EXHIBIT 4.1
PROMISSORY NOTE
FACE AMOUNT $800,000
PRICE $640,000
INTEREST RATE 0% per month
NOTE NUMBER November - 2005-101
ISSUANCE DATE November 30, 2005
MATURITY DATE November 30, 2006
FOR VALUE RECEIVED, On The Go Healthcare, Inc, a Delaware corporation
(the "Company"), (OTC BB: OGHC) hereby promises to pay DUTCHESS PRIVATE
EQUITIES FUND, L.P. AND DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
(collectively, the "Holder") within the Maturity Date, or earlier,
the Amount of Eight Hundred Thousand Dollars ($800,000) U.S., in such
amounts, at such times and on such terms and conditions as are
specified herein (this "Note").
Any capitalized terms not defined in this Note are defined in the
Investment Agreement for the Equity Line of Credit between Dutchess
Private Equities Fund, LP (the "Investor") and the Company
(the "Investment Agreement").
Article 1 Method of Payment
Payments made by the Company in satisfaction of this Note (each a
"Payment," and collectively, the "Payments") shall be made in the
amount of the greater of 1) sixty-six thousand six hundred and
sixty-six dollars sixty-six cents ($66,666.66) or 2) fifty percent
(50%) of each Put (the "Payment Amount") to the Holder until the
Face Amount is paid in full, minus any fees due. Payments will be
due on the third (3rd) calendar day of each month. In the event the
third (3rd) calendar day is a weekend or a United States or Canadian
bank holiday, in which funds are not available to transfer, the
Company shall make the Payment on the next business day. The first
payment will be January 3, 2006. Failure to make Payments will
constitute an Event of Default under this Agreement and the Holder
may immediately seek to take actions as described under Article 4
of this Agreement.
Notwithstanding any provision to the contrary in this Note, the
Company may pay in full to the Holder the Face Amount, or any balance
remaining thereof, in readily available funds at any time and from
time to time without penalty ("Prepayment").
After Closing, if the Company receives in excess of $1,200,000 in any
financing, debt or equity, be it from the Holder or another source,
including any sale, disposition or transfer of assets except in the
ordinary course of business, the Company must make a Prepayment to
the Holder when the aggregate amount of financing received by the
Company is in excess of $1,200,000 ("Threshold Amount"). The
calculation of the Threshold Amount will exclude all broker's fees,
commissions, inducement shares of stock or warrants and other expenses
of the financing or sale. The Company agrees to pay one hundred
percent (100%) of any proceeds raised by the Company over the
Threshold Amount toward the Prepayment of the Note until the Amount
is paid in full. The payments shall be made to the Holder upon the
Company's receipt of the financing. Failure to do so will result in
an event of default.
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The Company shall notify, via email or other written means, the Holder
whether or not the Company plans to use a Put or cash to make a
Payment.
The Company hereby authorizes Dutchess Private Equities Fund, II, LP,
to transfer funds directly to the Holder from each Put in connection
with the Company's execution of the Collateral (as defined below).
The Puts shall be deemed closed for the amounts transferred to the
Holder immediately upon the Put Closing.
Article 2 Collateral
The Company does hereby agree to issue twenty-four (24) Put Notices
("Collateral") to the Investor in the amount of fifty-thousand
dollars ($50,000) each. The Company shall deliver the Collateral
upon execution of this Note (hereto attached as Exhibit A). Upon
the completion of the Company's obligation to the Holder of the Face
Amount of this Note, the Company will not be under further obligation
to complete any more Puts. All remaining Put sheets shall be marked
"VOID" by the Investor and sent back to the Company at the Company's
request.
Article 3 Unpaid Amounts
In the event that on the Maturity Date the Company has any remaining
amounts unpaid on this Note (the "Residual Amount"), the Holder can
exercise its right to increase the Face Amount by ten percent (10%)
as an initial penalty and two and one-half percent (2.5%) of the
Face Amount per month paid as liquidated damages ("Liquidated
Damages"). The Liquidated Damages will be compounded daily. If
the aforementioned occurs, the Company will be in Default and the
remedies as described in Article 4 may be taken at the Holder's
discretion. It is the intention and acknowledgement of both
parties that the Liquidated Damages not be deemed as interest.
Article 4 Defaults and Remedies
Section 4.1 Events of Default.
An "Event of Default" or "Default" occurs if (a) the Company does not
make the Payment of the Face Amount of this Note within two (2)
business days of the applicable Closing of a Put, a Payment Date;
or, a balance on the Note exists on the Maturity Date, as applicable,
upon redemption or otherwise, (b) the Company, pursuant to or within
the meaning of any Bankruptcy Law (as hereinafter defined):
(i) commences a voluntary case; (ii) consents to the entry of an
order for relief against it in an involuntary case; (iii) consents
to the appointment of a Custodian (as hereinafter defined) of it or
for all or substantially all of its property; (iv) makes a general
assignment for the benefit of its creditors; or (v) a court of
competent jurisdiction enters an order or decree under any Bankruptcy
Law that: (A) is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company or for all or
substantially all of its property; or (C) orders the liquidation of
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the Company, and the order or decree remains unstayed and in effect
for ninety (90) calendar days; (c) the Company's $0.0001 par value
common stock (the "Common Stock") is suspended or is no longer listed
on any recognized exchange, including an electronic over-the-counter
bulletin board, for in excess of fifteen (15) consecutive trading days;
or (d) either the registration statement for the underlying shares in
the Investment Agreement or the Additional Registration Statement does
not remain effective for any reason or (e) the Company fails to comply
with any of the Articles of this Agreement as outlined. As used in
this Section 4.1, the term "Bankruptcy Law" means Title 11 of the
United States Code or any similar federal or state law for the relief
of debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.
After two consecutive Events of Default, as outlined in this Agreement,
the Holder can exercise its right to increase the Face Amount of the
Debenture by ten percent (10%) as an initial penalty and for each Event
of Default under this Agreement. In addition, the Holder may elect to
increase the Face Amount by two and one-half percent (2.5%) per month
paid as a penalty for liquated damages ("Liquidated Damages"). The
Liquated Damages will be compounded daily. It is the intention and
acknowledgement of both parties that the Liquidated Damages not be
deemed as interest.
In the Event of Default, the Holder may elect to secure a portion of
the Company's assets not to exceed 200% of the Face Amount of the Note,
including, but not limited to: accounts receivable, cash, marketable
securities, equipment, building, land or inventory. The Holder may
also elect to garnishee Revenue from the Company in an amount that will
repay the Holder on the schedules outlined in this Agreement.
For each Event of Default, as outlined in this Agreement, the Holder
can exercise its right to increase the Face Amount of the Debenture by
ten percent (10%) as an initial penalty. In addition, the Holder may
elect to increase the Residual Amount by two and one-half percent
(2.5%) per month paid as a penalty for Liquidated Damages. The
Liquidated Damages will be compounded daily. It is the intention and
acknowledgement of both parties that the Liquidated Damages not be
deemed as interest.
In the event of a Default hereunder, the Holder shall have the right,
but not the obligation, to 1) switch the Residual Amount to a
three-year ("Convertible Maturity Date"), fifteen percent (15%)
interest bearing convertible debenture at the terms described in
Section 4.2 (the "Convertible Debenture"). At such time of Default,
the Convertible Debenture shall be considered closed ("Convertible
Closing Date"). If the Holder chooses to convert the Residual Amount
to a Convertible Debenture, the Company shall have twenty (20)
business days after notice of the same (the "Notice of Convertible
Debenture") to file a registration statement covering an amount of
shares equal to three hundred percent (300%) of the Residual Amount.
Such registration statement shall be declared effective under the
Securities Act of 1933, as amended (the "Securities Act"), by the
Securities and Exchange Commission (the "Commission") within sixty
(60) business days of the date the Company files such Registration
Statement. In the event the Company does not file such registration
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statement within twenty (20) business days of the Holder's request,
or such registration statement is not declared by the Commission to
be effective under the Securities Act within the time period described
above , the Residual Amount shall increase by one thousand dollars
($1,000) per day. In the event the Company is given the option for
accelerated effectiveness of the registration statement, it agrees
that it shall cause such registration statement to be declared
effective as soon as reasonably practicable. In the event that the
Company is given the option for accelerated effectiveness of the
registration statement, but chooses not to cause such registration
statement to be declared effective on such accelerated basis, the
Residual Amount shall increase by one thousand dollars ($1,000) per day
commencing on the earliest date as of which such registration statement
would have been declared to be effective if subject to accelerated
effectiveness; or 2) the Holder may increase the Payment Amount
described under Article 1 to fulfill the repayment of the Residual
Amount. The Company shall provide full cooperation to the Holder in
directing funds owed to the Holder on any Put to the Investor. The
Company agrees to diligently carry out the terms outlined in the
Investment Agreement for delivery of any such shares. In the event
the Company is not diligently fulfilling its obligation to direct
funds owed to the Holder from Puts to the Investor, as reasonably
determined by the Holder, the Holder may, after giving the Company
two (2) business days' advance notice to cure the same, elect to
increase the Residual Amount of the Note by 2.5% each day, compounded
daily.
Section 4.2 Conversion Privilege
(a) The Holder shall have the right to convert the Convertible
Debenture into shares of Common Stock at any time following
the Convertible Closing Date and which is before the close
of business on the Convertible Maturity Date. The number
of shares of Common Stock issuable upon the conversion of
the Convertible Debenture shall be determined pursuant to
Section 4.3, but the number of shares issuable shall be
rounded up or down, as the case may be, to the nearest
whole share.
(b) The Convertible Debenture may be converted, whether in
whole or in part, at any time and from time to time.
(c) In the event all or any portion of the Convertible
Debenture remains outstanding on the Convertible Maturity
Date (the "Debenture Residual Amount"), the unconverted
portion of such Convertible Debenture will automatically
be converted into shares of Common Stock on such date in
the manner set forth in Section 4.3.
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Section 4.3 Conversion Procedure.
The Residual Amount may be converted, in whole or in part any time and
from time to time, following the Convertible Closing Date. Such
conversion shall be effectuated by surrendering to the Company, or its
attorney, the Convertible Debenture to be converted together with a
facsimile or original of the signed notice of conversion (the "Notice
of Conversion"). The date on which the Notice of Conversion is
effective ("Conversion Date") shall be deemed to be the date on which
the Holder has delivered to the Company a facsimile or original of the
signed Notice of Conversion, as long as the original Convertible
Debenture(s) to be converted are received by the Company within five
(5) business days thereafter. At such time that the original
Convertible Debenture has been received by the Company, the Holder
can elect to whether a reissuance of the Convertible Debenture is
warranted, or whether the Company can retain the Convertible Debenture
as to a continual conversion by the Holder. Notwithstanding the
above, any Notice of Conversion received by 4:00 P.M. EST shall be
deemed to have been received the following business day (receipt being
via a confirmation of the time such facsimile to the Company is
received).
(a) Common Stock to be Issued. Upon the conversion of any
Convertible Debentures and upon receipt by the Company or
its attorney of a facsimile or original of the Holder's
signed Notice of Conversion, the Company shall instruct
its transfer agent to issue stock certificates without
restrictive legends or stop transfer instructions, if at
that time the aforementioned registration statement
described in Section 4.1 has been declared effective
(or with proper restrictive legends if the registration
statement has not as yet been declared effective), in
such denominations to be specified at conversion
representing the number of shares of Common Stock issuable
upon such conversion, as applicable. In the event that
the Debenture is aged one year and deemed sellable under
Rule 144, the Company shall, upon a Notice of Conversion,
instruct the transfer agent to issue free trading
certificates without restrictive legends, subject to other
applicable securities laws. The Company is responsible
to provide all costs associated with the issuance of the
shares, including but not limited to the opinion letter,
FedEx of the certificates and any other costs that arise.
The Company shall act as registrar and shall maintain an
appropriate ledger containing the necessary information
with respect to each Convertible Debenture. The Company
warrants that no instructions, other than these
instructions, have been given or will be given to the
transfer agent and that the Common Stock shall otherwise
be freely resold, except as may be set forth herein or
subject to applicable law.
(b) Conversion Rate. Holder is entitled to convert the
Debenture Residual Amount , plus accrued interest, anytime
following the Convertible Closing Date, at the lesser of
(i) fifty percent (50%) of the lowest closing bid price
during the fifteen (15) trading immediately preceding the
Conversion Date or (ii) 100% of the lowest bid price for
the twenty (20) trading days immediately preceding the
Convertible Closing Date ("Fixed Conversion Price").
No fractional shares or scrip representing fractions of
shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case
may be, to the nearest whole share.
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(c) Nothing contained in the Convertible Debenture shall be
deemed to establish or require the payment of interest to
the Holder at a rate in excess of the maximum rate
permitted by governing law. In the event that the rate
of interest required to be paid exceeds the maximum rate
permitted by governing law, the rate of interest required
to be paid thereunder shall be automatically reduced to
the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness
by the Holder to the Company.
(d) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the
Common Stock as provided herein, including the
responsibility and cost for delivery of an opinion letter
to the transfer agent, if so required. Holder shall be
treated as a shareholder of record on the date Common
Stock is issued to the Holder. If the Holder shall
designate another person as the entity in the name of
which the stock certificates issuable upon conversion of
the Convertible Debenture are to be issued prior to the
issuance of such certificates, the Holder shall provide
to the Company evidence that either no tax shall be due
and payable as a result of such transfer or that the
applicable tax has been paid by the Holder or such
person. Upon surrender of any Convertible Debentures
that are to be converted in part, the Company shall
issue to the Holder a new Convertible Debenture equal
to the unconverted amount, if so requested in writing
by the Holder.
(e) Within three (3) business days after receipt of the
documentation referred to above in Section 4.2, the
Company shall deliver a certificate, for the number of
shares of Common Stock issuable upon the conversion.
In the event the Company does not make delivery of the
Common Stock as instructed by Holder within three (3)
business days after the Conversion Date, then in such
event the Company shall pay to the Holder one percent
(1%) in cash of the dollar value of the Debenture
Residual Amount remaining after said conversion,
compounded daily, per each day after the third (3rd)
business day following the Conversion Date that the
Common Stock is not delivered to the Purchaser.
The Company acknowledges that its failure to deliver
the Common Stock within five (5) business days after
the Conversion Date will cause the Holder to suffer
damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to
include in this Note a provision for liquidated damages
The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents
the parties' good faith effort to quantify such damages
and, as such, agree that the form and amount of such
liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated
damages shall not relieve the Company from its
obligations to deliver the Common Stock pursuant to
the terms of this Convertible Debenture.
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(f) The Company shall at all times reserve (or make alternative
written arrangements for reservation or contribution of
shares) and have available all Common Stock necessary to
meet conversion of the Convertible Debentures by the
Holder of the entire amount of Convertible Debentures then
outstanding. If, at any time the Holder submits a Notice
of Conversion and the Company does not have sufficient
authorized but unissued shares of Common Stock (or
alternative shares of Common Stock as may be contributed
by stockholders of the Company) available to effect, in
full, a conversion of the Convertible Debentures
(a "Conversion Default," the date of such default being
referred to herein as the "Conversion Default Date"), the
Company shall issue to the Holder all of the shares of
Common Stock which are available, and the Notice of
Conversion as to any Convertible Debentures requested to
be converted but not converted (the "Unconverted
Convertible Debentures"), may be deemed null and void upon
written notice sent by the Holder to the Company. The
Company shall provide notice of such Conversion Default
("Notice of Conversion Default") to the Holder, by
facsimile within three (3) business days of such default
(with the original delivered by overnight mail or two day
courier), and the Holder shall give notice to the Company
by facsimile within five (5) business days of receipt of
the original Notice of Conversion Default (with the
original delivered by overnight mail or two day courier)
of its election to either nullify or confirm the Notice
of Conversion.
The Company agrees to pay the Holder payments for a Conversion Default
("Conversion Default Payments") in the amount of (N/365) multiplied
by .24 multiplied by the initial issuance price of the outstanding or
tendered but not converted Convertible Debentures held by the Holder
where N = the number of days from the Conversion Default Date to the
date (the "Authorization Date") that the Company authorizes a
sufficient number of shares of Common Stock to effect conversion of
all remaining Convertible Debentures. The Company shall send notice
("Authorization Notice") to the Holder that additional shares of
Common Stock have been authorized, the Authorization Date, and the
amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into
Common Stock at the conversion rate set forth in the first sentence of
this paragraph, upon written notice sent by the Holder to the Company,
which Conversion Default shall be payable as follows: (i) in the event
the Holder elects to take such payment in cash, cash payments shall
be made to the Holder by the fifth (5th) day of the following calendar
month, or (ii) in the event Holder elects to take such payment in
stock, the Holder may convert such payment amount into Common Stock at
the conversion rate set forth in the first sentence of this paragraph
at any time after the fifth (5th) day of the calendar month following
the month in which the Authorization Notice was received, until the
expiration of the mandatory three (3) year conversion period.
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The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in
full a conversion of the Convertible Debentures will cause the Holder
to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in
this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth
in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such
liquidated damages are reasonable and will not constitute a penalty.
The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of
this Convertible Debenture.
(g) If, by the third (3rd) business day after the Conversion
Date of any portion of the Convertible Debentures to be
converted (the "Delivery Date"), the transfer agent fails
for any reason to deliver the Common Stock upon conversion
by the Holder and after such Delivery Date, the Holder
purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") solely in
order to make delivery in satisfaction of a sale of Common
Stock by the Holder (the "Sold Shares"), which delivery
such Holder anticipated to make using the Common Stock
issuable upon conversion (a "Buy-In"), the Company shall
pay to the Holder, in addition to any other amounts due
to Holder pursuant to this Convertible Debenture, and not
in lieu thereof, the Buy-In Adjustment Amount (as defined
below). The "Buy In Adjustment Amount" is the amount equal
to the excess, if any, of (x) the Holder's total purchase
price (including brokerage commissions, if any) for the
Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Holder from the sale
of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to the Holder in immediately available
funds within five (5) business days of written demand by
the Holder. By way of illustration and not in limitation
of the foregoing, if the Holder purchases shares of Common
Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000,
the Buy-In Adjustment Amount which the Company will be
required to pay to the Holder will be $1,000.
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(h) The Company shall defend, protect, indemnify and hold
harmless the Holder and all of its shareholders, officers,
directors, employees, counsel, and direct or indirect
investors and any of the foregoing person's agents or other
representatives (including, without limitation, those
retained in connection with the transactions contemplated
by this Agreement) (collectively, the "Section 4.3(h)
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 Section 4.3(h)
Indemnitee is a party to the action for which
indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Section
4.3(h) Indemnified Liabilities"), incurred by any Section
4.3(h) Indemnitee as a result of, or arising out of, or
relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any breach
of any covenant, agreement, or obligation of the Company
contained in the Transaction Documents or any other
certificate, instrument, or document contemplated hereby
or thereby, (iii) any cause of action, suit, or claim
brought or made against such Section 4.3(h) Indemnitee by
a third party and arising out of or resulting from the
execution, delivery, performance, or enforcement of the
Transaction Documents or any other certificate, instrument,
or document contemplated hereby or thereby, (iv) any
transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the
issuance of the Common Stock underlying the Convertible
Debenture ("Securities"), or (v) the status of the Holder
or holder of the Securities as an investor in the Company,
except insofar as any such misrepresentation, breach or
any untrue statement, alleged untrue statement, omission,
or alleged omission is made in reliance upon and in
conformity with written information furnished to the
Company by the Holder or the Investor which is specifically
intended by the Holder or the Investor to be relied upon
by the Company, including for use in the preparation of
any such registration statement, preliminary prospectus,
or prospectus, or is based on illegal trading of the
Common Stock by the Holder or the Investor. To the extent
that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities that is permissible
under applicable law. The indemnity provisions contained
herein shall be in addition to any cause of action or
similar rights the Holder may have, and any liabilities
the Holder may be subject to.
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Article 5 Additional Financing
The Company shall not, directly nor indirectly, without the prior
written consent of Holder offer Common Stock or file any registration
statement, (except those on Form S-8 or, in the case of an acquisition,
on Form S-4) for any securities (a "Subsequent Financing"), ending on
the earlier to occur of (i) Maturity Date or (ii) the date on which the
full Face Amount and accrued interest on the Note has been paid ( each
the "Lock Up Period") except with respect to securities issued pursuant
to Company's employee stock option plan or Common Stock issued for
acquisitions. Failure to do so will result in an Event of Default and
the Holder may elect to take the action outlined in Article 4. The
sole exceptions shall be any registration statements required to be
filed by the Company for previous financings completed by Laurus Funds
or any shares of Common Stock in the current registration statement
under review by the SEC.
Article 6 Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person
assumes in writing the obligations of the Company under this Note and
immediately after such transaction no Event of Default exists. Any
reference herein to the Company shall refer to such surviving or
transferee corporation and the obligations of the Company shall
terminate upon such written assumption. Failure to do so will
constitute an Event of Default under this Agreement and the Holder
may immediately seek to take actions as described under Article 4
of this Agreement.
Article 7 Notice
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Note must be in writing
and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile
(provided a confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party);
or (iii) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for
such communications shall be:
If to the Company:
Stuart Turk
85 Corstate Avenue, Unit #1
Concord, Ontario, Canada L4K 4Y2
(905) 760-2987
Copy to:
Amy Trombly, Esq.
Trombly Business Law
1320 Centre Street, Suite 202
Newton, MA 02459
If to the Holder:
Dutchess
Douglas Leighton
50 Commonwealth Avenue, Suite 2
Boston, MA 02116
Phone 617-301-4700
Facsimile 617-249-0947
Each party shall provide five (5) business days prior notice to
the other party of any change in address, phone number or
facsimile number.
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Article 8 Time
Where this Note authorizes or requires the payment of money or
the performance of a condition or obligation on a Saturday or Sunday
or a holiday in which the United States Stock Markets ("US Markets")
are closed ("Holiday"), or authorizes or requires the payment of money
or the performance of a condition or obligation within, before or
after a period of time computed from a certain date, and such period
of time ends on a Saturday or a Sunday or a Holiday, such payment may
be made or condition or obligation performed on the next succeeding
business day, and if the period ends at a specified hour, such payment
may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made
or performed in accordance with the terms of this Note. A "business
day" shall mean a day on which the US Markets are open for a full day
or half day of trading.
Article 9 No Assignment
This Note shall not be assigned.
Article 10 Rules of Construction.
In this Note, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the
singular, and words of the masculine gender include the feminine and
the neuter, and when the tense so indicates, words of the neuter gender
may refer to any gender. The numbers and titles of sections contained
in the Note are inserted for convenience of reference only, and they
neither form a part of this Note nor are they to be used in the
construction or interpretation hereof. Wherever, in this Note, a
determination of the Company is required or allowed, such determination
shall be made by a majority of the Board of Directors of the Company
and, if it is made in good faith, it shall be conclusive and binding
upon the Company and the Holder.
Article 11 Governing Law
The validity, terms, performance and enforcement of this Note shall be
governed and construed by the provisions hereof and in accordance with
the laws of the Commonwealth of Massachusetts applicable to agreements
that are negotiated, executed, delivered and performed solely in the
Commonwealth of Massachusetts.
Article 12 Litigation
The parties to this agreement will submit all disputes arising under
this agreement to arbitration in Boston, Massachusetts before a single
arbitrator of the American Arbitration Association ("AAA"). The
arbitrator shall be selected by application of the rules of the AAA,
or by mutual agreement of the parties, except that such arbitrator
shall be an attorney admitted to practice law in the Commonwealth of
Massachusetts. No party to this agreement will challenge the
jurisdiction or venue provisions as provided in this section.
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Article 13 Conditions to Closing
The Company shall have delivered the proper Collateral to the Holder
before Closing of this Note
Article 14 Structuring and Administrative Expense
The Company shall pay fees associated with the transaction in the
amount of forty thousand dollars ($40,000) directly from the Closing
of this Note.
Article 15 Indemnification
In consideration of the Holder's execution and delivery of this
Agreement and the acquisition and funding by the Holder of the Note
hereunder and in addition to all of the Company's other obligations
under the documents contemplated hereby, the Company shall defend,
protect, indemnify and hold harmless the Holder and all of its
shareholders, officers, directors, employees, counsel, and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnities") 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 any Indemnitee as a result of, or arising
out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Note, or any
other certificate, instrument or document contemplated hereby or
thereby (ii) any breach of any covenant, agreement or obligation of
the Company contained in the Note or any other certificate, instrument
or document contemplated hereby or thereby, except insofar as any
such misrepresentation, breach or any untrue statement, alleged untrue
statement, omission or alleged omission is made in reliance upon and
in conformity with written information furnished to the Company by,
or on behalf of, the Holder or is based on illegal trading of the
Common Stock by the Holder. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law. The indemnity provisions contained
herein shall be in addition to any cause of action or similar rights
the Holder may have, and any liabilities the Holder may be subject
to.
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Article 16 Waiver
The Holder's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements
or covenants shall not waiver, affect, or diminish any right of the
Holder under this Agreement to demand strict compliance and performance
herewith. Any waiver by the Holder of any Event of Default shall not
waive or affect any other Event of Default, whether such Event of
Default is prior or subsequent thereto and whether of the same or a
different type. None of the undertakings, agreements and covenants of
the Company contained in this Agreement, and no Event of Default,
shall be deemed to have been waived by the Holder, nor may this
Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument
in writing specifying such waiver, amendment, change or modification
and signed by the Holder.
Article 17 Waiver of Jury Trial
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS
AGREEMENT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR
ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
Article 18 Senior Obligation
The Company shall cause this Note and all other existing Notes with the
Holder ("Holder's Debt") to be senior in right of payment to all other
Indebtedness of the Company.
Article 19 RESERVED
Article 20 Transactions With Affiliates.
The Company shall not, and shall cause each of its Subsidiaries not
to, enter into, amend, modify or supplement, or permit any Subsidiary
to enter into, amend, modify or supplement, any agreement, transaction,
commitment or arrangement with any of its or any Subsidiary's officers,
directors, persons who were officers or directors at any time during
the previous two years, shareholders who beneficially own five percent
(5%) or more of the Common Stock, or affiliates or with any individual
related by blood, marriage or adoption to any such individual or with
any entity in which any such entity or individual owns a five percent
(5%) or more beneficial interest (each a "Related Party") during the
Lock Up Period. This Article 20 shall not apply to compensation
arrangements with Officers and Directors.
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Article 21 Investor Shares
The Company shall issue one hundred and eighty thousand (180,000)
shares of unregistered, restricted Common Stock to the Holder as an
incentive for the investment ("Shares"). The Shares shall be issued
and delivered immediately to the Holder and shall carry piggyback
registration rights. The Investor's Shares shall be deemed fully
earned as of the date hereof valued at eighty-five cents ($.85) per
share. In the event the Shares are not registered in the next
registration statement, the Company shall pay to the Holder, as a
penalty, one hundred and eighty thousand (180,000) additional shares
of common stock for each time a registration statement is filed and
the Shares are not included. The Holder retains the right to waive
such penalty, in the event Holder chooses to do so. Failure to do
so will result in an Event of Default and the Holder may elect to
take the action outlined in Article 4. This Event of Default will
survive this Agreement until such time as the Shares are no longer
under the control of the Holder.
Article 22 Use of Proceeds
The Company will use proceeds for general corporate working capital
purposes or acquisitions. This shall not to be used to pay down
long-term debt to any financial institution.
Article 23 Miscellaneous
a. All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, impersonal,
singular or plural, as the identity of the person or
persons may require.
b. Neither this Note nor any provision hereof shall be waived,
modified, changed, discharged, terminated, revoked or
canceled, except by an instrument in writing signed by the
party effecting the same against whom any change, discharge
or termination is sought.
c. Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given
when personally delivered or sent by facsimile transmission:
(i) if to the Company, at its executive offices or (ii) if
to the Holder, at the address for correspondence set forth
in the Article 6, or at such other address as may have been
specified by written notice given in accordance with this
paragraph.
d. This Note may be executed in two or more counterparts, all
of which taken together shall constitute one instrument.
Execution and delivery of this Note by exchange of facsimile
copies bearing the facsimile signature of a party shall
constitute a valid and binding execution and delivery of
this Note by such party. Such facsimile copies shall
constitute enforceable original documents.
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e. This Written Agreement represent the FINAL AGREEEMENT
between the Company and the Holders and may not be
contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties, there are no
unwritten oral agreements among the parties.
f. The execution, delivery and performance of this Note by
the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not
(i) result in a violation of the Articles of Incorporation,
any Certificate of Designations, Preferences and Rights of
any outstanding series of preferred stock of the Company or
the By-laws or (ii) conflict with, or constitute a material
default (or an event which with notice or lapse of time or
both would become a material default) under, or give to
others any rights of termination, amendment, acceleration
or cancellation of, any material agreement, contract,
indenture mortgage, indebtedness or instrument to which the
Company or any of its Subsidiaries is a party, or result in
a violation of any law, rule, regulation, order, judgment or
decree, including United States federal and state securities
laws and regulations and the rules and regulations of the
principal securities exchange or trading market on which the
Common Stock is traded or listed (the "Principal Market"),
applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor
its Subsidiaries is in violation of any term of, or in
default under, the Articles of Incorporation, any
Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the
By-laws or their organizational charter or by-laws,
respectively, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for possible conflicts,
defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually
or in the aggregate have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any
law, statute, ordinance, rule, order or regulation of any
governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible
violations the sanctions for which either individually or
in the aggregate would not have a Material Adverse Effect.
The Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or
registration (except the filing of a registration statement)
with, any court, governmental authority or agency,
regulatory or self-regulatory agency or other third party
in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, this Note in
accordance with the terms hereof or thereof. All consents,
authorizations, permits, orders, filings and registrations
which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or
prior to the date hereof and are in full force and effect
as of the date hereof. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on
each of the Closing Dates and is not aware of any facts
which would reasonably lead to delisting of the Common
Stock by the Principal Market in the foreseeable future.
15
g. The Company and its "Subsidiaries" (which for purposes of
this Note means any entity in which the Company, directly
or indirectly, owns capital stock or holds an equity or
similar interest) are corporations duly organized and
validly existing in good standing under the laws of the
respective jurisdictions of their incorporation, and have
the requisite corporate power and authorization to own
their properties and to carry on their business as now
being conducted. Both the Company and its Subsidiaries
are duly qualified to do business and are in good standing
in every jurisdiction in which their ownership of property
or the nature of the business conducted by them makes such
qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would
not have a Material Adverse Effect. As used in this Note,
"Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations,
results of operations, financial condition or prospects
of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by
the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of
the Company to perform its obligations under the Note.
h. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate
power and authority to enter into and perform this Note,
and to issue the Note and Incentive Debenture in accordance
with the terms hereof and thereof, (ii) the execution and
delivery of the Note by the Company and the consummation by
it of the transactions contemplated hereby and thereby,
including without limitation the reservation for issuance
and the issuance of the Incentive Debenture pursuant to this
Note, have been duly and validly authorized by the Company's
Board of Directors and no further consent or authorization
is required by the Company, its Board of Directors, or its
shareholders, (iii) the Note has been duly and validly
executed and delivered by the Company, and (iv) the Note
constitutes the valid and binding obligations of the
Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
Any misrepresentations shall be considered a breach of contract and Default
under this Agreement and the Holder may seek to take actions as described
under Article 4 of this Agreement.
*****
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IN WITNESS WHEREOF, the Company has duly executed this Note as of the date
first written above.
ON THE GO HEALTHCARE, INC.
By /s/ Stuart Turk
-----------------------------
Name: Stuart Turk
Title: Chief Executive Officer
DUTCHESS PRIVATE EQUITIES FUND, LP and
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: /s/ Douglas H. Leighton
-----------------------------
Name: Douglas H. Leighton
Title: A Managing Member
17