the further
conditions precedent that on the date of such Loan:
(a) The following statements shall be true and the Agent shall have
received a certificate signed by a duly authorized officer of the Borrower,
dated the date of such Loan, stating that (i) the representations and
warranties contained in Section 5.1 of this Agreement, and in Section 4.01
of the Security Agreement are correct on and as of the date of such Loan as
though made on and as of such date; and (ii) no Default or Event of Default
has occurred and is continuing, or would result from such Loan;
(b) The Agent shall have received a detailed statement of the use of
proceeds from the Loan, reasonably satisfactory to the Agent, certified by
the Borrower's chief financial officer and chief executive officer;
(c) The Agent shall have received such other approvals, opinions, or
documents as the Agent may reasonably request;
(d) The closing bid price of the Common Stock for the 20 trading days
preceding the date of the Loan shall have been above $1.00; and
(e) The average daily trading volume for the 20 trading days preceding the
date of the Loan shall have been in excess of 20,000.
ss.5. Representations and Warranties.
5.1. Borrower's Representations and Warranties. The Borrower represents and
warrants to the Lenders that:
(a) Incorporation, Good Standing, and Due Qualification. The Borrower is a
corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation; has the corporate power
and authority to own its assets and to transact the business in which it is
now engaged and proposes to be engaged in; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required. The Borrower has no
Subsidiaries.
(b) Corporate Power and Authority. The execution, delivery and performance
by the Borrower of the Loan Documents have been duly authorized by all
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necessary corporate action and do not and will not (i) require any consent
or approval of the shareholders of such corporation; (ii) contravene such
corporation's charter or bylaws; (iii) violate any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to such corporation; (iv)
result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which
such corporation is a party or by which it or its properties may be bound
or affected; (v) result in or require the creation or imposition of any
Lien upon or with respect to any to the properties now owned or hereafter
acquired by such corporation; and (vi) cause such corporation to be in
default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award, or any such indenture,
agreement, lease or instrument.
(c) Legally Enforceable Agreement. This Agreement is, and each of the other
Loan Documents when delivered under this Agreement will be, legal, valid
and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
(d) Financial Statements. Borrower's Financial Statements. The balance
sheet of the Borrower as at December 31, 1998 and 1997, and, and the
related statements of income, retained earnings and cash flows of the
Borrower for the fiscal years then ended, and the accompanying footnotes,
together with the opinion thereon of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Co., independent
certified public accountants, and the interim consolidated and
consolidating balance sheet of the Borrower as at September 30, 1999, and
the related statements of income, retained earnings and cash flows of the
Borrower for the nine (9) month period then ended, copies of which have
been included by the Borrower in its reports filed with the SEC on Forms
10-K and 10-Q, respectively, are complete and correct and fairly present
the financial condition of the Borrower as at such dates and the results of
the operations of the Borrower for the periods covered by such statements,
all in accordance with GAAP consistently applied (subject to year-end
adjustments in the case of the interim financial statements), and since
September 30, 1999, there has been no material adverse change in the
condition (financial or otherwise), business, or operations of the Borrower
or any Subsidiary. There are no liabilities of the Borrower or any
Subsidiary, fixed or contingent, which are material but are not reflected
in the financial statements or in the notes thereto, other than liabilities
arising in the ordinary course of business since September 30, 1999.
(e) Full Disclosure. No information, exhibit or report furnished by the
Borrower, to the Agent in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material
fact or any fact necessary to make the statement contained therein not
materially misleading.
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(f) Labor Disputes and Acts of God. Neither the business nor the properties
of the Borrower or any Subsidiary are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance) materially and adversely affecting
such business properties or the operation of the Borrower or such
Subsidiary.
(g) Other Agreements. Except as set forth on Schedule 5.1 (g) the Borrower
is not a party to any indenture, loan, or credit agreement, or to any lease
or other agreement or instrument, or subject to any charter or corporate
restriction which could have a material adverse effect on the business,
properties, assets, operations, or conditions, financial or otherwise, of
the Borrower to carry out its obligations under the Loan Documents. The
Borrower is not in default in any respect in the performance, observance,
or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which
it is a party.
(h) Litigation. There is no pending or threatened action or proceeding
against or affecting the Borrower before any court, governmental agency, or
arbitrator which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties, or
business of the Borrower or the ability of the Borrower to perform its
obligations under the Loan Documents.
(i) No Defaults on Outstanding Judgments or Orders. The Borrower has
satisfied all judgments (if any), and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
(j) Ownership and Liens. The Borrower has title to, or valid leasehold
interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interest reflected in the
financial statements referred to in paragraph 5.1(d) of this Agreement
(other than any properties or assets disposed of in the ordinary course of
business), and none of the properties and assets owned by the Borrower and
none of its leasehold interests is subject to any Lien, except such as may
be permitted pursuant to paragraph 7.1(a) of this Agreement.
(k) ERISA. The Borrower is in compliance in all material respects with all
applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan; no
notice of intent to terminate a Plan has been filed, nor has any Plan been
terminated; no circumstances exist which constitute grounds entitling the
PBGC to institute proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower nor any Commonly Controlled
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Entity has completely or partially withdrawn from a Multiemployer Plan; the
Borrower and each Commonly Controlled Entity have met their minimum funding
requirements under ERISA with respect to all of their Plans, and the
present value of all vested benefits under each Plan does not exceed the
fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance
with the provisions of ERISA; and neither the Borrower nor the Parent nor
any Commonly Controlled Entity has incurred any liability to the PBGC under
ERISA.
(l) Operation of Business. The Borrower possesses all licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct their respective businesses substantially as now
conducted and as presently proposed to be conducted, and the Borrower is
not in violation of any valid rights of others with respect to any of the
foregoing.
(n) Taxes. The Borrower has filed all tax returns (federal, state, and
local) required to be filed and have paid all taxes, assessments, and
governmental charges and levies thereon to be due, including any interest
and penalties.
(o) Debt. Schedule 5.1(o) is a complete and correct list of all credit
agreements, indentures, purchase agreements, guaranties, Capital Leases,
and other investments, agreements, and arrangements presently in effect
providing for or relating to extensions of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance
financing) in respect of which the Borrower is in any manner directly or
contingently obligated; and the maximum principal or face amounts of the
credit in question, which are outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given
as security therefor are correctly described or indicated in Schedule
5.1(o).
(p) Environment. The Borrower has duly complied with, and its businesses,
operations, assets, equipment, property, leaseholds, or other facilities
are in compliance with, the provisions of all federal, state, and local
environmental, health, and safety laws, codes and ordinances, and all rules
and regulations promulgated thereunder. The Borrower has been issued and
will maintain all required federal, state, and local permits, licenses,
certificates, and approvals relating to (1) air emissions; (2) discharges
to surface water or groundwater; (3) noise emissions; (4) solid or liquid
waste disposal; (5) the use, generation, storage, transportation, or
disposal of toxic or hazardous substances or wastes (intended hereby and
hereafter to include any and all such materials listed in any federal,
state, or local law, code or ordinance and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (6) other
environmental, health, or safety matters. A true, accurate, and complete
list of all such permits, licenses, certificates, and approvals is attached
hereto as Schedule 5.1(p). The Borrower has not received notice of, nor
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knows of, or suspects facts which might constitute any violations of any
federal, state, or local environmental, health, or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder with
respect to its businesses, operations, assets, equipment, property,
leaseholds, or other facilities. Except in accordance with a valid
governmental permit, license, certificate, or approval listed in Schedule
5.1(p), there has been no emission, spill, release, or discharge into or
upon (1) the air; (2) soils; or any improvements located thereon; (3)
surface water or groundwater; or (4) the sewer, septic system or waste
treatment, storage or disposal system servicing the premises of any toxic
or hazardous substances or wastes at or from the premises; and accordingly
the premises of the Borrower and its Subsidiaries are free of all such
toxic or hazardous substances or wastes. There has been no complaint,
order, directive, claim, citation, or notice by any governmental authority
or any person or entity with respect to (1) air emissions; (2) spills,
releases or discharges to soils or improvements located thereon, surface
water, groundwater or the sewer, septic system or waste treatment, storage
or disposal systems servicing the premises; (3) noise emissions; (4) solid
or liquid waste disposal; (5) the use, generation, storage, transportation,
or disposal of toxic or hazardous substances or waste; or (6) other
environmental, health, or safety matters affecting the Borrower or its
business, operations, assets, equipment, property, leaseholds, or other
facilities. Neither the Borrower nor its Subsidiaries have any
indebtedness, obligation, or liability, absolute or contingent, matured or
not matured, with respect to the storage, treatment, cleanup, or disposal
of any solid wastes, hazardous wastes or other toxic or hazardous
substances (including without limitation any such indebtedness, obligation,
or liability with respect to any current regulation, law, or statute
regarding such storage, treatment, cleanup, or disposal) which is not shown
on Schedule 5.1(p). Set forth in Schedule 5.1(p) is a list of all real
property owned or leased by the Borrower and its Subsidiaries, and a brief
description of the business conducted at such location.
(p) Registration and Listing of Common Stock. The Borrower is a reporting
company (although its Form 10-SB has yet to clear the SEC), and has
continuously been a reporting company for more than the 11 calendar months
preceding the Closing Date, and the Common Stock is registered under the
Exchange Act and listed on the OTC Bulletin Board. The Borrower has filed
all reports and other documents required of it by the Exchange Act, the
rules and regulations of the SEC, and the rules and regulations of the OTC
Bulletin Board.
(q) No U.S. Offering. The Borrower has not offered any of the Notes, the
Conversion Shares, the Warrants or the Warrant Shares to a U.S. Person (as
defined in SEC Rule 902(k)) or to a person in the United States.
(r) Offshore Transaction. The negotiations for and the issuance of the
Notes and the Warrants to the Agent has been made in an offshore
transaction as defined in SEC Rule 902(h).
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(s) No Directed Selling Efforts. The Company has not engaged in any
directed selling efforts, as defined in SEC Rule 902(c), with respect to
the Notes and the Warrants.
(t) Category 3 Securities. The Company has complied with all of the
conditions required of it under SEC Rule 903(b)(3) with respect to the
issuance of the Notes and Warrants.
(u) Exemption of Notes and Warrants from Registration. The Borrower's
issuance of the Notes and the Warrants is exempt from the registration
requirements of Section 5 of the Securities Act pursuant to the provisions
of SEC Regulation S.
5.2. Agent's Representations and Warranties. The Agent represents and
warrants to the Borrower that:
(a) Accredited Investor. Each of the Agent and the other Lenders is an
accredited investor as that term is defined in Rule 501(a)(3) of Regulation
D of the SEC.
(b) U. S. Persons. Neither the Agent nor any Lender is a U.S. Person as
defined in SEC Rule 902(k).
(c) The Agent has complied with all of the conditions required of it by SEC
Rule 903(b)(3) to be complied with by it in connection with the
transactions contemplated by this Agreement.
ss.6. Affirmative Covenants.
6.1. Financial and Operational. So long as any of the Notes shall remain
unpaid, the Borrower will:
(a) Maintenance of Existence. Preserve and maintain its corporate existence
and good standing in the jurisdiction of its incorporation, and qualify and
remain qualified as a foreign corporation in each jurisdiction in which
such qualification is required.
(b) Maintenance of Records. Keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all material financial transactions of the Borrower.
(c) Maintenance of Properties. Maintain, keep and preserve all of its
properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear
and tear excepted.
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(d) Conduct of Business. Continue to engage in an efficient and economical
manner in a business of the same general type as conducted by it on the
date of this Agreement.
(e) Maintenance of Insurance. Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering
such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated, which insurance may provide for
reasonable deductibility from its coverage.
(f) Compliance With Laws. Comply with all applicable laws, codes,
regulations, rules, ordinances and orders, including without limitation
paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property.
(g) Right of Inspection. At any reasonable time and from time to time,
permit the Agent or any of its agents or representatives to examine and
make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower, and to discuss its affairs, finances
and accounts with any of its officers, directors and independent
accountants.
(h) Reporting Requirements. Furnish to the Agent:
(i) Quarterly Financial Statements. The Borrower's reports on Form
10-Q or 10-QSB contemporaneously with their filing with the SEC.
(ii) Annual Financial Statements. The Borrower's annual reports on
Form 10-K or 10-KSB contemporaneously with their filing with the SEC.
(iii) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Subsidiary by independent
accountants in connection with their examination of the financial
statements of the Borrower.
(iv) Certificate of No Default. Within twenty-five (25) days after the
end of each month a certificate of the Borrower's chief financial
officer certifying that to the best of his or her knowledge no Default
or Event of Default has occurred and is continuing or, if a Default or
Event of Default has occurred and is continuing, a statement as to the
nature thereof and the action that is proposed to be taken with
respect thereto.
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(v) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality (domestic or foreign) or arbitrator, affecting the
Borrower, which, if determined adversely to the Borrower, could have a
material adverse effect on the financial condition, properties or
operations of the Borrower.
(vi) Notice of Defaults and Events of Default. As soon as possible and
in any event within ten (10) days after the occurrence of each
material Default or material Event of Default, a written notice
setting forth the details of such Default or Event of Default and the
action that is proposed to be taken by the Borrower with respect
thereto.
(vii) ERISA reports. As soon as possible, and in any event within
thirty (30) days after the Borrower knows or has reason to know that
any circumstances exist that constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan subject to ERISA with
respect to the Borrower or any Commonly Controlled Entity, and
promptly but in any event within two (2) Business Days of receipt by
the Borrower or any Commonly Controlled Entity of notice that the PBGC
intends to terminate a Plan or appoint a trustee to administer the
same, and promptly but in any event within five (5) Business Days of
the receipt of notice concerning the imposition of withdrawal
liability with respect to the Borrower or any Commonly Controlled
Entity, the Borrower will deliver to the Agent a certificate of the
chief financial officer of the Borrower setting forth all relevant
details and the action which the Borrower proposes to take with
respect thereto.
(vii) Reports to Other Creditors. Promptly after the furnishing
thereof, copies of any statement or report furnished by the Borrower
or any Subsidiary to any other party pursuant to the terms of any
indenture, loan, credit or similar agreement and not otherwise
required to be furnished to the Agent pursuant to any other clause of
this Agreement.
(viii) Other Regulatory Reports and Filings. Promptly after the
sending or filing thereof, copies of all proxy statements, financial
statements and reports that the Borrower or any Subsidiary sends to
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its shareholders, and copies of all regular, periodic and special
reports, and all registration statements that the Borrower files with
the securities regulatory authorities of any country, province or
state, or with any securities exchange.
(ix) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower as
the Agent may from time to time reasonably request.
(i) Environment, Health and Safety. Be and remain in compliance with
the provisions of all federal, state, and local environmental, health,
and safety laws, codes and ordinances, and all rules and regulations
issued thereunder; notify the Agent immediately of any notice of a
hazardous discharge or environmental complaint received from any
governmental agency or any other party; notify the Agent immediately
of any hazardous discharge from or affecting its premises; immediately
contain and remove the same, in compliance with all applicable laws;
promptly pay any fine or penalty assessed in connection therewith;
permit the Agent to inspect the premises, to conduct tests thereon,
and to inspect all books, correspondence, and records pertaining
thereto; and at the Agent's request, and at the Borrower's expense,
provide a report of a qualified environmental engineer, satisfactory
in scope, form, and content to the Agent, and such other and further
assurances reasonably satisfactory to the Agent that the condition has
been corrected.
6.2. The Borrower hereby further covenants and agrees with the Agent that:
(a) Warrants. Contemporaneously with the execution of this Agreement, the
Borrower shall issue and deliver to the Agent (i) a warrant in the form of
Exhibit D hereto to purchase up to 3,428,571 shares of Common Stock (the
"Lenders' Warrant"), and (ii) a warrant in the form of Exhibit E hereto to
purchase up to 1,142,857shares of Common Stock (the "Agent's Warrant"),
each at a price per share of $1.09375, and each vesting as provided
therein. The Lenders' Warrant and the Agent's Warrant each shall be
exercisable from time to time, pro rata, as follows: (i) the Warrants shall
be immediately exercisable for 20% of the number of Warrant Shares; and,
(ii) the Warrants shall be exercisable for an additional1% of the number of
Warrant Shares for each $25,000 of principal of Loans made under this
Agreement.
(b) Registration of Common Stock Underlying Notes and Warrants.
Contemporaneously with the execution of this Agreement, the Borrower shall
execute and deliver to the Agent a registration rights agreement in the
form of Exhibit F hereto. (the "Registration Rights Agreement").The
Borrower shall register the issuance and sale of the Conversion Stock and
the Warrant Stock in accordance with the provisions of the Registration
Rights Agreement.
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(d) Escrow. Contemporaneously with the execution of this Agreement, the
Borrower shall executed an escrow agreement with the Agent as escrow holder
(the "Escrow Agreement") in the form of Exhibit G to this Agreement.
Contemporaneously with the execution of this Agreement, the Borrower shall
execute and deliver to the Escrow Holder a certificate for 2,700,000 shares
of Common Stock as a portion of the number of Conversion Shares (based upon
a conversion price of $0.375 per share) underlying the principal amount of
the Note evidencing the initial Loan and the number of Warrant Shares for
which the Warrants shall be exercisable upon funding the initial Loan.
Prior to each additional Loan, the Borrower shall execute and deliver to
the Escrow Holder a certificate for 200% of the number of additional
Conversion Shares (based upon a conversion price of $0.375 per share)
underlying the principal amount of the Note evidencing that Loan and 200%
the number of additional Warrant Shares for which the Warrants shall be
exercisable upon funding that Loan, until all of the Conversion Shares and
Warrant Shares have been delivered to the Escrow Holder.. All certificates
for Conversion Shares and Warrant Shares delivered to the Escrow Holder
shall be registered in the name of Thomson Kernaghan & Co. Limited. Until
such time as the registration statement covering the Conversion Shares and
the Warrant shares is effective, the certificates shall bear a legend
indicating that they have been issued in a transaction that is exempt from
the registration requirements of the Securities Act, and may not be
transferred except pursuant to registration under the Securities Act or an
exemption from such registration. Except for such legend, the Common Stock
underlying the Lenders' Warrant and the Agent's Warrant shall be free and
clear of any legends, liens, claims, stop orders or other restrictions. Not
later than the third Business Day following the effective date of the
Registration Statement, the Borrower shall cause the Common Stock
underlying the Lenders' Warrant and the Agent's Warrant to be registered in
Agent's street name, in DTC form, free and clear of any legends, liens,
claims, stop orders or other restrictions.
ss.7. Negative Covenants.
7.1. So long as any of the Notes remains unpaid, or the Agent shall be
obligated to make Loans under this Agreement, the Borrower will not:
(a) Liens. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Lien upon or
with respect to any of its properties, now owned or hereafter acquired,
except:
(1) Liens in favor of the Agent;
(2) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
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(3) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar
Liens, securing obligations incurred in the ordinary course of
business which are not past due for more than thirty (30) days or
which are being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established;
(4) Liens under workers' compensation, unemployment insurance, Social
Security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money),
leases (permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance,
or other similar bonds, or other similar obligations arising in the
ordinary course of business;
(6) Liens disclosed on Schedule 5.1(o);
(7) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(8) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use, and enjoyment by the Borrower or any Subsidiary
of the property or assets encumbered thereby in the normal course of
its business or materially impair the value of the property subject
thereto; and
(9) Liens securing obligations of a Subsidiary to the Borrower or
another Subsidiary
(b) Debt. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Debt, except:
(1) Debt of the Borrower under this Agreement or the Note;
(2) Debt described in Schedule 5.1(o) but no voluntary prepayments,
renewals, extensions, refinancings, or increases in he amounts
thereof;
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(3) Debt of the Borrower subordinated on terms satisfactory to the
Agent to the Borrower's obligation under this Agreement and the Note;
(4) Debt of the Borrower to any Subsidiary or of any Subsidiary to the
Borrower or another Subsidiary; and
(5) Accounts payable to trade creditors for goods or services which
are not aged more than sixty (60) days from the billing date and
current operating liabilities (other than for borrowed money) which
are not more than ten (10) days past due, in each case incurred in the
ordinary course of business, as presently conducted, and paid within
the specified time, unless contested in good faith and by appropriate
proceedings.
(c) Mergers, Etc. Wind up, liquidate or dissolve itself, reorganize, merge
or consolidate with or into, or convey, sell, assign, transfer, lease, or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of
the assets or the business of any Person, and the Borrower shall not permit
any Subsidiary to do so, except that (1) any Subsidiary may merge into or
transfer assets to the Borrower, and (2) any Subsidiary may merge into or
consolidate with or transfer assets to any other Subsidiary.
(d) Leases. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any material
obligation as lessee for the rental or hire of any real or personal
property, except: (i) Capital Leases created pursuant to existing lease
financing agreements disclosed on Schedule 5.1(o); (ii) leases existing on
the date of this Agreement and any extensions or renewals thereof; and
(iii) leases between the Borrower and any Subsidiary or between any
Subsidiaries.
(e) Sale and Leaseback. Sell, transfer, or otherwise dispose of, or permit
any Subsidiary to sell, transfer, or otherwise dispose of, any real or
personal property to any Person and thereafter directly or indirectly lease
back the same or similar property.
(f) Dividends. Declare or pay any dividends; or purchase, redeem, retire,
or otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders as such
whether in cash, assets, or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution
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on, or for the purchase, redemption, or retirement of any shares of its
capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or permit any of
its Subsidiaries to do any of the foregoing or to purchase or otherwise
acquire for value any stock of the Borrower or another Subsidiary.
(g) Sale of Assets. Sell, lease, assign, transfer, or otherwise dispose of,
or permit any Subsidiary to sell, lease, assign, transfer, or otherwise
dispose of, any of its now owned or hereafter acquired assets (including,
without limitation, shares of stock and indebtedness of Subsidiaries,
receivables, and leasehold interests), except: (1) inventory disposed of in
the ordinary course of business; (2) the sale or other disposition of
assets no longer used or useful in the conduct of its business; and (3)
that any Subsidiary may sell, lease, assign, or otherwise transfer its
assets to the Borrower.
(h) Investments. (i) Make, or permit any Subsidiary to make, any loan or
advance to any Person, or (ii) purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any Person, or participate
as a partner or joint venturer with any other Person, except: (1) direct
obligations of the U.S. or any agency thereof with maturities of one year
or less from the date of acquisition; (2) commercial paper of a domestic
issuer rated at least "A-1" by Standard & Poor's Corporation or "P-1" by
▇▇▇▇▇'▇ Investors Service, Inc.; (3) certificates of deposit with
maturities of one year or less from the date of acquisition issued by any
commercial bank having capital and surplus in excess of One Hundred Million
U.S. Dollars (US$100,000,000); and (4) stock, obligations, or securities
received in settlement of debts (created in the ordinary course of
business) owing to the Borrower or any Subsidiary.
(i) Guaranties, Etc. Assume, guaranty, endorse, or otherwise be or become
directly or contingently responsible or liable, or permit any Subsidiary to
assume, guaranty, endorse, or otherwise be or become directly or
contingently responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods, or services, or
to supply or advance any funds, assets, goods, or services, or an agreement
to maintain or cause such Person to maintain a minimum working capital or
net worth, or otherwise to assure the creditors of any Person against
loss), for obligations of any Person, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business.
(j) Transactions With Affiliates. Enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the
rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase,
sale, or exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
-55-
requirements of the Borrower's or such Subsidiary's business and upon fair
and reasonable terms no less favorable to the Borrower or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person
not an Affiliate.
(k) Capital Expenditures. Purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any material capital assets,
without the Agent's prior written consent.
ss.8. Financial Covenants
8.1. So long as the Note shall remain unpaid or the Agent shall have any
Commitment under this Agreement, the Borrower shall not, nor shall it permit any
Subsidiary to, increase the amount of any borrowings, or obtain any additional
advances on any existing lines of credit in excess of their currently contracted
limits, except for Loans under this Agreement, without the Agent's prior written
consent.
ss.9. Events of Default
9.1. Events of Default. If any of the following events shall occur:
(a) The Borrower should fail to pay the principal of or interest on any
Note as and when due and payable, or any amount of any other fee by or
within 10 days after the date that it is due and payable;
(b) Any representation or warranty made or deemed made by the Borrower in
this Agreement or any other Loan Document, or which is contained in any
certificate, document, opinion, or financial or other statement furnished
at any time under or in connection with any Loan Document, shall prove to
have been incorrect, incomplete, or misleading in any material respect on
or as of the date made or deemed made;
(c) The Borrower shall fail to perform or observe any term, covenant, or
agreement contained in this Agreement to be performed or observed by it ;
(d) The Borrower or any Subsidiary shall (i) fail to pay any indebtedness
for borrowed money (other than the Note) of the Borrower or such
Subsidiary, as the case may be, or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise), or (ii) fail to perform or observe any material
term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such indebtedness, when
required to be performed or observed, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration of,
-56-
after the giving of notice or passage of time, or both, the maturity of
such indebtedness, whether or not such failure to perform or observe shall
be waived by the holder of such indebtedness; or any such indebtedness
shall be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
(e) The Borrower or any Subsidiary (i) shall generally not pay, or shall be
unable to pay, or shall admit in writing its inability to pay its debts as
such debts become due; or (ii) shall make an assignment for the benefit of
creditors, or petition or apply to any tribunal for the appointment of a
custodian, receiver, or trustee for it or a substantial part of its assets;
or (iii) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made, and which remains
undismissed for a period of thirty (30) days or more; or (v) shall take any
corporate action indicating its consent to, approval of, or acquiescence in
any such petition, application, proceeding, or order for relief or the
appointment of a custodian, receiver, or trustee for all or any substantial
part of its properties; or (vi) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of
thirty (30) days or more;
(f) One or more judgments, decrees, or orders for the payment of money
shall be rendered against the Borrower or any Subsidiary and such
judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of thirty (30) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal;
(g) The Security Agreement shall at any time after its execution and
delivery and for any reason cease (a) to create a valid and perfected
security interest in and to the property purported to be subject to such
Security Agreement, and in the priority disclosed on Schedule 5.1(o); or
(b) to be in full force and effect or shall be declared null and void, or
the validity or enforceability thereof shall be contested by the Borrower,
or the Borrower shall deny it has any further liability or obligation under
the Security Agreement, or the Borrower shall fail to perform any of its
material obligations under the Security Agreement;
(h) Any of the following events shall occur or exist with respect to the
Borrower or any Commonly Controlled Entity under ERISA: any Reportable
Event shall occur; complete or partial withdrawal from any Multiemployer
Plan shall take place; any Prohibited Transaction shall occur; a notice of
intent to terminate a Plan shall be filed, or a Plan shall be terminated;
or circumstances shall exist which constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan,
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or the PBGC shall institute such proceedings; and in each case above, such
event or condition, together with all other events or conditions, if any,
could subject the Borrower to any tax, penalty, or other liability which in
the aggregate may exceed Ten Thousand Dollars ($10,000); or
(i) If the Agent receives its first notice of a hazardous discharge or an
environmental complaint regarding the Borrower or a Subsidiary from a
source other than the Borrower, and the Agent does not receive notice
(which may be given in oral form, provided same is followed with all due
dispatch by written notice given by Certified Mail, Return Receipt
Requested) of such hazardous discharge or environmental complaint from the
Borrower within twenty-four (24) hours of the time the Agent first receives
said notice from a source other than the Borrower; or if any federal,
state, or local agency asserts or creates a Lien upon any or all of the
assets, equipment, property, leaseholds, or other facilities of the
Borrower or a Subsidiary by reason of the occurrence of a hazardous
discharge or an environmental complaint; or if any federal, state, or local
agency asserts a claim against the Borrower, a Subsidiary, or its
respective assets, equipment, property, leaseholds, or other facilities for
damages or cleanup costs relating to a hazardous discharge or an
environmental complaint; provided, however, that such claim shall not
constitute a default if, within five (5) Business Days of the occurrence
giving rise to the claim, (i) the Borrower can prove to the Agent's
satisfaction that the Borrower has commenced and is diligently pursuing
either: (a) a cure or correction of the event which constitutes the basis
for the claim, and continues diligently to pursue such cure or correction
to completion or (b) proceedings for an injunction, a restraining order, or
other appropriate emergent relief preventing such agency or agencies from
asserting such claim, which relief is granted within ten (10) Business Days
of the occurrence giving rise to the claim and the injunction, order, or
emergent relief is not thereafter resolved or reversed on appeal; and (ii)
in either of the foregoing events, the Borrower has posted a bond, letter
of credit, or other security satisfactory in form, substance, and amount to
both the Agent and the agency or entity asserting the claim to secure the
proper and complete cure or correction of the event which constitutes the
basis for the claim;
(j) A change of Control of the Borrower or any Subsidiary occurs, including
without limitation any Person shall acquire securities representing 25% or
more of the voting securities of the Borrower;
then, and in any such event, the Agent may, by notice to the Borrower, (i)
declare its obligation to make Loans to be terminated, whereupon the same shall
forthwith terminate, and (ii) declare the Notes, all interest thereon, and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Notes, all such interest, and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by the Parent and
the Borrower.
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9.2. Agent's Right to Setoff. Upon the occurrence and during the
continuance of any Event of Default, the Agent is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all funds,
deposits and accounts at any time held and other indebtedness at any time owing
by the Agent to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement or the Note or any other Loan Document, irrespective of whether or not
the Agent shall have made any demand under this Agreement or the Note or such
other Loan Document and although such obligations may be unmatured. The Agent
agrees promptly to notify the Borrower after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Agent under this Section 9.2 are
in addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Agent may have.
ss.10. Miscellaneous.
10.1. Amendments, Etc. No amendment, modification, termination, or waiver
of any provision of any Loan Document to which the Borrower is a party, nor
consent to any departure by the Borrower from any Loan Document to which it is a
party, shall in any event be effective unless the same shall be in writing and
signed by the Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
10.2. Notices, Etc. All notices given under this Agreement and under the
other Loan Documents shall be in writing, addressed to the parties as set forth
below, and shall be effective on the earliest of (i) the date received, or (ii)
if given by facsimile transmittal on the date given if transmitted before 5:00
p.m. the recipient's time, otherwise it is effective the next day, or (iii) on
the second business day after delivery to a major international air delivery or
air courier service (such as Federal Express or Network Couriers):
If to the Agent:
Thomson Kernaghan & Co. Ltd.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (that does not constitute notice) to:
▇▇▇▇ ▇. ▇▇▇▇
Attorney at Law
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Borrower:
Surgical Safety Products, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (that does not constitute notice) to:
Mintmire & Associates
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
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10.3. No Waiver. No failure or delay on the part of the Agent in exercising
any right, power, or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power, or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power, or remedy hereunder. The rights and remedies provided herein are
cumulative, and are not exclusive of any other rights, powers, privileges, or
remedies, now or hereafter existing, at law or in equity or otherwise.
10.4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Agent, and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under any Loan Document to which the Borrower is a party without
the prior written consent of the Agent.
10.5 Costs, Expenses, and Taxes. The Borrower agrees to pay on demand all
costs and expenses incurred by the Agent in connection with the preparation,
execution, delivery, filing, and administration of the Loan Documents, and of
any amendment, modification, or supplement to the Loan Documents, including,
without limitation, the fees and out-of-pocket expenses of counsel for the Agent
incurred in connection with advising the Agent as to its rights and
responsibilities hereunder. The Borrower also agrees to pay all such costs and
expenses, including court costs, incurred in connection with enforcement of the
Loan Documents, or any amendment, modification, or supplement thereto, whether
by negotiation, legal proceedings, or otherwise. In addition, the Borrower shall
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, and recording of any
of the Loan Documents and the other documents to be delivered under any such
Loan Documents, and agree to hold the Agent harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees. This provision shall survive termination of
this Agreement.
10.6. Integration. This Agreement and the Loan Documents contain the entire
agreement between the parties relating to the subject matter hereof and
supersede all oral statements and prior writings with respect thereto.
10.7. Indemnity. The Borrower shall defend, protect, indemnify, and hold
harmless the Agent and each Lender, and all of their respective officers,
directors, employees, and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities, and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Borrower in this Agreement or any
other Loan Document, or any other certificate, instrument, or document
contemplated hereby or thereby; or (b) any breach of any covenant, agreement, or
obligation of the Borrower contained in this Agreement or any other Loan
Document; or (c) the activities of the Borrower or any Subsidiary, each of their
respective predecessors in interest or third parties with whom they or any of
them have or had a contractual relationship, or arising directly or indirectly
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from the violation of any environmental protection, health, or safety law,
whether such claims are asserted by any governmental agency or any other person;
or (d) any cause of action, suit, or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance, or enforcement of this Agreement or any Loan Document, or any other
instrument, document, or agreement executed pursuant hereto or thereto by any of
the Indemnities, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the Loans or from the exercise of
the Warrants, or the status of the Agent or any Lender or holder of any of the
Notes, Warrants, Conversion Shares or Warrant Shares, or as a stockholder in the
Borrower. To the extent that the foregoing undertaking by the Borrower may be
unenforceable for any reason, the Borrower shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. This indemnity shall survive termination of
this Agreement.
10.8. Governing Law. This Agreement and the Note shall be governed by, and
construed in accordance with, the laws of the Province of Ontario, Canada;
provided, however, if any provision of this Agreement is unenforceable under
Ontario law, but is enforceable under the laws of the U.S. State of Florida,
then Florida law shall govern the construction and enforcement of that
provision.
10.9. Severability of Provisions. Any provision of any Loan Document which
is prohibited or unenforceable in any jurisdiction (after applying the
provisions of paragraph 10.8 of this Agreement to that provision) shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
10.10 Headings. Section and paragraph headings in the Loan Documents are
included for the convenience of reference only and shall not constitute a part
of the applicable Loan Documents for any other purpose.
10.11. Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement (whether in contract or tort, or both, or at law or
in equity) shall be determined by binding arbitration at Toronto, Canada, in
accordance with the commercial arbitration rules of the International Chamber of
Commerce. The prevailing party in any arbitration proceeding shall be awarded
reasonable attorneys fees and costs of the proceeding. The arbitration award
shall be final, and may be entered in any court having jurisdiction. Nothing in
this paragraph shall preclude either party from applying to a court for
temporary equitable relief, when appropriate, pending and subject to such
temporary orders and permanent award as the arbitrator or arbitrators may make.
The parties agree that the courts of the Province of Ontario, Canada, shall have
exclusive jurisdiction and venue for the adjudication of any civil action
between them arising out of relating to this Agreement, and hereby irrevocably
consent to such jurisdiction and venue.
10.12. Agent's Fee. The Borrower shall pay Thomson Kernaghan & Co. Ltd. a
fee for their services as Agent (the "Agent's Fee") in an amount equal to ten
percent (10%) of the aggregate principal amount of all Loans, payable pro rata
upon the disbursement of each Loan.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
Effective Date.
The Agent:
THOMSON KERNAGHAN & CO. LTD.
By _________________________________
Name _______________________________
Title ________________________________
Date signed __________________________
The Borrower:
SURGICAL SAFETY PRODUCTS, INC.
By _________________________________
Name _______________________________
Title ________________________________
Date signed __________________________
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NOTE
US$............[amount of Loan] Toronto, Ontario ........ ...., .......
FOR VALUE RECEIVED, on demand, and if no demand then on November 30, 2002, the
undersigned, SURGICAL SAFETY PRODUCTS, INC., (the "Borrower"), a New York (USA)
corporation, whose address is ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇,
hereby promises to pay to the order of THOMSON KERNAGHAN & CO. LTD., (the
"Agent"), at the Agent's office at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇,
▇▇▇▇▇▇, in lawful currency of the United States of America and in immediately
available funds, the principal sum of ................. DOLLARS AND NO CENTS
(US$...............) together with interest on the unpaid principal amount of
this Note at the rate of EIGHT PERCENT (8%) per year, from the date of this Note
until paid.
This Note is one of the Notes referred to in, and is entitled to the benefits
of, the Loan Agreement, dated as of December 20, 1999, between the Borrower and
the Agent (the "Loan Agreement"). Terms used herein which are defined in the
Loan Agreement shall have their defined meanings when used herein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity of this Note upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity of this Note
upon the terms and conditions specified in the Loan Agreement. This Note is
secured by a Security Agreement referred to in the Loan Agreement, executed by
the Borrower, reference to which is hereby made for a description of the
collateral provided for under the Security Agreement, and the rights of the
parties with respect thereto.
This Note shall be governed by the laws of the Province of Ontario, Canada;
provided, however, if any provision of this Agreement is unenforceable under
Ontario law, but is enforceable under the laws of the U.S. State of Florida,
then Florida shall govern the construction and enforcement of that provision.
The Agent or other holder of this Note is entitled, at its option, to convert at
any time and from time to time, all or any part of the principal amount of the
Note, plus accrued interest, into shares (the "Conversion Shares") of the
Borrower's common stock, $0.001 par value ("Common Stock"). No fraction of
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share.
To convert this Note, this Note must be surrendered at the principal executive
office of the Escrow Agent pursuant to an Escrow Agreement between the Company
and Thomson Kernaghan & Co. Ltd., dated December 20, 1999, accompanied by
written notice of conversion substantially in the form of Exhibit A to this
Note, with appropriate insertions. The date upon which the conversion shall be
effective (the "Conversion Date") shall be deemed to be the date on which the
Agent or other holder has delivered this Note, with the conversion notice duly
executed to Escrow Holder, or if earlier, the date set forth in such notice of
conversion if the Note and such conversion notice is received by the Escrow
Holder within three (3) business days therefrom. The Escrow Holder will deliver
certificates representing the Conversion Shares within three (3) business days
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following receipt of the Note and conversion notice. The price per share of
Common Stock into which this Note is convertible (the "Conversion Price") shall
be the higher of (i) US$0.375, or (ii) the lower of (x) $0.8203125 or (y) 75% of
the closing bid price of the Borrower's Common Stock quoted on the OTC Bulletin
Board on the Conversion Date; i.e., in no event shall the Conversion Price be
less that US$0.375 per share of Common Stock.
The Borrower is obligated to register the issuance and resale of the Conversion
Shares under the Securities Act of 1933, as amended, pursuant to the terms of
the Registration Rights Agreement between the Borrower and the Agent referred to
in the Loan Agreement.
Any controversy or claim arising out of or relating to this Note (whether in
contract or tort, or both, or at law or in equity) shall be determined by
binding arbitration at Toronto, Canada, in accordance with the commercial
arbitration rules of the International Chamber of Commerce. The prevailing party
in any arbitration proceeding shall be awarded reasonable attorneys fees and
costs of the proceeding. The arbitration award shall be final, and may be
entered in any court having jurisdiction. Nothing in this paragraph shall
preclude either party from applying to a court for temporary equitable relief,
when appropriate, pending and subject to such temporary orders and permanent
award as the arbitrator or arbitrators may make. The parties hereby consent to
the exclusive jurisdiction of the courts of the Province of Ontario for that
purpose.
SURGICAL SAFETY PRODUCTS, INC.
By _________________________________
Name _______________________________
Title ________________________________
Date signed __________________________
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EXHIBIT "A"
NOTICE OF CONVERSION
(To be executed by the Holder in order to Convert the Note)
TO SURGICAL SAFETY PRODUCTS, INC.
C/O THOMSON KERNAGHAN & CO. LIMITED
The undersigned hereby irrevocably elects to convert $________________ of
the principal amount of the above Note into Shares of Common Stock of Surgical
Safety Products, Inc. according to the conditions stated therein, as of the
Conversion Date written below.
Conversion Date
Applicable Conversion Price
Signature
Name __________________________________________________________
Address:
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SECURITY AGREEMENT
This SECURITY AGREEMENT, PLEDGE AND ASSIGNMENT (this ASecurity Agreement@)
dated and effective as of December 9, 1998, is made by Surgical Safety Products,
Inc. (the ABorrower@), a New York corporation, as the debtor, to Thomson
Kernaghan & Co. Ltd. (the AAgent@), as the secured party, in connection with the
Loan Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) The Borrower and the Agent have made and entered into a Loan
Agreement (as it now exists or subsequently may be modified, the ALoan
Agreement@) effective as of December __, 1999. The Borrower will derive
substantial direct and indirect benefit from the transactions contemplated by
the Loan Agreement.
(2) It is a condition precedent to the making of Loans by the Agent
under the Loan Agreement that the Borrower shall have made the pledge and
granted the assignment and security interest contemplated by this Security
Agreement.
(3) All capitalized terms used but not defined in this Security
Agreement shall have the meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Agent to make Loans under the Loan Agreement, the Borrower hereby
agrees with the Agent as follows:
Section 1.01. Pledge, Assignment and Grant of Security. The Borrower
hereby assigns and pledges to the Agent, and hereby grants to the Agent a
security interest in all of the Borrower=s right, title and interest in and to
the following, whether now owned or hereafter acquired (the ACollateral@):
(1) All equipment in all its forms, wherever located, now or
hereafter existing, all fixtures and all parts thereof and all accessions
thereto (any and all such equipment, fixtures, parts, and accessions being the
AEquipment@);
(2) All inventory in all of its forms, wherever located, now or
hereafter existing and raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or production
thereof; (b) goods in which the Borrower has an interest in mass or a joint or
other interest or right of any kind (including, without limitation, goods in
which the Borrower has an interest or right as consignee); and (c) goods which
are returned to or repossessed by the Borrower), and all accessions thereto and
products thereof and documents therefor (any and all such inventory, accessions,
products, and documents being the AInventory@); and
(3) All accounts, contract rights, chattel paper and instruments,
now or hereafter existing, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of sevices, and all rights now or
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hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper and instruments (any and all such accounts, contract rights,
chattel paper and instruments, being the AReceivables,@ and any and all such
leases, security agreements, and other contracts being the ARelated Contracts@);
(4) All proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds which constitute property of the types
described in clauses (1) through (4) of this Section 1.01), and, to the extent
not otherwise included, all (a) payments under insurance (whether or not the
Agent is the loss payee thereof), or any indemnity, warranty, or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral, and (b) cash.
Section 2.01. Security for Obligations. This Security Agreement
secures the payment for all obligations of the Borrower now or hereafter
existing under the Loan Agreement, the Notes and the Registration Rights
Agreement, whether for principal, interest, fees, expenses, or otherwise, and
all obligations of the Borrower now or hereafter existing under this Security
Agreement (collectively, the AObligations@). Without limiting the generality of
the foregoing, this Security Agreement secures the payment of all amounts which
constitute part of the Obligations and would be owed by the Borrower to the
Agent under any of the Loan Documents but for the fact that they are
unenforceable or not allowable owing to the existence of bankruptcy,
reorganization, or similar proceedings involving the Borrower.
Section 3.01. Borrower Remains Liable. Anything herein to the
contrary notwithstanding, (1) the Borrower shall remain 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 Security Agreement had not been excluded; (2) the exercise by
the Agent of any rights hereunder shall not release the Borrower from any of its
duties or obligations under the contracts and agreements included in the
Collateral; and (3) the Agent shall not have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Security Agreement, nor shall the Agent be obligated to perform any of the
obligations or duties of the Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
Section 4.01. Representations and Warranties. The Borrower represents
and warrants as follows:
(1) All of the Equipment and Inventory are located at the places
specified in Schedule I hereto. The chief place of business and chief executive
office of the Borrower and the office where the Borrower keeps its records
concerning the Receivables, and the originals of all chattel paper that evidence
Receivables, and the original copies of the Assigned Agreements, are located at
its address specified in Section 17.01. None of the Receivables is evidenced by
a promissory note or other instrument.
(2) The Borrower is the legal and beneficial owner of the Collateral
free and clear of any Lien except for (i) the security interest created by this
Security Agreement, and (ii) the security interests described in Schedule II. No
effective financing statement or other document similar in effect covering all
or any part of the Collateral is on file in any recording office, except (i)
such as may have been filed in favor of the Agent relating to this Security
Agreement, and (ii) the financing statements described in Schedule II. The
Borrower has no trade names except as set forth on Schedule III.
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(3) Except as provided on Schedule I, the Borrower has exclusive
possession and control of the Equipment and Inventory.
(4) Except as set forth on Schedule I, this Security Agreement
creates a valid and perfected first priority security interest in the
Collateral, securing the payment of the Obligations, and all filings and other
actions necessary or desirable to perfect and protect such security interest
have been duly taken.
(5) The Borrower is a corporation duly incorporated, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own its assets and to
transact its business, and is duly qualified and in good standing under the laws
of each jurisdiction in which qualification is required.
(6) The execution and performance by the Borrower of this Security
Agreement have been duly authorized by all necessary corporate action and do not
and will not (a) require any consent or approval of the Borrower=s stockholders;
(b) contravene the Borrower=s charter or bylaws; (c) violate any provision of
any law, rule, or regulation; or (d) result in a breach of or constitute a
default under any indenture or loan or Loan Agreement or any other agreement,
lease, or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(7) This Security Agreement is the legal, valid, and binding
obligation of the Borrower, enforceable in accordance with its respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors= rights
generally.
(8) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required (a) for the pledge by the Borrower of
the Security Collateral pursuant to this Security Agreement, for the grant by
the Borrower of the assignment and security interest granted hereby or for the
execution, delivery, or performance of this Security Agreement by the Borrower;
(b) for the perfection or maintenance of the pledge, assignment, and security
interest created hereby (including the first priority nature of such pledge,
assignment, and security interest); or (c) for the exercise by the Agent of the
voting or other rights provided for in this Security Agreement or the remedies
in respect of the Collateral pursuant to this Security Agreement (except as may
be required in connection with the disposition of any portion of the Security
Collateral by laws affecting the offering and sale of securities generally).
(9) The Inventory has been produced by the Borrower in compliance
with all requirements of the Fair Labor Standards Act.
(10) There are no conditions precedent to the effectiveness of this
Security Agreement that have not been satisfied or waived.
(11) The Borrower has, independently and without reliance upon the
Agent and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Security Agreement.
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Section 5.01. Further Assurances.
(1) The Borrower agrees that from time to time, at the expense of
the Borrower, the Borrower will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to perfect and
protect any pledge, assignment or security interest granted or purported to be
granted hereby or to enable the Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Borrower will execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may request, in order
to perfect and preserve the pledge, assignment, and security interest granted or
purported to be granted hereby.
(2) The Borrower hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A photocopy or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(3) The Borrower will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
Section 6.01. As to Equipment and Inventory.
(1) The Borrower shall keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places therefor
specified in Section 4.01(1) or, upon 10 days= prior written notice to the
Agent, at such other places in a jurisdiction where all action required by
Section 5.01 shall have been taken with respect to the Equipment and Inventory.
(2) The Borrower shall cause the Equipment to be maintained and
preserved in the same condition, repair, and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer=s manual, and
shall forthwith, or in the case of any loss or damage to any of the Equipment as
quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end. The Borrower shall promptly furnish to
the Agent a statement respecting any loss or damage to any of the Equipment.
(3) The Borrower shall pay promptly when due all property and other
taxes, assessments, and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials, and supplies) against, the
Equipment and Inventory. In producing the Inventory, the Borrower shall comply
with all requirements of the Fair Labor Standards Act.
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Section 7.01. Insurance.
(1) the Borrower shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in such amounts, against such risks, in
such form and with such insurers, as shall be satisfactory to the Agent from
time to time. The Borrower's current insurers are satisfactory to the Agent.
Each policy for liability insurance shall provide for all losses to be paid on
behalf of the Agent and the Borrower as their respective interests may appear
and each policy for property damage insurance shall provide for all losses
(except for losses of less than $10,000 per occurrence) to be paid directly to
the Agent. Each such policy shall in addition (a) name the Borrower and the
Agent as insured parties thereunder (without any representation or warranty by
or obligation upon the Agent) as their interests may appear; (b) contain the
agreement by the insurer that any loss thereunder shall be payable to the Agent
notwithstanding any action, inaction, or breach of representation or warranty by
the Borrower; (c) provide that there shall be no recourse against the Agent for
payment of premiums or other amounts with respect thereto; and (d) provide that
at least ten days= prior written notice of cancellation or of lapse shall be
given to the Agent by the insurer. The Borrower shall, if so requested by the
Agent, deliver to the Agent original or duplicate policies of such insurance
and, as often as the Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Further, the Borrower shall, at
the request of the Agent, duly execute and deliver instruments of assignment of
such insurance policies to comply with the requirements of Section 6.01 and
cause the insurers to acknowledge notice of such assignment.
(2) Reimbursement under any liability insurance maintained by the
Borrower pursuant to this Section 7.01 may be paid directly to the person who
shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (3) of this Section
7.01 is not applicable, the Borrower shall make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by the Borrower pursuant to this Section 7.01
shall be paid to the Borrower as reimbursement for the costs of such repairs or
replacements.
(3) Upon (a) the occurrence and during the continuance of any Event
of Default, or (b) the actual or constructive total loss (in excess of US$10,000
per occurrence) of any Equipment or Inventory, all insurance payments in respect
of such Equipment or Inventory shall be paid to and applied by the Agent as
specified in Section 13.01(2).
Section 8.01. Place of Perfection; Records, Collection of Receivables.
(1) The Borrower shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables, and the original copies of the Assigned Agreements and the
originals of all chattel paper that evidence Receivables, at the location
therefor specified in Section 4.01(1) or, upon 30 days= prior written notice to
the Agent, at any other locations in a jurisdiction where all actions required
by Section 6.01 shall have been taken with respect to the Receivables. The
Borrower will hold and preserve such records, Assigned Agreements and chattel
paper and will permit representatives of the Agent at any time during normal
business hours to inspect and make abstracts from such records and chattel
paper.
(2) Except as otherwise provided in this subsection (2), the
Borrower shall continue to collect, at its own expense, all amounts due or to
become due the Borrower under the Receivables. In connection with such
collections, the Borrower may take (and, at the Agent=s direction, shall take)
such action as the Borrower or the Agent may deem necessary or advisable to
enforce collection of the Receivables: provided, however, that the Agent shall
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have the right upon the occurrence and during the continuance of an Event of
Default or an event which, with the giving of notice or the lapse of time, or
both, would become an Event of Default and upon written notice to the Borrower
of its intention to do so, to notify the account debtors or obligors under any
Receivables of the assignment of such Receivables to the Agent and subject to
any priority interests of other secured creditors to direct such account debtors
or obligors to make payment of all amounts due or to become due to the Borrower
thereunder directly to the Agent and upon such notification and at the expense
of the Borrower, to enforce collection of any such Receivables, and to adjust,
settle, or compromise the amount or payment thereof, in the same manner and to
the same extent as the Borrower might have done. After receipt by the Borrower
of the notice from the Agent referred to in the proviso to the preceding
sentence, (a) all amounts and proceeds (including instruments) received by the
Borrower in respect of the Receivables shall be received in trust for the
benefit of the Agent hereunder, shall be segregated from other funds of the
Borrower, and shall be forthwith paid over to the Agent in the same form as so
received (with any necessary endorsement) to be held as cash collateral and
either (i) released to the Borrower so long as no Event of Default shall have
occurred and be continuing or (ii) if any Event of Default shall have occurred
and be continuing, applied as provided by Section 13.01(2), and (b) the Borrower
shall not adjust, settle, or compromise the amount or payment of any Receivable,
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
Section 9.01. Transfers and Other Liens; Additional Shares.
(1) The Borrower shall not (a) sell, assign (by operation of law or
otherwise), or otherwise dispose of, or grant any option with respect to, any of
the Collateral, except Inventory in the ordinary course of business, or (b)
create or permit to exist any Lien upon or with respect to any of the
Collateral, except for the security interest under this Security Agreement.
Section 10.01. Agent Appointed Attorney-In-Fact. The Borrower hereby
irrevocably appoints the Agent the Borrower=s attorney-in-fact, with full
authority in the place and stead of the Borrower and in the name of the Borrower
or otherwise, from time to time in the Agent=s discretion, to take any action
and to execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposed of this Security Agreement (subject to the rights of the
Borrower under Section 8.01), including, without limitation, upon five days=
notice to the Borrower:
(1) To obtain and adjust insurance required to be paid to the Agent
pursuant to Section 8.01;
(2) To ask, demand, collect, ▇▇▇ for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral;
(3) To receive, endorse, and collect any drafts or other instruments,
documents, and chattel paper, in connection therewith; and
(4) To file any claims or take any action or institute any proceedings
which the Agent may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Agent
with respect to any of the Collateral.
Section 11.01. Agent May Perform. If the Borrower fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Borrower under Section 14.01 (2). 5
days after notice and failure
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Section 12.01. The Agent=s Duties. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Agent shall have no duty as to any Collateral, as
to ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders, or other matters relative to any Security Collateral,
whether or not the Agent has or is deemed to have knowledge of such matters, or
as to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which it accords its own property.
Section 13.01 Remedies. If any Event of Default shall have occurred
and be continuing:
(1) The Agent may exercise in respect of the collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of Delaware at that time (the ACode@)
(whether or not the Code applies to the affected Collateral), and also may (a)
require the Borrower to, and the Borrower hereby agrees that it will at its
expense and upon request of the Agent forthwith, assemble all of part of the
Collateral as directed by the Agent and make it available to the Agent at a
place to be designated by the Agent which is reasonably convenient to both
parties and (b) upon five days= notice to the Borrower (except as specified
below), sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Agent=s offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Agent may deem
commercially reasonable. The Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten days= notice to the Borrower of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. the Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(2) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of the
Agent, be held by the Agent as Collateral for, and/or then or any time
thereafter be applied (after payment of any amounts payable to the Agent
pursuant to Section 19.01) in whole or in part by the Agent against, all or any
part of the Obligations in such order as the Agent shall elect. Any surplus of
such cash or cash proceeds held by the Agent and remaining after payment in full
of all the Obligations shall be paid over to the Borrower or to whomsoever may
be lawfully entitled to receive such surplus.
(3) The Agent may exercise any and all rights and remedies of the
Borrower under or in connection with the Assigned Agreements or otherwise in
respect of the Collateral, including, without limitation, any and all rights of
the Borrower to demand or otherwise require payment of any amount under, or
performance of any provision of, any Assigned Agreement.
(4) All payments received by the Borrower under or in connection
with any Assigned Agreement or otherwise in respect of the Collateral shall be
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received in trust for the benefit of the Agent, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Agent in the same
form as so received (with any necessary endorsement).
Section 14.01. Indemnity and Expenses.
(1) The Borrower agrees to indemnify the Agent from and against any
and all claims, losses, and liabilities (including reasonable attorney fees)
growing out of or resulting from this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except claims, losses, or
liabilities resulting from the Agent=s gross negligence or willful misconduct.
(2) The Borrower will upon demand pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Agent may incur in connection
with (a) the administration of this Security Agreement; (b) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral; (c) the exercise or enforcement of any
of the rights of the Agent hereunder; or (d) the failure by the Borrower to
perform or observe any of the provisions hereof.
Section 15.01. Security Interest Absolute. All rights of the Agent
and the pledge, assignment, and security interest hereunder, and all obligations
of the Borrower hereunder, shall be absolute and unconditional, irrespective of:
(1) Any lack of validity, regularity, or enforceability of the Loan
Agreement, the Notes or any other agreement or instrument relating thereto;
(2) Any change in the time, manner, or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Loan Agreement or the Notes,
including, without limitation, any increase in Obligations resulting from the
extension of additional credit to the Borrower or any of its Subsidiaries or
otherwise.
(3) Any taking, exchange, release, or nonperfection of any other
collateral, or any taking, release, or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations;
(4) Any manner of application of Collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Obligations or any other assets of the Borrower
or any of its subsidiaries;
(5) Any change, restructuring, or termination of the corporate
structure or existence of the Borrower or any of its subsidiaries; or
(6) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower.
Section 16.01. Amendments; Etc. No amendment, modification,
termination, or waiver of any provision of this Security Agreement, and no
consent to any departure by the Borrower herefrom, shall in any event be
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effective unless the same shall be in writing and signed by the Agent, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
Section 17.01. Addresses for Notices. All notices given under this
Security Agreement shall be in writing, addressed to the parties as set forth
below, and shall be effective on the earliest of (i) the date received, or (ii)
if given by facsimile transmittal on the date given if transmitted before 5:00
p.m. the recipient=s time, otherwise it is effective the next day, or (iii) on
the second business day after delivery to a major international air delivery or
air courier service (such as Federal Express or Network Couriers):
If to the Agent: If to the Borrower:
Thomson Kernaghan & Co. Ltd. Surgical Safety Products, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Executive Vice President Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (that does not constitute
With a copy (that does not constitute notice) to:
notice) to: Mintmire & Associates
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ at Law ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Section 18.01. Continuing Security Interest; Assignments Under Loan
Agreement. This Security Agreement shall create a continuing security interest
in the Collateral and shall (1) remain in full force and effect until (a) the
payment in full of the Obligations and all other amounts payable under this
Security Agreement, and (b) the expiration or termination of any obligation of
the Agent to make Loans; (2) be binding upon the Borrower, its successors and
assigns; and (3) inure to the benefit of, and be enforceable by, the Agent and
its successors, transferees, and assigns. Without limiting the generality of the
foregoing clause (3), the Agent may assign or otherwise transfer all or any
portion of its rights and obligations under the Loan Agreement (including,
without limitation, all or any portion of any Notes held by it) to any other
person or entity, and such other person or entity shall thereupon become vested
with all the benefits in respect thereof granted to the Agent herein or
otherwise. Upon the later of the payment in full of the Obligations and all
other amounts payable under this Security Agreement and the expiration or
termination of any obligation of the Agent to make Loans, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Borrower. Upon any such termination, the Agent will, at the Borrower=s
expense, execute and deliver to the Borrower such documents as the Borrower
shall reasonably request to evidence such termination.
Section 19.01. Governing Law; Terms. This Security Agreement shall
be governed by and construed in accordance with the laws of the Province of
Ontario, except: (a) if any provision of this Security Agreement is
unenforceable under Ontario law but is enforceable under the laws of the U.S.
State of Florida, then Florida law shall govern the construction and enforcement
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of that provision; and (b) the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral shall
be governed by the Uniform Commercial Code as adopted in Florida. Unless
otherwise defined in this Security Agreement or in the Loan Agreement, terms
used in Article 9 of the UCC are used herein as therein defined.
Section 20.01. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement (whether in contract or tort, or both, or
at law or in equity) shall be determined by binding arbitration at Toronto,
Canada, in accordance with the commercial arbitration rules of the International
Chamber of Commerce. The prevailing party in any arbitration proceeding shall be
awarded reasonable attorneys fees and costs of the proceeding. The arbitration
award shall be final, and may be entered in any court having jurisdiction.
Nothing in this paragraph shall preclude either party from applying to a court
for temporary equitable relief, when appropriate, pending and subject to such
temporary orders and permanent award as the arbitrator or arbitrators may make.
The parties hereby consent to the exclusive jurisdiction of the courts of the
Province of Ontario for that purpose.
IN WITNESS WHEREOF, the parties have caused this Security Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
The Agent: The Borrower:
THOMSON KERNAGHAN & CO. LTD. SURGICAL SAFETY PRODUCTS, INC.
By _________________________________ By _________________________________
Name _______________________________ Name _______________________________
Title ______________________________ Title ______________________________
Date signed ________________________ Date signed ________________________
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SCHEDULE I
Part 1
-76-
Schedule II
Locations of Equipment and Inventory
-77-
SCHEDULE II
Description of Other Liens, Security Interests and Financing Statements
-78-
SCHEDULE III
Description of Borrower=s Trade Names
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LENDERS' WARRANT
Warrant No. _____
Void after 5:00 p.m. Toronto, Ontario time, on November 30, 2002, 2002
Warrant to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
-------------------------------------------------------------
WARRANT TO PURCHASE 3,428,571 SHARES OF COMMON STOCK
OF
SURGICAL SAFETY PRODUCTS, INC..
----------------------------------------------------------------
This it to certify that, FOR VALUE RECEIVED, Thomson Kernaghan & Co.
Limited as Agent or assigns ("Holder") is entitled to purchase, subject to the
provisions of this Warrant, from SURGICAL SAFETY PRODUCTS, INC., a New York
corporation (the "Company"), the fully paid, validly issued and non-assessable
shares of Common Stock, $0.001 par value, of the Company ("Common Stock") at any
time or from time to time during the period from the date hereof, through and
including November 30, 2002, but not later than 5:00 p.m. Toronto, Ontario time,
on November 30, 2002 (the "Exercise Period") at the price of US$1.09375 per
share (the "Exercise Price"). The total number of shares of Common Stock to be
issued upon exercise of this Warrant shall be 3,428,571 shares. The price to be
paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price."
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This Warrant is being issued pursuant to the Loan Agreement, dated
as of December 20, 1999, between the Company and the Holder. This Warrant shall
be exercisable from time to time as follows: (i) this Warrant shall be
immediately exercisable for 20% of the number of Warrant Shares; and, (ii) the
Warrants shall be exercisable for an additional1% of the number of Warrant
Shares for each $25,000 of principal of Loans made under the Loan Agreement.
The Company has agreed to register the issuance and resale of the
Common Stock issuable upon exercise of this Warrant under the U.S. Securities
Act of 1933, as amended, pursuant to a Registration Rights Agreement between the
Company and the Holder of even date herewith.
A. EXERCISE OF WARRANT
This Warrant may be exercised in whole or in part at any time or
from time to time during the Exercise Period; provided, however, that (i) if the
last day of the Exercise Period is a day on which banking institutions in the
City of Toronto are authorized by law to close, then the Exercise Period shall
terminate on the next succeeding day that shall not be such a day, and during
such period the Holder shall have the right to exercise this Warrant into the
kind and amount of shares of stock and other securities and property (including
cash) receivable by a holder of the number of shares of Common Stock into which
this Warrant might have been exercisable immediately prior thereto. This Warrant
may be exercised by presentation and surrender hereof to Thomson Kernaghan & Co.
Limited as Escrow Holder at the Escrow Holder's principal office, ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇, with the Exercise Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as practicable
after each such exercise of the Warrants, but not later than seven (7) days from
the date of such exercise, the Escrow Holder shall, to the extent that the
Company has deposited shares of Common Stock with the Escrow Holder for that
purpose, issue and deliver to the Holder a certificate or certificates for the
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its principal office, or by the stock transfer agent of the Company
at its office, in proper form for exercise, the Holder shall be deemed to be
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (ii) IF NOT EXERCISED ON
BEHALF OF A U.S. PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST IN THE
WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
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B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for
issuance, and deposited with the Escrow Holder for delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of the Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant to the
exercise of the Warrants to be duly issued and deposited with the
Escrow Holder for delivery in accordance herewith and the terms
hereof;
2. all shares of Common Stock that shall be issued upon exercise of the
right to purchase provided for herein, upon payment of the prevailing
Exercise Price herein provided, shall be fully paid and
non-assessable;
3. it will use its best efforts to maintain its corporate existence; and
4. generally, it will well and truly perform and carry out all of the
acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
No fractional shares or script representing fractional shares shall
be issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
1. If the Common Stock is listed on a National Securities Exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ system, the current market value shall be the
last reported sale price of the Common Stock on such exchange or
system on the last business day prior to the date of exercise of this
Warrant or, if no such sale is made (or reported) on such day, the
average closing bid and asked prices for such day on such exchange or
system; or
2. If the Common Stock is not so listed or admitted to unlisted trading
privileges, the current market value shall be the mean to the last
reported bid and ask prices reported by the Electronic Bulletin Board
or National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and ask prices are not so reported, the current
market value shall be an amount, not less than book value thereof as
at the end of the most recent fiscal year of the Company ending prior
to the date of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company.
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D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of
a shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number
and kind of securities purchasable upon the exercise of the Warrant shall be
subject to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the respective Exercise Price in effect at the time
of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by
multiplying the respective Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of
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which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially
issuable upon exercise of this Warrant by a fraction, the denominator
of which shall be the Exercise Price after giving effect to such
action and the numerator of which shall be the Exercise Price in
effect immediately prior to such action.
3. No adjustment in the respective Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any
adjustment that by reason of this Subsection (3) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this
Section (F) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Section
(F) to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (F), as
it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any federal income
tax liability to the holders of Common Stock or securities convertible
into Common Stock (including the Warrants).
4. In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise Price or
the related number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required
by the provisions of the foregoing Section (F), the Company shall forthwith file
in the custody of its Secretary or an Assistant Secretary at its principal
office, an officer's certificate showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
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the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
H. NOTICES TO WARRANT HOLDERS
So long as this Warrant shall be outstanding, (i) if the Company
shall pay any dividend or make any distribution upon the Common Stock or (ii) if
the Company shall offer to the holders of Common Stock for subscription or
purchase by them any share of any class or any other rights, options or warrants
(other than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other
change of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
-85-
J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date
of issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Florida; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Florida, but is
enforceable under the laws of the Province of Ontario, Canada, then such
provision shall be governed by and interpreted in accordance with the laws of
the Province of Ontario.
Any controversy or claim arising out of or relating to this
Agreement (whether in contract or tort, or both, or at law or in equity) shall
be determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make.
The parties agree that the courts of the Province of Ontario,
Canada, shall have exclusive jurisdiction and venue for the adjudication of any
civil action between them arising out of relating to this Agreement, and hereby
irrevocably consent to such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
SURGICAL SAFETY PRODUCTS, INC..
By:_____________________________
Its:_____________________________
DATED: December __, 1999
ATTEST:
=======================
-86-
FORM OF NOTICE OF EXERCISE
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock at the
Exercise Price of US$1.09375 per share, for a total of US$ _________________.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________
(Please typewrite or print in block letters)
Address________________________________________
=========================================
The undersigned represents and warrants to U.S. Surgical Products, Inc. that the
conditions for exercise of the within Warrant set forth in the first sentence of
the first paragraph above have been fully complied with and no U.S. Person has
any interest in the Warrant or the Warrant Shares.
Signature____________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
-87-
ASSIGNMENT FORM
FOR VALUE RECEIVED,
-------------------------------------------------------
hereby sells, assigns and transfers unto
Name
----------------------------------------------------------
(Please typewrite or print in block letters)
Address
----------------------------------------------------------
----------------------------------------------------------
the right to purchase shares of Common Stock of Surgical Safety Products, Inc.,
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint __________________________
________________ Attorney, to transfer the same on the books of Surgical Safety
Products, Inc., with full power of substitution in the premises.
Date: __________________________
Signature: ____________________________________
(sign exactly as your name appears on the first page of this Warrant)
Note: The Warrant and the Common Stock issuable upon exercise of the Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only in accordance therewith and as provided in the legends
set forth in the Warrant.
-88-
AGENTS' WARRANT
Warrant No. _____
Void after 5:00 p.m. Toronto, Ontario time, on November 30, ▇▇▇▇
▇▇▇▇▇▇▇ to Purchase Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE SELLER WILL BE PROVIDED WITH OPINION OF COUNSEL
OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
-------------------------------------------------------------
WARRANT TO PURCHASE 1,142,857 SHARES OF COMMON STOCK
OF
SURGICAL SAFETY PRODUCTS, INC..
----------------------------------------------------------------
This it to certify that, FOR VALUE RECEIVED, Thomson Kernaghan & Co.
Limited or assigns ("Holder") is entitled to purchase, subject to the provisions
of this Warrant, from SURGICAL SAFETY PRODUCTS, INC., a New York corporation
(the "Company"), the fully paid, validly issued and non-assessable shares of
Common Stock, $0.001 par value, of the Company ("Common Stock") at any time or
from time to time during the period from the date hereof, through and including
November 30, 2002, but not later than 5:00 p.m. Toronto, Ontario time, on
November 30, 2002 (the "Exercise Period") at the price of US$1.09375 per share
(the "Exercise Price"). The total number of shares of Common Stock to be issued
upon exercise of this Warrant shall be 1,142,857 shares. The price to be paid
for each share of Common Stock may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the respective exercise price of a share of Common Stock in effect
at any time and as adjusted from time to time is hereinafter sometimes referred
to as the "Exercise Price."
-89-
This Warrant is being issued pursuant to the Loan Agreement, dated
as of December 20, 1999, between the Company and the Holder. This Warrant shall
be exercisable from time to time as follows: (i) this Warrant shall be
immediately exercisable for 20% of the number of Warrant Shares; and, (ii) the
Warrants shall be exercisable for an additional1% of the number of Warrant
Shares for each $25,000 of principal of Loans made under the Loan Agreement.
The Company has agreed to register the issuance and resale of the
Common Stock issuable upon exercise of this Warrant under the U.S. Securities
Act of 1933, as amended, pursuant to a Registration Rights Agreement between the
Company and the Holder of even date herewith.
A. EXERCISE OF WARRANT
This Warrant may be exercised in whole or in part at any time or
from time to time during the Exercise Period; provided, however, that (i) if the
last day of the Exercise Period is a day on which banking institutions in the
City of Toronto are authorized by law to close, then the Exercise Period shall
terminate on the next succeeding day that shall not be such a day, and during
such period the Holder shall have the right to exercise this Warrant into the
kind and amount of shares of stock and other securities and property (including
cash) receivable by a holder of the number of shares of Common Stock into which
this Warrant might have been exercisable immediately prior thereto. This Warrant
may be exercised by presentation and surrender hereof to Thomson Kernaghan & Co.
Limited as Escrow Holder at the Escrow Holder's principal office, ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇, with the Exercise Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as practicable
after each such exercise of the Warrants, but not later than seven (7) days from
the date of such exercise, the Escrow Holder shall, to the extent that the
Company has deposited shares of Common Stock with the Escrow Holder for that
purpose, issue and deliver to the Holder a certificate or certificates for the
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its principal office, or by the stock transfer agent of the Company
at its office, in proper form for exercise, the Holder shall be deemed to be
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT), (ii) IF NOT
EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S. PERSON HAS ANY INTEREST
IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT
BE COMPLIED WITH, THEN THE WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF
COUNSEL, THE FORM AND SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS
DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE ACT.
-90-
B. RESERVATION OF SHARES AND COVENANTS OF THE COMPANY
The Company shall at all times have allotted and reserved for
issuance, and deposited with the Escrow Holder for delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of the Warrant.
The Company covenants with the Holder that so long as any Warrants
remain outstanding and may be exercised:
1. it will cause the shares of Common Stock and the certificates
representing the Common Stock subscribed and paid for pursuant to the
exercise of the Warrants to be duly issued and deposited with the
Escrow Holder for delivery in accordance herewith and the terms
hereof;
2. all shares of Common Stock that shall be issued upon exercise of the
right to purchase provided for herein, upon payment of the prevailing
Exercise Price herein provided, shall be fully paid and
non-assessable;
3. it will use its best efforts to maintain its corporate existence; and
4. generally, it will well and truly perform and carry out all of the
acts or things to be done by it as provided herein.
C. FRACTIONAL SHARES
No fractional shares or script representing fractional shares shall
be issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
1. If the Common Stock is listed on a National Securities Exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ system, the current market value shall be the
last reported sale price of the Common Stock on such exchange or
system on the last business day prior to the date of exercise of this
Warrant or, if no such sale is made (or reported) on such day, the
average closing bid and asked prices for such day on such exchange or
system; or
2. If the Common Stock is not so listed or admitted to unlisted trading
privileges, the current market value shall be the mean to the last
reported bid and ask prices reported by the Electronic Bulletin Board
or National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Warrant; or
3. If the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and ask prices are not so reported, the current
market value shall be an amount, not less than book value thereof as
at the end of the most recent fiscal year of the Company ending prior
to the date of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company.
-91-
D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company for other warrants
of different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
applicable transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such Assignment Form and this
Warrant shall promptly be canceled. This Warrant may be divided or combined with
other warrants that carry the same rights upon presentation hereof at the
principal office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt of the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
This Warrant and the Common Stock issuable upon exercise of this
Warrant were issued under Regulation S under the Act and may be transferred only
in accordance therewith and as provided in the legends set forth in this
Warrant.
E. RIGHTS OF THE HOLDER
The Holder shall not, by virtue hereof, be entitled to any rights of
a shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein.
F. ANTI-DILUTION PROVISIONS
The respective Exercise Price in effect at any time and the number
and kind of securities purchasable upon the exercise of the Warrant shall be
subject to adjustment from time to time upon the happening of certain events are
follows:
1. In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the respective Exercise Price in effect at the time
of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by
multiplying the respective Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of
-92-
which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
2. Whenever the respective Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially
issuable upon exercise of this Warrant by a fraction, the denominator
of which shall be the Exercise Price after giving effect to such
action and the numerator of which shall be the Exercise Price in
effect immediately prior to such action.
3. No adjustment in the respective Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any
adjustment that by reason of this Subsection (3) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under this
Section (F) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Section
(F) to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (F), as
it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any federal income
tax liability to the holders of Common Stock or securities convertible
into Common Stock (including the Warrants).
4. In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (1) to (3) inclusive above.
5. Irrespective of any adjustments in the respective Exercise Price or
the related number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in
the similar Warrants initially issuable pursuant to this Warrant.
G. OFFICER'S CERTIFICATE
Whenever the respective Exercise Price shall be adjusted as required
by the provisions of the foregoing Section (F), the Company shall forthwith file
in the custody of its Secretary or an Assistant Secretary at its principal
office, an officer's certificate showing the adjusted Exercise Price determined
as herein provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of related additional shares of
Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
-93-
the holder or any holder of a Warrant executed and delivered pursuant to Section
(A) and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
H. NOTICES TO WARRANT HOLDERS
So long as this Warrant shall be outstanding, (i) if the Company
shall pay any dividend or make any distribution upon the Common Stock or (ii) if
the Company shall offer to the holders of Common Stock for subscription or
purchase by them any share of any class or any other rights, options or warrants
(other than this Warrant) or (iii) if a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen (15) days prior
to the date specified, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which a record date
is to be determined for the purpose of such dividend, distribution or issue of
rights, options, or warrants or such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not otherwise affect the action take by the Company.
I. RECLASSIFICATION, REORGANIZATION OR MERGER
In case of any reclassification, capital reorganization or other
change of outstanding shares Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the Holder shall have the right thereafter, by
exercising this Warrant at any time prior to the expiration of the Warrant, to
purchase the kind and amount of shares of stock an other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of such number of shares
of Common Stock that might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (I) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (F) hereof.
-94-
J. WARRANTS TO RANK PARI PASSU
All Warrants shall rank pari passu, whatever may be the actual date
of issue of the same.
K. GOVERNING LAW; JURISDICTION AND VENUE
This Warrant shall be governed by and interpreted in accordance with
the laws of the State of Florida; provided, however, that if any provision of
this Agreement is unenforceable under the laws of the State of Florida, but is
enforceable under the laws of the Province of Ontario, Canada, then such
provision shall be governed by and interpreted in accordance with the laws of
the Province of Ontario.
Any controversy or claim arising out of or relating to this
Agreement (whether in contract or tort, or both, or at law or in equity) shall
be determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make.
The parties agree that the courts of the Province of Ontario,
Canada, shall have exclusive jurisdiction and venue for the adjudication of any
civil action between them arising out of relating to this Agreement, and hereby
irrevocably consent to such jurisdiction and venue.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by the undersigned, each being duly authorized, as of the date
below.
SURGICAL SAFETY PRODUCTS, INC..
By:_____________________________
Its:_____________________________
DATED: December __, 1999
ATTEST:
=======================
-95-
FORM OF NOTICE OF EXERCISE
THIS WARRANT MAY BE EXERCISED ONLY (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock at the
Exercise Price of US$1.09375 per share, for a total of US$ _________________.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________
(Please typewrite or print in block letters)
Address________________________________________
=========================================
The undersigned represents and warrants to U.S. Surgical Products, Inc. that the
conditions for exercise of the within Warrant set forth in the first sentence of
the first paragraph above have been fully complied with and no U.S. Person has
any interest in the Warrant or the Warrant Shares.
Signature____________________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
-96-
ASSIGNMENT FORM
FOR VALUE RECEIVED,
-------------------------------------------------------
hereby sells, assigns and transfers unto
Name
--------------------------------------------------------
(Please typewrite or print in block letters)
Address
--------------------------------------------------------
--------------------------------------------------------
the right to purchase shares of Common Stock of Surgical Safety Products, Inc.,
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint _________________________
________________ Attorney, to transfer the same on the books of Surgical Safety
Products, Inc., with full power of substitution in the premises.
Date: __________________________
Signature: _____________________________________________________________
(sign exactly as your name appears on the first page of this Warrant)
Note: The Warrant and the Common Stock issuable upon exercise of the Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only in accordance therewith and as provided in the legends
set forth in the Warrant.
-97-
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December 20, 1999, by and between Surgical Safety Products,
Inc., a New York corporation (the "Company"), and Thomson Kernaghan & Co.
Limited (the "Agent"), for itself and certain lenders (the "Lenders") described
in the Loan Agreement defined below..
Preliminary Statements
In connection with the consummation of the transactions contemplated
by that certain Loan Agreement (including all exhibits thereto, the "Loan
Agreement") of even date herewith by and between the Company and the Agent, the
Company has agreed, upon the terms and subject to the conditions of the Loan
Agreement, at the option of the Agent or other holders of the Notes (as defined
in the Loan Agreement), to convert the Notes into shares of the Company's Common
Stock (the "Conversion Shares").
The Company has also agreed, upon the terms and subject to the
conditions of the Loan Agreement, to issue to the Agent a Warrant (the "Lender's
Warrant") to purchase up to 3,428,571 shares of the Company's Common Stock (the
"Lender's Warrant Shares") and to issue to the Agent a Warrant (the "Agent's
Warrant") to purchase up to1,142,857 shares of the Company's Common Stock (the
"Agent's Warrant Shares").
The Lender's Warrant Shares and the Agent's Warrant Shares are
collectively referred to as the Warrant Shares. The Conversion Shares and the
Warrant Shares are hereinafter collectively referred to as the "Registrable
Securities." The Registrable Securities are issuable pursuant and subject to the
provisions of the Loan Agreement.
To induce the Agent to execute and deliver the Loan Agreement and to
make Loans thereunder, the Company has agreed, pursuant to the terms and
conditions of this Agreement, to provide certain registration rights with
respect to the Registrable Securities.
Agreement
In consideration of the foregoing, the mutual covenants and
conditions set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to become legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
"Agent" shall mean Thomson Kernaghan & Co. Limited.
"Agent's Warrant" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
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"Agent's Warrant Shares" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Agreement" shall mean this Registration Rights Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Shares" shall have the meaning ascribed to such term in
the Preliminary Statements to this Agreement.
"Company" shall mean Surgical Safety Products, Inc., a New York
company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as in effect from time to time.
"Filing Deadline" shall have the meaning ascribed to such term in
Section 2.1 of this Agreement.
"Holder" or "Holders" shall mean (a) the Agent, to the extent that the
Agent holds Registrable Securities, and (b) any Person holding Registrable
Securities as a transferee of the Agent (directly or indirectly, including
subsequent transfers).
"Lender's Warrant" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Lender's Warrant Shares" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Loan Agreement" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing with the Commission one or
more registration statements covering Registrable Securities in compliance
with the Registrable Securities Act that is declared or ordered effective
by the Commission.
"Registrable Securities" shall mean the Conversion Shares, the
Lender's Warrant Shares and the Agent's Warrant Shares, and any shares of
capital stock issued or issuable with respect to the Conversion Shares, the
Lender's Warrant Shares or the Agent's Warrant Shares as a result of any
stock split, stock dividend, recapitalization, exchange or similar event;
provided, however, that such Registrable Securities shall cease to be
Registrable Securities when (a) a registration statement with respect to
such Registrable Securities shall have been declared effective under the
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Registrable Securities Act and such Registrable Securities shall have been
disposed of pursuant to the registration statement, (b) such Registrable
Securities are distributed to the public pursuant to Rule 144(k) (or any
successor provisions) promulgated under the Securities Act or (c) such
Registrable Securities shall have ceased to be outstanding.
"Registration Deadline" shall have the meaning ascribed to such term
in Section 2.1 of this Agreement.
"Registration Expenses" shall mean all expenses incurred in order to
comply with Article II hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of one (1)
counsel for the Holders, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, but
excluding the compensation of regular employees of the Company (which shall
be paid in any event by the Company) and excluding Selling Expenses.
"Restricted Registrable Securities" shall mean Registrable Securities
that are "restricted Registrable Securities" as defined in Rule 144 under
the Securities Act.
"Registrable Securities" shall have the meaning ascribed to such term
in the Preliminary Statements to this Agreement.
"Securities Act" shall mean the Registrable Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as in effect from time to time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions incurred in connection with the sale of Registrable Securities
pursuant to a registration effected hereunder.
"Warrant Shares" shall have the meaning ascribed to such term in the
Preliminary Statements to this Agreement.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the
Loan Agreement.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Mandatory Registration.
(a) The Company shall prepare and file with the Commission within sixty (60)
days from the date of this Agreement (the "Filing Deadline") a registration
statement or registration statements (as is necessary) on Form S-3 covering
the issuance and the resale of all of the Registrable Securities. Such
registration statement shall initially register for resale at least
21,750,000 Conversion Shares, and 100% of the Warrant Shares. The Company
shall use its best efforts to have the registration statement declared
effective by the Commission within one hundred and twenty (120) days after
the Filing Deadline (the "Registration Deadline"). The Company shall permit
the registration statement to become effective within five (5) business
days after receipt of a "no review" notice from the Commission. Such
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registration statement shall be kept current and effective for the greater
of (i) a period of at least three (3) years from the Closing Date and (ii)
a period of at least ninety (90) days after (x) all of the Notes shall have
been converted into Conversion Shares or paid in full, and (y) the Agent's
Warrant and the Agent's Warrant shall have been fully exercised or expired.
If a registration statement with respect to the Registrable Securities is
not effective on the Registration Deadline date, the Company agrees to and
shall pay the Agent liquidated damages of US$13,000 per month, pro-rated
for partial months, until the registration statement is effective.
Section 2.2 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 2.1 shall be borne by the Company; and all Selling Expenses
in connection with such registration, qualification or compliance shall be borne
by the holders of the Registrable Securities so registered pro rata on the basis
of the number of shares so registered.
Section 2.3 Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Article II, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense, the Company will:
(a) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Registrable Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement;
(b) furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirement of the
Registrable Securities Act, and such other documents as they may reasonably
request (including a conformed copy of the registration statement filed with the
Commission and any amendments thereto and an original executed underwriting
agreement entered into in connection with such registration) in order to
facilitate the disposition of Registrable Registrable Securities owned by them;
(c) use reasonable efforts to register and qualify the Registrable
Securities covered by such registration statement under such other Registrable
Securities or blue sky laws of one (1) jurisdiction (in addition to those
jurisdictions in which the Company has otherwise agreed to so register and
qualify such Registrable Securities) as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;
(d) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter(s) of such offering; each Holder participating in such underwriting
shall also enter into and perform its obligations under such underwriting
agreement;
(e) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
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of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Article II, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with registration pursuant to this Article II, if such Registrable Securities
are being sold through underwriters, or on the date that the registration
statement with respect to such Registrable Securities becomes effective, if such
Registrable Securities are not being sold through underwriters, (i) a copy of
any opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters of the Company, and
(ii) a copy of any letter, dated such date, from the independent accountants of
the Company, addressed to the underwriters of the Company.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (f) of this Section 2.3, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of a supplemented or amended prospectus and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense), all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities that was in effect prior to such amendment
or supplement. In the event the Company shall give any such notice, the period
set forth in clause (a) of this Section 2.3 shall be extended by the number of
days during the period from and including the date of the giving of such notice
pursuant to clause (e) of this Section 2.3 to and including the date when each
seller of Registrable Securities covered by such registration statement shall
have received the copies of a supplemented or amended prospectus.
Section 2.4 Indemnification.
(a) The Company will indemnify each Holder, each Holder's officers,
directors and partners, and each Person controlling such Holder (collectively,
"Holder's Parties"), participating in any registration, qualification, or
compliance effected pursuant to this Article II with respect to Registrable
Securities held by such Holder and each underwriter, if any, and each Person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to which they may become
subject under the Registrable Securities Act, the Exchange Act or other federal
or state law, arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other similar document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any 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 (ii) any violation by the Company of
any federal, state or common law rule or regulation applicable to the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder's Parties each such underwriter, and each Person who
controls any such underwriter, for any legal and any other expenses reasonably
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incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as incurred, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission, made in reliance on and in conformity with written information
furnished to the Company by such Holder's Parties or underwriter or Person
controlling such underwriter specifically for use in the preparation thereof.
(b) Each Holder will, if Registrable Securities held by such Holder are included
in the Registrable Securities as to which such registration, qualification or
compliance is being effected, severally and not jointly, indemnify the Company,
each of its directors and officers, each underwriter, if any, of the Company
Registrable Securities covered by such a registration statement, and each Person
who controls the Company or such underwriter within the meaning of the
Registrable Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other similar document,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company, such directors, officers, Persons, underwriters
or control Persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, as incurred, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with the written
information furnished to the Company by such Holder specifically for use in the
preparation thereof, or (ii) any violation by any such Holder of any federal,
state or common law rule or regulation applicable to such Holder in connection
with the distribution of Registrable Securities pursuant to a registration
statement, and will reimburse the Company, such Holders, such directors,
officers, Persons, underwriters or control Persons for any legal any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, as incurred; provided, however,
that the obligations of each such Holder hereunder shall be limited to an amount
equal to the aggregate proceeds received by such Holder in such offering.
(c) Each party entitled to indemnification under this Section 2.4 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice 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
unreasonably be withheld). The Indemnified Party may participate in such defense
at such party's expense; provided, however, that the Indemnifying Party shall
bear the expense of such defense of one counsel representing the Indemnified
Party if representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicts of interest. The failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.4, except to the
extent such failure to give notice shall materially and adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
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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 that 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 to such claim or litigation.
(d)
(i) If the indemnification provided for in this Section 2.4 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party hereunder shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or
by the Indemnified Party and the parties' relevant intent, knowledge,
access to information and opportunities to correct or prevent such
statement or omission.
(ii) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 2.4 were determined by pro rata
allocation or by any other method of allocation that does not take account
of the equitable considerations referred to above. The amount paid or
payable by an Indemnified Party as a result of the claims, losses, damages
and liabilities referred to above shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such action or claim.
(iii) No Holder that is a seller of Registrable Securities covered by
such registration statement or Person controlling such seller other than
the Company shall be obligated to make contribution hereunder that in the
aggregate exceeds the total public offering price of the Registrable
Securities sold by such Holder, less the aggregate amount of any damages
that such Holder and its controlling Persons have otherwise been required
to pay pursuant to this Section 2.4. The obligations of such Holders to
contribute are several in proportion to their respective ownership of the
Registrable Securities covered by such registration statement and not
joint.
(iv) The indemnity and contribution provided herein shall be in
addition to, and not in lieu of, any other liability that one party may
have to another.
Section 2.5 Information by Holder. Each Holder of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Article
II.
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Section 2.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission that may at any time
permit the sale of the Restricted Registrable Securities to the public without
registration, the Company agrees to:
(a) use its best efforts to facilitate the sale of the Restricted
Registrable Securities to the public without registration under the Registrable
Securities Act, pursuant to Rule 144 under the Registrable Securities Act;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Registrable Securities Act, at all
times after the effective date of the first registration statement filed by the
Company for an offering of its Registrable Securities to the general public;
(c) file with the Commission in a timely manner all reports and other
documents required of the Company under the Registrable Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(d) so long as a Holder owns any Restricted Registrable Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the public information requirements of said Rule 144,
and the reporting requirements of the Registrable Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as a
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing a Holder to sell any such Registrable Securities without
registration.
Section 2.7 Transfer of Registration Rights. The rights granted
under this Article II may be assigned or otherwise conveyed by any Holder of
Registrable Securities to any transferee, subject to compliance with all
applicable Registrable Securities laws and regulations.
Section 2.8 Certain Limitations in Connection with Future Grants
of Registration Rights.
From and after the date of this Agreement, without the prior written
consent of the Holders of a majority of the Registrable Securities, the Company
shall not enter into any agreement with any holder or prospective holder of any
Registrable Securities of the Company providing for the granting to such holder
of registration rights that would be superior to those granted to Holders
pursuant to Section 2.1.
Section 2.9 Restrictions on Market Manipulation. In the event any
shares of Common Stock are offered or sold by any Holder in a registration, each
such Holder will:
(a) advise the Company in writing of any offer, sale or other disposition
by it of any Common Stock in any manner other than as set forth in the
registration statement or any prospectus included therein on or for the 30-day
period prior to the filing of such registration statement until the distribution
under the registration statement has been completed;
(b) not effect any stabilization activity in connection with the Company's
Common Stock;
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(c) not bid or purchase, for any account in which it has a beneficial
interest, any Common Stock except as may be permitted pursuant to Rule 10b-6
under the Exchange Act (if applicable);
(d) not until it has sold all of such shares of Common Stock, attempt to
induce any Person to purchase any Common Stock except as may be permitted
pursuant to Rule 10b-6; and
(e) not until it has sold all such shares of Common Stock, pay any
compensation for soliciting another to purchase any Registrable Securities of
the Company, except as may be permitted pursuant to Rule 10b-6.
ARTICLE III
MISCELLANEOUS
Section 3.1 Governing Law; Jurisdiction and Venue. This Agreement
shall be governed by and interpreted in accordance with the laws of the State of
Florida; provided, however, that if any provision of this Agreement is
unenforceable under the laws of the State of Florida, but is enforceable under
the laws of the Province of Ontario, Canada, then such provision shall be
governed by and interpreted in accordance with the laws of the Province of
Ontario. Any controversy or claim arising out of or relating to this Agreement
(whether in contract or tort, or both, or at law or in equity) shall be
determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make. The parties agree
that the courts of the Province of Ontario, Canada, shall have exclusive
jurisdiction and venue for the adjudication of any civil action between them
arising out of relating to this Agreement, and hereby irrevocably consent to
such jurisdiction and venue.
Section 3.2 Successors and Assignees. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assignees, heirs, executors and administrators (as the
case may be) of the parties hereto.
Section 3.3 Entire Agreement. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 3.4 Notices, etc. All notices given under this Agreement and
under the other Loan Documents shall be in writing, addressed to the parties as
set forth below, and shall be effective on the earliest of (i) the date
received, or (ii) if given by facsimile transmittal on the date given if
transmitted before 5:00 p.m. the recipient's time, otherwise it is effective the
next day, or (iii) on the second business day after delivery to a major
international air delivery or air courier service (such as Federal Express or
Network Couriers):
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If to the Agent:
Thomson Kernaghan & Co. Ltd.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Chairman
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (that does not constitute notice) to:
▇▇▇▇ ▇. ▇▇▇▇
Attorney at Law
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Borrower:
Surgical Safety Products, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (that does not constitute notice) to:
Mintmire & Associates
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Section 3.5 Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to any Holder of any Registrable Securities,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of such Holder nor shall it be construed to be a
waiver of any such breach or default or an acquiescence therein or of or in any
similar breach or default thereunder occurring nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Holder of any breach or default under
this Agreement or any waiver on the part of any Holder of any provisions or
conditions of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any Holder shall be cumulative
and not alternative.
Section 3.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which may be executed by less than all of the
parties hereto, each of which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one
instrument.
Section 3.7 Severability. In the event any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 3.8 Amendments. The provisions of this Agreement may be
amended at any time and from time to time, and particular provisions of this
Agreement may be waived, with and only with, an agreement or consent in writing
signed by the Company and by the Holders of a majority of the Registrable
Securities voting as a single class.
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The parties have executed this Registration Rights Agreement as of
the date first written above.
The Agent:
THOMSON KERNAGHAN & CO. LTD.
By ________________________________
Name ______________________________
Title _____________________________
Date signed _______________________
The Company:
SURGICAL SAFETY PRODUCTS, INC.
By ________________________________
Name ______________________________
Title _____________________________
Date signed________________________
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SURGICAL SAFETY PRODUCTS, INC.,
AND
THOMSON KERNAGHAN & CO. LTD
ESCROW AGREEMENT
1. Parties
1.1. This Escrow Agreement (this AAgreement@) is made and entered
into effective December 20, 1999 (the AEffective Date@), by and between Surgical
Safety Products, Inc. (the ACompany@) and Thomson Kernaghan & Co. Limited (the
AEscrow Holder@).
2. Recitals.
2.1. This Agreement is made with reference to the following facts and
circumstances:
(a) The Company and Thomson Kernaghan & Co. Limited, as Agent, are entering
into a Loan Agreement dated December 20, 1999 (the ALoan Agreement@), pursuant
to which the Company will issue to the Agent up to an aggregate of US$5,000,000
of notes (the ANotes@). The Notes are convertible, at the option of the holder
or holders thereof, into shares of the Company=s common stock, $0.001 par value
(ACommon Stock@). Under the terms of the Loan Agreement, the Company has agreed
to issue and deliver to the Agent (i) a warrant to purchase up to an aggregate
of up to 3,428,571shares of the Company=s Common Stock.(the ALenders= Warrant@),
and (ii) a warrant to purchase up to an aggregate of up to 1,142,857 shares of
the Company=s Common Stock (the AAgent=s Warrant@). The Lenders= Warrant and the
Agent=s Warrant are referred to each as a AWarrant@ and collectively as the
AWarrants.@ The Common Stock into which the Notes are convertible are referred
to as the Conversion Shares. The Common Stock to which the Warrants are subject
are referred to as the AWarrant Shares.@ The Conversion Shares and the Warrant
Shares are issuable in such amounts and upon the terms set forth in the Loan
Agreement.
(b) The conversion price of the Conversion Shares is the higher of (i)
US$0.375, or (ii) the lower of (x) $0.8203125 or (y) 75% of the closing bid
price of the Borrower=s Common Stock quoted on the OTC Bulletin Board on the
Conversion Date; i.e., in no event shall the Conversion Price be less that
US$0.375 per share of Common Stock.
(c) The exercise price for the Warrant Shares is US$1.09375 per share.
(d) The Notes mature, unless sooner paid or converted, on November 30, 2002
(e) The Warrants, unless sooner exercised or redeemed, expire on November
30, 2002.
(f) Under the terms of a Registration Rights Agreement between the Company
and the Agent, the Company has agreed to file a registration statement (the
ARegistration Statement@) under the United States Securities Act of 1933 as
Amended (the ASecurities Act@), for the purpose of registering the issuance and
resale of the Conversion Shares and the Warrant Shares.
(g) Under the terms of the Loan Agreement, the Company has agreed to
execute this Agreement with the Escrow Holder, to issue certificates for the
Conversion Shares (the AConversion Shares Certificates@) and the Warrant Shares
(the AWarrant Shares
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Certificates@), registered in the name of the Escrow Holder, and to deliver
those certificates to the Escrow Holder pursuant to the terms of this Agreement.
(h) In accordance with the terms of the Loan Agreement, the Company is
issuing a Note for US$650,000 upon the execution of this Agreement (the AInitial
Note@).
2.1. In consideration of the premises, and in order to establish the escrow
for the Conversion Shares and the Warrant Shares required by the Loan Agreement,
the Company is entering into this Agreement with the Escrow Holder.
3. Escrow
3.1. Contemporaneously with the execution of this Agreement, the Borrower
shall execute and deliver to the Escrow Holder a certificate for the number of
Conversion Shares underlying the Note evidencing the initial Loan and the number
of Warrant Shares for which the Warrants shall be exercisable upon funding the
initial Loan. Prior to each additional Loan, the Borrower shall execute and
deliver to the Escrow Holder a certificate for the number of additional
Conversion Shares underlying the Note evidencing that Loan and the number of
additional Warrant Shares for which the Warrants shall be exercisable upon
funding that Loan.
3.2. All certificates for Conversion Shares and Warrant Shares delivered to
the Escrow Holder shall be registered in the name of Thomson Kernaghan & Co.
Ltd.. Until such time as the registration statement covering the Conversion
Shares and the Warrant shares is effective, the certificates shall bear a legend
indicating that they have been issued in a transaction that is exempt from the
registration requirements of the Securities Act, and may not be transferred
except pursuant to registration under the Securities Act or an exemption from
such registration. Except for such legend, the Common Stock underlying the
Lenders= Warrant and the Agent=s Warrant shall be free and clear of any legends,
liens, claims, stop orders or other restrictions.
3.3. Not later than the third Business Day following the effective date of
the Registration Statement, the Borrower shall cause the Common Stock underlying
the Lenders= Warrant and the Agent=s Warrant to be registered in Agent=s street
name, in DTC form, free and clear of any legends, liens, claims, stop orders or
other restrictions.
3.4. All Conversion Shares and Warrant Shares deposited by the Company
after the effective date of the Registration Statement shall be registered in
the street name of Thomson Kernaghan & Co. Ltd., in DTC form, free and clear of
any legends, liens, claims, stop orders or other restrictions.
4. Release of Conversion Shares and Warrant Shares
4.1. Upon receipt of a Conversion Notice, the Escrow Holder shall promptly
(and in any event within three business days) release the number of Conversion
Shares specified in the Conversion Notice to the person specified therein. If
all of the unpaid principal of and interest on the Note is being converted; then
the Escrow Holder shall endorse the Note as paid in full, and transmit the Note,
so endorsed, and the Conversion Notice, to the Company. If the conversion is for
less than all of the unpaid principal of and interest on the Note, the Escrow
Holder shall endorse upon the Note the amount of principal thereof and interest
thereon that is being converted, and transmit a copy of the Note, so endorsed,
and the Conversion Notice, to the Company.
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4.2. Upon receipt of a Warrant, together with an executed Purchase Form and
the Exercise Price for the number of Warrant Shares specified therein, the
Escrow Holder shall promptly (and in any event within three business days (i)
release the number of Warrant Shares specified in the Purchase Form to the
person specified therein; (ii) transmit a copy of the Warrant and Purchase Form
to the Company; and (ii) disburse the Exercise Price for such Warrant Shares to
the Company, either by check or wire transfer as the Company shall specify by
written instructions to the Escrow Holder. Promptly upon the written request of
the Escrow Holder, the Company shall issue replacement Warrants and deliver them
to the Escrow Holder, upon any partial exercise of a Warrant ,or upon the
transfer of a Warrant or any interest therein.
5. Termination and Resignation
5.1. This Agreement, unless sooner terminated, shall terminate on the date
on which all of the Notes have been redeemed or converted, and all of the
Warrants have been exercised or expired.
5.2. The Escrow Holder may resign as such at any time, without liability
therefor, by giving the Company and the Agent not less than 10 days prior
written notice of its election to do so. In the event of the Escrow Holder=s
resignation, the Company shall promptly appoint a successor Escrow Holder
acceptable to the Agent.
6. Limitation on the Escrow Holder=s Liability; Indemnification.
6.1. The Escrow Holder shall not be liable to the Company, to any Note
holder, to any Warrant holder, or to any other person or entity for any action
taken or omitted by it, except for the Escrow Holder=s own gross negligence or
wilful misconduct. Without limiting the generality of the foregoing:
(a) The Escrow Holder may rely upon, and shall be protected in acting or
refraining from acting in reliance upon, any notice, certificate, instrument,
request, paper or other document believed by it to be genuine and made, sent,
signed or presented by the Company, any Note holder, any Warrant holder, or any
other person or entity.
(b) The Escrow Holder shall not be responsible or liable for the
genuineness, validity or sufficiency of any Note, Warrant, stock certificate,
notice or other instrument delivered to it, including without limitation the
genuineness of any signature thereon, or of the identity or authority of any
person executing or delivering the same.
6.2. The Escrow Holder shall not be obligated to take any action to defend
or enforce this Agreement, or to appear in, prosecute or defend any action or
legal proceeding, or to file any income or other tax return that, in the Escrow
Holder=s opinion, would or might involve any cost, expense, loss or liability,
unless, and as often as required by it, the Company shall furnish it with
security and indemnity satisfactory to it against all such cost, expense, loss
and liability.
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6.3. The Escrow Holder shall not be responsible for the validity or
enforceability of any provision of this Agreement, or for the execution thereof
by the Company, or for the truth or accuracy of any recitals or other statements
of fact contained in this Agreement.
6.4. The Escrow Holder is not, and shall not be deemed for any purpose to
be, a fiduciary under this Agreement or otherwise, for the Company, for any Note
holder, for any Warrant holder, or for any other person or entity.
6.5. Except for matters for which the Escrow Holder is liable to the
Company under paragraph 6.1 of this Agreement, the Company hereby agrees to
defend and indemnify the Escrow Holder and its shareholders, directors,
officers, employees and agents, and to hold each of them harmless from and
against any and all judgments, awards, orders, damages, claims, demands,
liability, penalties, costs, and expenses (including attorney fees and court or
arbitration costs) of any nature whatsoever, directly or indirectly arising out
of or relating to this Agreement, or any act or omission of the Escrow Holder
hereunder. This indemnity shall survive termination of this Agreement.
7. Miscellaneous Provisions.
7.1. No amendment, modification, termination, or waiver of any provision of
this Agreement, nor consent to any departure by the Company from any of its
provisions, shall in any event be effective unless the same shall be in writing
and signed by the Escrow Holder, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
7.2. All notices given under this Agreement shall be in writing, addressed
to the parties as set forth below, and shall be effective on the earliest of (i)
the date received, or (ii) if given by facsimile transmittal on the date given
if transmitted before 5:00 p.m. the recipient=s time, otherwise it is effective
the next day, or (iii) on the second business day after delivery to a major
international air delivery or air courier service (such as Federal Express or
Network Couriers):
If to the Escrow Holder: If to the Company:
Thomson Kernaghan & Co. Ltd. Surgical Safety Products, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (that does not With a copy (that does not constitute
constitute notice) to: notice) to:
▇▇▇▇ ▇. ▇▇▇▇ Mintmire & Associates
Attorney at Law ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
7.3. No failure or delay on the part of the Escrow Holder in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power, or
remedy hereunder. The rights and remedies provided herein are cumulative, and
are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law or in equity or otherwise.
7.4. This Agreement shall be binding upon and inure to the benefit of the
Company and the Escrow Holder, and their respective successors and assigns,
except that the Company may not assign or transfer any of its r rights under
this Agreement without the prior written consent of the Escrow Holder.
7.5 The Company agrees to pay on demand all costs and expenses incurred by
the Escrow Holder in connection with the preparation, execution, delivery,
filing, and administration of this Agreement, and of any amendment,
modification, or supplement hereto, including, without limitation, the fees and
out-of-pocket expenses of counsel for the Escrow Holder incurred in connection
with advising the Escrow Holder as to its rights and responsibilities hereunder.
The Company also agrees to pay all such costs and expenses, including court
costs, incurred in connection with enforcement of this Agreement, or any
amendment, modification, or supplement thereto, whether by negotiation, legal
proceedings, or otherwise. In addition, the Company shall pay any and all stamp
and other taxes and fees payable or determined to be payable in connection with
the issuance, transfer and deliver of any Warrant or Warrant Shares, and agrees
to hold the Escrow Holder harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees. This provision shall survive termination of this Agreement.
7.6. This Agreement shall be governed by, and construed in accordance with,
the laws of the Province of Ontario, Canada; provided, however, if any provision
of this Agreement is unenforceable under Ontario law, but is enforceable under
the laws of the U.S. State of Florida, then Florida law shall govern the
construction and enforcement of that provision.
7.7. Any controversy or claim arising out of or relating to this Agreement
(whether in contract or tort, or both, or at law or in equity) shall be
determined by binding arbitration at Toronto, Canada, in accordance with the
commercial arbitration rules of the International Chamber of Commerce. The
prevailing party in any arbitration proceeding shall be awarded reasonable
attorneys fees and costs of the proceeding. The arbitration award shall be
final, and may be entered in any court having jurisdiction. Nothing in this
paragraph shall preclude either party from applying to a court for temporary
equitable relief, when appropriate, pending and subject to such temporary orders
and permanent award as the arbitrator or arbitrators may make. The parties
hereby consent to the exclusive jurisdiction of the courts of the Province of
Ontario for that purpose.
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IN WITNESS WHEREOF, the Company and the Escrow Holder have executed this
Agreement as of the Effective Date.
The Escrow Holder: The Company:
THOMSON KERNAGHAN & CO. LIMITED SURGICAL SAFETY PRODUCTS, INC..
By _________________________________ By ________________________________
Name _______________________________ Name ______________________________
Title ______________________________ Title _____________________________
Date signed ________________________ Date signed _______________________
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AMENDMENT NO. 1 TO THE
(1) LOAN AGREEMENT WITH THE EFFECTIVE DATE DECEMBER 20, 1999;
(2) SECURITY AGREEMENT, PLEDGE AND ASSIGNMENT EFFECTIVE
DECEMBER 9, 1999;
(3) REGISTRATION RIGHTS AGREEMENT EXECUTED THE 22ND DAY OF
DECEMBER 1999; AND
(4) THE ESCROW AGREEMENT EFFECTIVE DECEMBER 20, 1999
EACH OF WHICH IS BY AND BETWEEN SURGICAL SAFETY PRODUCTS,
INC. (the "Company" and "Borrower") AND THOMSON KERNAGHAN & CO.
(the "Agent" and "Escrow Holder")
and
(5) THE NOTE DATED DECEMBER 30, 1999 IN THE AMOUNT OF $650,000
PAYABLE TO THOMSON KERNAGHAN & CO. LTD;
(6) THE LENDER'S WARRANT GRANTED TO THOMSON KERNAGHAN & CO.
LTD. FOR THE PURCHASE OF 3,428,571 SHARES; and
(7) THE AGENT'S WARRANT GRANTED TO THOMSON KERNAGHAN & CO.
LTD. FOR THE PURCHASE OF 1,142,857 SHARES
THIS AMENDMENT effective the 30th day of December 1999 is by and
between the Company/Borrower and Agent/Escrow Holder as noted in the heading.
1. The defined terms set forth herein shall have the same meaning as set forth
in the (1) Loan Agreement with the Effective Date December 20, 1999 (the "Loan
Agreement"); (2) Security Agreement, Pledge and Assignment Effective December 9,
1999 (the "Security Agreement"); (3) Registration Rights Agreement Executed the
22nd Day of December 1999 (the "RR Agreement"); and (4) the Escrow Agreement
Effective December 20, 1999 (the "Escrow Agreement") each of which is by and
between Surgical Safety Products, Inc. (the "Company" and "Borrower") and
Thomson Kernaghan & Co. (the "Agent" and "Escrow Holder") and (5) the Note dated
December 30, 1999 in the amount of $650,000 payable to Thomson Kernaghan & Co.
Ltd (the "Note"); (6) the Lender's Warrant granted to Thomson Kernaghan & Co for
the purchase of 3,428,571 Shares (the "Lender's Warrant"); and (7) the Agent's
Warrant granted to Thomson Kernaghan & Co for the purchase of 1,142,857 Shares
(the "Agent's Warrant").
2. This Amendment amends, modifies and revokes the following and replaces each
of them as set out herein.
o The Loan Agreement "Effective Date" and "Closing Date" are amended and
modified to December 30, 1999.
o The effective date of the Security Agreement is amended and modified
to December 30, 1999 and paragraph 1 of the Preliminary Statement is
amended and modified to reflect the effective date of the Loan
Agreement as December 30, 1999.
o The effective date of the RR Agreement is made December 30, 1999 and
Article II, Section 2.1(a) in the RR Agreement is amended and modified
and replaced with the following:
"Section 2.1 Mandatory Registration.
o The Company shall prepare and file with the Commission within sixty
(60) days from the date of this Agreement (the "Filing Deadline") a
registration statement or registration statements (as is necessary) on
Form S-3 covering the issuance and the resale of all of the
Registrable Securities. Such registration statement shall initially
register for resale 20,038,097 shares. The Company shall use its best
efforts to have the registration statement declared effective by the
Commission within one hundred and twenty (120) days after the Filing
Deadline (the "Registration Deadline"). The Company shall permit the
registration statement to become effective within five (5) business
days after receipt of a "no review" notice from the Commission. Such
registration statement shall be kept current and effective for the
greater of (i) a period of at least three (3) years from the Closing
Date and (ii) a period of at least ninety (90) days after (x) all of
the Notes shall have been converted into Conversion Shares or paid in
full, and (y) the Lender's Warrant and the Agent's Warrant shall have
been fully exercised or expired. If a registration statement with
respect to the Registrable Securities is not effective on the
Registration Deadline date, the Company agrees to and shall pay the
Agent liquidated damages of US$13,000 per month, pro-rated for partial
months, until the registration statement is effective."
o The Escrow Agreement "Effective Date" is amended and modified to
December 30, 1999.
o Paragraph 2 of the Note is amended and modified to reflect the date of
the Loan Agreement as December 30, 1999 and Paragraph 4 of the Note is
amended and modified to reflect the date of the Escrow Agreement as
December 30, 1999.
o Page 2, first full paragraph of the Lender's Warrant and the Agent's
Warrant are each amended and modified to reflect the date of the Loan
Agreement as December 30, 1999.
IN WITNESS WHEREOF, the parties have set their hand and seal
effective on the date first above written.
SURGICAL SAFETY PRODUCTS, INC. THOMSON KERNAGHAN & CO., LTD.
BY:____________________________ BY:_____________________________
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