THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT, dated as of January 11, 2007, is made by and
between In Veritas Medical Diagnostics, Inc., a Colorado corporation (the
"Company"), and Longview Fund L.P. ("Longview").
WHEREAS, on September 7, 2005, the Company and Longview entered into a
Securities Purchase Agreement ("Securities Purchase Agreement") pursuant to
which the Company issued to Longview a secured convertible debenture which has
an outstanding principal amount, plus accrued interest, of $261,300 (the "Old
Debenture"); In connection with the Securities Purchase Agreement and
contemporaneously therewith, the Company and Longview also entered in an
Investor Registration Rights Agreement (the "Registration Rights Agreement"), an
Intercreditor Agreement (the "Intercreditor Agreement"), and a Security
Agreement (the "Security Agreement"). The Securities Purchase Agreement,
Registration Rights Agreement, Security Agreement, Intercreditor Agreement, and
Debenture (as defined below) and all other agreements entered into between the
Company and Longview in connection therewith are collectively referred to herein
as the "Transaction Documents".
WHEREAS, the Company acknowledges that an event of default has occurred
under the Debenture as a result of (i) the Registration Statement not being
declared effective within 120 days after filing thereof, and (ii) the Company's
breach of its obligations to make payments of principal and interest under the
Debenture (collectively, the "Existing Defaults").
WHEREAS, liquidated damages in an amount of $48,000 have accrued pursuant
to the Registration Rights Agreement (the "Liquidated Damages").
WHEREAS, the Company and Longview wish to provide for the terms and
conditions pursuant to which (i) the Old Debenture shall be modified to a new
principal amount of $261,300 which is convertible into common stock of the
Company at a conversion price of $0.05 per share (the "Modified Debenture"),
(ii) the Company shall pay to Longview lump sum payments in an aggregate amount
of $25,000, which shall be applied against the principal amount of the Modified
Debenture, and (iii) the Company shall issue to Longview, in consideration of
the Liquidated Damages, a debenture in a principal amount of $48,000, which is
convertible into common stock of the Company at a conversion price of $0.05 per
share (the "Second Debenture");
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which the parties hereby acknowledge, the parties agree as
follows:
1. Lump Sum Payments. The Company shall pay Longview an aggregate of
$25,000.00 towards the Modified Debenture in two installments of $12,500.00,
with the first payment being due and payable no later than February 28, 2007 and
the second payment being due and payable on March 30, 2007 (the "Second
Payment").
2. Exchange of Old Debenture for Modified Debenture. The Company and
Longview hereby agree that the Old Debenture shall be exchanged for a Modified
Debenture in an outstanding principal amount of $261,300, which is convertible
into common stock at a conversion price of $0.05 per share. The Modified
Debenture and Second Debenture shall be issued simultaneously with the execution
of this agreement. The Modified Debenture and Second Debenture are attached
hereto as Exhibits A and B, respectively.
3. Closing. Upon receipt of the Modified Debenture, Longview shall deliver
the Old Debenture to the Company.
4. Company Representations and Warranties and Covenants. The Company
represents warrants and covenants to Longview as follows:
a. Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Colorado and has all requisite
corporate power and authority to own its properties and carry on its business as
now being conducted.
b. Capitalization. As of the date of this Agreement, the authorized capital
stock of the Company consists of 500,000,000 shares of common stock, $.001 par
value per share, 59,223,457 shares of which are validly issued and outstanding
and 50,000,000 shares of preferred stock, $.001 par value per share, 34,343,662
of which are validly issued and outstanding.
c. Authority; Enforceability. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as (a) enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, moratorium or similar
laws from time to time in effect affecting creditors' rights generally and (b)
the availability of equitable remedies may be limited by equitable principles of
general applicability.
d. Third Party Consents. No consent, authorization, order or approval of,
or filing or registration with, any governmental authority or other person is
required for the execution and delivery of this Agreement or the consummation by
the Company of any of the transactions contemplated hereby.
e. Common Stock. All shares of the Company's Common Stock to be issued
pursuant to this Agreement will be, when issued, free from liens, duly
authorized, validly issued, fully paid and non-assessable.
f. Most Favored Nation Exchange. From the date hereof until the date three
(3) years after the date hereof, if the Company consummates an equity financing,
including an equity-linked financing such as, but not limited to, a convertible
notes financing or a unit financing of notes plus warrants (a "Subsequent
Financing"), Longview shall have the right to exchange the principal amount of
the Modified Debenture and Second Debenture for any of the securities issued in
the Subsequent Financing at the Subsequent Financing price. If at any time the
Modified Debenture or Second Debenture is outstanding, the Company shall offer,
issue or agree to issue any common stock or securities convertible into or
exercisable for shares of common stock (or modify any of the foregoing which may
be outstanding) to any person or entity at a price per share or conversion or
exercise price per share which shall be less than the Conversion Price in
respect of the Modified Debenture and Second Debenture, without the consent of
Longview, then the Conversion Price shall automatically be reduced to such other
lower price.
g. Tacking. The Company represents that the holding period of the Modified
Debenture for Rule 144 purposes tacks with the holding period for the Old
Debenture. Upon receipt of a valid notice of conversion, the Company shall
instruct its legal counsel to render an appropriate legal opinion to the
Company's transfer agent.
h. No Other Representations or Warranties. Except as set forth above in
this Section 4, no other representations or warranties, express or implied, are
made in this Agreement by the Company to Longview.
5. Longview Representations and Warranties and Covenants. Longview
represents, warrants and covenants to the Company as follows:
a. Investment Representation. Longview acknowledges that the Note is a
restricted security, that Longview is acquiring the Note for its own account
with the present intention of holding the Note for purposes of investment and
not with a view to distribution within the meaning of the Securities Act of
1933, as amended and that the Note will bear a legend to such effect. Longview
has relied solely on its independent investigation in making the decision to
purchase the Note.
b. Accredited Investor. Longview represents that it is an "accredited
investor" as such term is defined in Rule 501 of Regulation D ("Regulation D")
promulgated under the Securities Act.
c. Waiver. In reliance upon the representations, warranties and covenants
of the Company contained in this Agreement, and subject to the terms and
conditions set forth herein, Longview hereby waives the Existing Defaults and
further waives its rights and remedies under the Transaction Documents or
applicable law in respect of or arising out of the Existing Defaults, subject to
the conditions, amendments and modifications contained herein.
d. No Other Representations or Warranties. Except as set forth above in
this Section 4, no other representations or warranties of any kind, express or
implied, are made in this Agreement by Longview to the Company.
6. Miscellaneous.
a. Survival of Representations, Warranties and Agreements. The
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Closing
and shall not be limited or affected by any investigation by or on behalf of any
party hereto.
b. Further Assurances. Each of the Company and Longview will use its, as
the case may be, best reasonable efforts to take all action and to do all things
necessary, proper or advisable on order to consummate and make effective the
transactions contemplated by this Agreement.
c. Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents, exhibits and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements, and
understandings and communications, both written and oral, among the parties with
respect to the subject matter hereof, and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
d. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable principles of conflicts of law. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the civil or state courts of New York or in the federal
courts located in New York County.
e. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute one and the same document. This Agreement may be executed by
facsimile signature and delivered by facsimile transmission.
f. Amendment and Modification. This Agreement may not be amended or
modified except by an instrument in writing signed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
IN VERITAS MEDICAL DIAGNOSTICS, INC.
By: /s/ Martin Thorp
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Name: Martin Thorp
Title: Chief Financial Officer
LONGVIEW FUND, L.P.
By: /s/ S. Michael Rudolph
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Name: S. Michael Rudolph
Title: CFO - Investment Advisor