exv10w6



 





Exhibit 10.6




SECURED CONVERTIBLE PROMISSORY NOTE




$238,500




March 5, 2007




     FOR VALUE RECEIVED, the undersigned, Sutura, Inc., a Delaware corporation (the “Maker”),
hereby promises to pay to the order of Pandora Select Partners, L.P., a British Virgin Islands
limited partnership, or its assigns (the “Payee”), at such place as the Payee may designate in
writing, the principal sum of Two Hundred Thirty-Eight Thousand Five Hundred Dollars ($238,500)
under the terms set forth herein. This Note is one of a series of four Notes (together, the
“Series Notes") being issued by Maker on the date hereof. This Note is being issued by Maker and
purchased by Payee in accordance with the provisions of Section 6.4 of that certain Purchase
Agreement dated December 13, 2006 among Maker, the Payee and the other purchasers named therein.


1. Interest. The unpaid principal balance hereof from time to time outstanding shall bear
interest from the date hereof at the rate of eight percent (8%) per annum.



2. Payment. Except as otherwise provided herein, and subject to any default hereunder, the
principal and interest hereof is payable as follows:




     (a) Interest only is payable in cash or stock (as provided below) quarterly in arrears on the
last day of each calendar quarter, beginning March 31, 2007.



          (i) The parties hereby agree that the Company may pay interest due hereunder, or any portion
thereof, by issuing to the Payee fully paid and nonassessable shares of Maker’s Common Stock, par
value $0.001 per share, in lieu of cash. The number of shares of Common Stock issuable upon payment
of any portion of an interest payment hereunder in stock shall be computed by dividing each such
applicable portion of the interest payment to be paid in shares of Common Stock by the Interest
Conversion Rate (as defined below ) in effect at such time.




          (ii) The Interest Conversion Rate shall be equal to the greater of (i) $0.045 per share;
or (ii) the average of the daily closing bid prices for the Company’s Common Stock over a period of
30 consecutive Trading Days. The last day of such 30 day period will be the Trading Day immediately
prior to the day in which a interest payment is due. A “Trading Day” is (x) a day on which the
Common Stock is traded on the New York Stock Exchange, the American Stock Exchange, the NASDAQ
National Market, the NASDAQ SmallCap Market or OTC Bulletin Board (all “Trading Markets”), or (y)
if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted
in the over-the-counter market as reported by the Pink Sheets, LLC (or any similar organization or
agency succeeding to its function of reporting prices).




          (iii) Any Common Stock issued in payment of any portion of the interest payments shall
have those registration rights set forth in the Registration Rights Agreement.




 









 





     (b) On
June 30, 2008 (the “Maturity Date"), the remaining outstanding principal balance
of this Note will be due and payable in cash, together with all then-accrued but unpaid interest.



     (c) Except as provided herein, the Maker will have no right of early prepayment on this Note.



3. Conversion.




     (a) At any time while any portion of the principal or interest of this Note is outstanding,
the Payee may give the Maker written notice (the “Payee Notice”) of its intention to convert all or
any portion of the outstanding principal and/or accrued but unpaid interest on this Note into
shares of the Maker’s Common Stock based on a conversion rate as described below (the “Conversion
Rate”). The number of shares of Common Stock issuable upon payment of any portion of the
outstanding principal and/or accrued but unpaid interest on this Note            shall be computed
by dividing each such applicable portion of the payment to be paid in shares of Common Stock by the
Conversion Rate in effect at such time. Upon receipt of the Payee Notice, the Maker shall
immediately cause certificates dated the Payee Notice date and representing these shares to be
delivered to Payee within 20 days of, and payment shall be deemed to have been made on, the date of
the Payee Notice.



     (b) The Conversion Rate shall initially be equal to $0.045.



     (c) The Conversion Rate (and, as applicable, the factors above used to compute it) shall be
adjusted proportionally for any subsequent stock dividend or split, stock combination or other
similar recapitalization, reclassification or reorganization of or affecting Maker’s Common Stock.
In case of any consolidation or merger to which the Maker is a party other than a merger or
consolidation in which the Maker is the continuing corporation, or in case of any sale or
conveyance to another corporation of the property of the Maker as an entirety or substantially as
an entirety, or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third corporation into the
Maker), then instead of receiving shares of Maker’s Common Stock, Payee shall have the right
thereafter to receive the kind and amount of shares of stock and other securities and property
which the Payee would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale or conveyance had the same portion of this Note
been paid or converted immediately prior to the effective date of such consolidation, merger,
statutory exchange, sale or conveyance and, in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section with respect to the
rights and interests thereafter of the Payee, to the end that the provisions set forth in this
Section shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in
relation to any shares of stock and other securities and property thereafter deliverable in
connection with this Note. The provisions of this subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.



     (d) Any Common Stock issued in payment of all any portion of the outstanding principal and/or
accrued but unpaid interest on this Note shall have those registration rights set



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forth in the Registration Rights Agreement of even date herewith by and among Maker, Payee and
certain other parties thereto.


4. Security. The full and timely payment of this Note shall be secured by that certain
Fourth Amended Security Agreement and Fourth Amended Patent and Trademark Security Agreement, each
dated as of December 13, 2006 (together, the “Security Agreements”), covering all of Maker’s
assets. The security interest granted under the Security Agreements shall be a first priority
security interest subordinate to no other secured rights, but shared with the other holders of the
Series Notes and the secured parties under the Security Agreements.



5. Default. The occurrence of any one or more of the following events shall constitute an
event of default, upon which Payee may declare the entire principal amount of this Note, together
with all accrued but unpaid interest, to be immediately due and payable:




     (a) The Maker shall fail to make any required payment of principal or interest when due, and
such failure shall continue through five days after Payee gives written notice of such failure to
Maker.



     (d) The Maker shall fail to materially perform or comply with any covenant, agreement, term or
provision contained in any of the Security Agreements, and such failure shall continue through five
days after Payee gives written notice of such default to Maker.



     (e) The Maker shall be in default of any term or provision of any of the promissory notes sold
pursuant that certain Purchase Agreement dated September 7, 2005 among Maker, the Payee and the
other purchasers named therein (the “September 2005 Notes"), or any of the promissory notes sold
pursuant to that certain Purchase Agreement dated March 25, 2005 among Maker, the Payee and the
other purchasers named there (the “March 2005 Notes"), or any of the promissory notes sold pursuant
to that certain Purchase Agreement dated September 17, 2004 among Maker, the Payee and the other
purchasers named therein (the “September 2004 Notes"), "), or any of the promissory notes sold
pursuant to that certain Purchase Agreement dated December 13, 2006 among Maker, the Payee and the
other purchasers named therein (the “December 2006 Notes"), and such default is not cured within
five days after written notice from Payee to Sutura.



     (f) The Maker shall become insolvent or shall fail to pay, or become unable to pay, its debts
as they become due; or any bankruptcy, reorganization, debt arrangement or other proceeding under
any bankruptcy or insolvency law shall be instituted by or against the Maker.



     (g) Any representation or warranty of the Maker contained in any of the Security Agreements
shall be untrue in any material respect.



     (h) The Maker incurs an event of default under the terms of any of the other Series Notes.



     Without limiting the above, the Maker acknowledges that payments on the various scheduled due
dates in Sections 2 are of essence and that any failure to timely pay any installment of principal
or interest (within any permitted grace period above) permits Payee to declare this Note
immediately due in cash in its entirety without any prior notice of any kind to



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Maker, except for the specific notices provided above. Further, the Maker agrees that any
event of default under this Note shall constitute an event of default under each of the other
Series Notes, the December 2006 Notes, the September 2005 Notes, the March 2005 Notes and the
September 2004 Notes.


6. Mandatory Prepayments. If Maker or its controlling stockholders enter into a definitive
agreement relating to a Sale Transaction, the Maker shall give Payee at least fifteen days prior
written notice of the proposed date for consummation of the Sale Transaction. The Maker’s notice
shall include a description of the proposed price, terms and conditions of the Sale Transaction.
Despite any other provisions hereof, the entire principal balance of this Note, and all accrued but
unpaid interest, shall be due and payable immediately prior to (and as a condition of) the closing
on the Sale Transaction. However, within fifteen days after receipt of Maker’s notice, Payee may
give written notice to Maker that Payee elects to convert all or any portion of the outstanding
principal and/or accrued but unpaid interest on this Note into shares of the Maker’s Common Stock
(in which case, the Payee’s notice will constitute a Payee Notice under Section 3 above and the
portion of this Note not so converted will be retired in cash as otherwise provided in this
Section).




     The Maker shall not consummate any Sale Transaction, the price, terms and conditions of which
materially deviate from those described in Maker’s notice to the Payee, without first giving the
Payee a new notice specifying such changes. Such new notice will commence a new 15-day period
during which time Payee may give its notice to Maker as provided above. Nothing in this Section
will restrict the Maker’s ability to effect a Sale Transaction if Maker complies with the foregoing
provisions hereof.


7. Limitations on Conversion. Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by the Payee upon any conversion of this
Note (or otherwise in respect hereof) shall be limited to the extent necessary to insure that,
following such conversion (or other issuance), the total number of shares of Common Stock then
beneficially owed by Payee and its affiliates and any other persons whose beneficial ownership of
Common Stock would be aggregated with the Payee’s for purposes of Section 13(d) of the Exchange Act
does not exceed 9.99% of the total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock issuable upon such conversion or payment).
For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. This provision shall not
restrict the number of shares of Common Stock which Payee may receive or beneficially own in order
to determine the amount of securities or other consideration that Payee may receive in the event of
a merger, sale or other transaction as contemplated in Section 3(c) of this Note.



8. Applicable Law. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THE NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF.




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9. Waivers. The Maker hereby waives presentment for payment, notice of dishonor, protest
and notice of payment and all other notices of any kind in connection with the enforcement of this
Note.



10. No Setoffs. The Maker shall pay principal and interest under the Note without any
deduction for any setoff or counterclaim.



11. Costs of Collection. If this Note is not paid when due, the Maker shall pay Payee’s
reasonable costs of collection, including reasonable attorney’s fees.




	 	 	 	 	 
	 	 	SUTURA, INC.
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	David Teckman, President and
	 

	 	 	 	Chief Executive Officer







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