NOTE PURCHASE AGREEMENT


 


 


This NOTE PURCHASE
AGREEMENT (including all exhibits hereto, this “Purchase Agreement”), is entered into as of April 4, 2014, by
Healthcare Corporation of America, a Delaware corporation (the “Company” or the “Borrower”),
and the Noteholders listed on Exhibit A (the “Noteholders”).


 


RECITALS


 


The Company wishes to sell and each Noteholder
wishes to purchase a secured Note, substantially in the form attached as Exhibit B (the “Note”),
of the Company on the terms, and subject to the conditions, contained in this Purchase Agreement.


 


NOW, THEREFORE, in
consideration of the mutual promises and agreements set forth herein, the parties hereto agree as follows:


 


1.Issuance of Note.


 


(a)               
Subject to the terms and conditions set forth in this Agreement, at the closing of this Purchase Agreement (the “Closing”),
the Company shall issue the Notes in the respective principal amounts listed on Exhibit A to the Noteholders in consideration of,
and as an inducement to, each Noteholder’s respective payment of such amounts to the Company. The aggregate amount of principal
under the Notes is One Million United States Dollars ($1,000,000) (payable in two (2) installments as agreed by the parties).


 


(b)              
Each Note:


 


(i) will bear interest
at the annual rate of eight percent (8%),


 


(ii) will be payable
as to principal and interest on demand on April 2, 2015 (“Maturity Date”), subject to acceleration upon Event
of Default, and


 


(iii) will be subject
to the further terms and provisions set forth in this Purchase Agreement.


 


(c)               
The delivery of each executed Note to each Noteholder as well as all agreements, instruments and ancillary documents referenced
therein (the “Closing”) is taking place simultaneously with the execution and delivery of this Purchase Agreement
(the “Closing Date”).


 


(d)              
The Company will use the proceeds of the Notes for the Company’s ongoing operations.


 


2.Interest. The Company
shall pay interest on the whole amount of the principal sum outstanding under the Note, commencing from the date hereof and continuing
until payment in full of this Note, at the annual rate of eight percent (8%).


 






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3.Prepayment. The Company
may prepay the principal and all accrued interest due under the Notes at any time prior to the Maturity Date, in reasonable payments
not to be less than $100,000. Payments will be applied pro rata to each Note, and will be applied first to interest and
then to principal outstanding under each Note, in accordance with the terms of the Note. For the sake of clarity, the security
interest and guaranty described in Section 4 and 5, respectively, herein, shall remain in effect until full repayment of all accrued
amounts, notwithstanding any prepayment.


 


4.Security. To secure the timely payment and
performance by the Company of its obligations under this Purchase Agreement and the Note, the Company hereby assigns, pledges and
grants to the Noteholders, for their ratable benefit, the following collateral (the “Collateral”):


 


4.1A continuing first priority security
interest in and to all of the shares (the “340 Basics Shares”) and assets of 340 Basics, Inc. a New Jersey corporation
and a wholly-owned subsidiary of the Company (“340 Basics”). Such security interest will be subject to the terms
of a Security Agreement dated as of the date of this Purchase Agreement, to be executed by Selway Capital Holdings LLC on behalf
of all of the Noteholders (the “Security Agreement”, and together with the Note, Warrant, Guaranty, Junior Subordination
Agreement, Senior Subordination Agreement and other ancillary documents, collectively referred to as the “Loan Documents”).
The Company is delivering to the Noteholders the stock certificate or certificates representing the 340 Basics Shares, together
with a stock power in blank.


 


4.2A continuing second priority security
interest in and to all other assets of the Borrower, including equity interests in all other subsidiaries. Such second priority
security interest will be subordinate only to the security interest of Partners for Growth III, L.P., a Delaware limited partnership,
as further set forth in the Senior Lender Subordination Agreement to be entered into by and between Partners for Growth III, L.P.,
the Borrower and the Noteholders (or on their behalf) in connection with the transactions contemplated herein (the “Senior
Lender Subordination Agreement”).


 


4.3The Company will provide all requested
assistance to the Noteholders to perfect the Noteholders’ security interest in the Collateral by the filing of financing
statements or any other means reasonably requested by the Noteholders. In connection with the perfection of the security interest
set forth in Section 4.1 hereinabove, the Company, the Noteholders (or on their behalf) and certain previous holders of convertible
notes shall enter into a junior lender subordination agreement (the “Junior Lender Subordination Agreement”).


 


4.4The Company and 340 Basics shall
mark their respective books and records as may be necessary or appropriate to evidence, protect and perfect the Noteholders’
security interest and shall make any public filings or take any other action necessary or advisable to reflect such security interest.


 






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5.Guaranty. On the Closing
Date, 340 Basics is delivering a guaranty (the “Guaranty”) of the Company’s obligations under the Notes.
The Guaranty is an absolute guaranty of payment and not of collection.


 


6.Next Financing Round.


 


6.1As of the Effective
Date, the Company is in the process of raising up to Five Million Five Hundred Thousand Dollars ($5,500,000) from investors (the
“Next Financing Round”). These investors may purchase debt, equity and/or derivatives from the Company (the
“Next Round Securities”).


 


6.2The Company
makes the following covenants with respect to the Next Financing Round:


 


(a) if, as of the
date which is thirty (30) days after the Closing Date, the Company has failed to secure at least One Million Five Hundred Thousand
Dollars ($1,500,000), such failure will constitute an Event of Default (as defined in Section 7 of this Agreement);


 


(b) if, as of the
date which is thirty (30) days after the Closing Date, the Company has secured at least One Million Five Hundred Thousand Dollars
($1,500,000), but less than Three Million Five Hundred Thousand Dollars ($3,500,000), then the Company shall be entitled to an
additional thirty (30) days in which to raise an aggregate of at least Three Million Five Hundred Thousand Dollars ($3,500,000);


 


(c) if, on or before
expiration of such second thirty (30) day period, the Company has failed to secure at least Three Million Five Hundred Thousand
Dollars ($3,500,000), such failure will constitute an Event of Default.


 


7.Warrants.


 


7.1Simultaneously
with the execution and delivery of this Purchase Agreement, the Company is issuing in favor of the Noteholders warrants to purchase
an aggregate of Two Million (2,000,000) shares of Common Stock, subject to stock split, upon the terms and conditions hereinafter
set forth, pursuant to a Warrant dated as of the date of this Purchase Agreement and issued by the Company (the “Warrants”).
The term of the Warrants is five (5) years.


 


7.2The exercise
price of the Warrants is equal to the lowest of the following: (i) the price of common equity of the Next Round Securities (as
defined below), (ii) the conversion price of a convertible note raised after the Next Financing Round (as defined below), or (iii)
the exercise price of warrants which make up part of the package of the Next Round Securities.


 


8.Events of Default.


 


8.1The following
shall constitute events of default (individually an “Event of Default”):


 






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(a) the Events of
Default described in Section 6 above;


 


(b)default in the
payment in full of all principal and interest due under the Notes on or before the Maturity Date, or inability of the Borrower
to pay any of its debts or liabilities as they fall due;


 


(c) filing of a petition
in bankruptcy or the commencement of any proceedings under any bankruptcy laws by or against the Company, which filing or proceeding,
is not dismissed within sixty (60) days after the filing or commencement thereof, or if the Company shall cease or suspend the
conduct of its usual business or if the Company shall become, or in light of its usual business conditions is likely to become,
insolvent and is unable to pay its debts when due;


 


(d) failure of the Company
to comply in any way with the terms, covenants or conditions contained in the Notes or in this Purchase Agreement, or breach by
the Company of any material representation or warranty contained in the Notes or in this Purchase Agreement;


 


(e)commencement of
actions, suits or proceedings at law or in equity against the Company alleging failure to repay any material indebtedness; and


 


(f)the Events of
Default described in Section 6 of the Security Agreement.


 


8.2If at any time, an Event of
Default shall occur, all obligations under the Notes shall become immediately due and payable without presentment, demand or protest,
all of which are hereby waived by the Company. Upon occurrence of an Event of Default:


 


(a)               
The Noteholders may, in their discretion, take ownership of the 340 Basics Shares, ratably in accordance with the principal
amount of each Note. Thereafter, the Noteholders shall have and exercise all rights of a holder of the 340 Basics Shares under
this Purchase Agreement and the other Loan Documents. Such rights include, without limitation, the right to vote the 340 Basics
Shares in any manner the respective Noteholder deems advisable, the right to dividends declared on the 340 Basics Shares, and the
right to transfer, encumber, or otherwise dispose of the 340 Basics Shares in such Noteholder’s sole discretion, except as
limited by applicable securities or other laws; and


 


(b)              
The Noteholders shall have and may exercise all other rights under law and equity to the Collateral, subject to the first
priority security interest of Partners for Growth III, L.P., a Delaware limited partnership. Such rights and remedies shall be
cumulative.


 


 


8.Optional Conversion. The Noteholders,
in their sole discretion, may elect at any time to convert part or all of the amounts due under the Notes, including principal
and interest, into the Next Round Security on terms that are identical to those of the Next Round Securities.


 






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9.Representations
and Warranties. The Company represents and warrants to the Noteholders as follows:


 


9.1The 340 Basics
Shares constitute all of the outstanding and issued shares of 340 Basics. The 340 Basics Shares have been duly and validly authorized
and issued and are fully paid and non-assessable and have been sold and delivered to the holders thereof in compliance with, or
under valid exemption from, all applicable federal and state laws and rules and regulations. There are no subscriptions, warrants,
options, calls, commitments, rights or agreement by which 340 Basics is bound relating to the issuance, transfer, voting or redemption
of the 340 Basics Shares or any pre-emptive rights held by any person with respect to the 340 Basics Shares.


 


9.2 None of the
340 Basics Shares is registered or qualified under the various federal or state securities laws of the United States. None of the
340 Basics Shares has been issued or transferred in violation of any securities registration, securities disclosure, or similar
laws of any jurisdiction to which such issuance or transfer may be subject.


 


9.3 Each of the
Company and 340 Basics is duly organized and existing in good standing under the laws of the State of Delaware, is duly qualified
as a foreign corporation and authorized to do business in all jurisdictions in which the nature of its business or property makes
such qualification necessary, except where the failure to so qualify would not have a material adverse effect on the business of
the Company, and has the power to own its properties and to carry on its business as now conducted and as proposed to be conducted.


 


9.4 The Company
has full power, authority and legal right to enter into this Purchase Agreement and the other Loan Documents and to perform all
its obligations thereunder. The Company has duly executed and delivered this Purchase Agreement and the other Loan Documents. This
Purchase Agreement and the other Loan Documents constitute the legal, valid and binding obligation of the Company enforceable in
accordance with their respective terms.


 


9.5The execution,
delivery and performance of this Purchase Agreement and of the other Loan Documents:


 


(a) are within the
Company’s corporate powers, as applicable, have been duly authorized by all necessary corporate action, are not in contravention
of law or the terms of the Company’s certificate of Incorporation, By-laws, or other organizational documents, or to the
conduct of the Company’s business or of any material contract or undertaking to which the Company is a party or by which
the Company is bound;


 


(b) will not conflict
with or violate any law or regulation, or any judgment, order or decree of any governmental body;


 


(c)will not require
the consent of any governmental body, any party to a contract or any other person or entity; and


 






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(d) will not conflict
with, nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any lien
upon any asset of the Company under the provisions of any agreement, instrument, or other document to which the Company is a party
or by which it or its property is a party or by which it may be bound, except for the consent of Partners for Growth III, L.P.,
a Delaware limited partnership, which the Company has obtained.


 


9.6There is no
litigation pending or, to the Company’s knowledge, threatened against the Company.


 


9.7The Company
has paid in full all federal, state, local and foreign taxes and assessments and has timely filed all tax returns. No tax audit
is pending or, to the Company’s knowledge, threatened against the Company.


 


9.8No representation
or warranty made by the Company in this Purchase Agreement or in any other Loan Document contains any untrue statement of fact
or omits to state any fact necessary to make the statements herein or therein not misleading. There is no fact known to the Company
or which reasonably should be known to the Company which the Company has not disclosed to the Noteholders in writing with respect
to the transactions contemplated by this Purchase Agreement.


 


 


10.Representations
of the Noteholder. Each Noteholder represents and warrants to the Company that:


 


10.1The Noteholder
has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the Company and it is able financially to bear the risks
thereof;


 


10.2The Noteholder
has had an opportunity to discuss the Company, business, management and financial affairs with the Company's management and has
received (or had made available to the Noteholder) any financial and business documents requested and believes the material and
information provided is sufficient to permit making an informed decision regarding this Purchase Agreement and the other Loan Documents;


 


10.3The Noteholder
is entering into this Purchase Agreement and acquiring the Note for the Noteholder’s own account for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof other than in compliance with the Securities Act
and applicable state securities laws; and


 


10.4The Noteholder
understands that (i) the Note has not been registered under the Securities Act by reason of its issuance in a transaction exempt
from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 504, 505 or 506 promulgated under
the Securities Act, (ii) this Note must be held indefinitely unless a subsequent disposition thereof is registered under the Securities
Act or is exempt from such registration, and (iii) this Note will bear a legend substantially to such effect.


 






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10.5The Noteholder
is an accredited investor within the meaning of Regulation D under the Securities Act.


 


10.6The Noteholder
expressly understands and agrees that its security interests set forth in Section 4.2 are subject to the rights of Partners for
Growth III, L.P., as further set forth in the Senior Lender Subordination Agreement.


 


11.Governing Law; Jurisdiction.
This Purchase Agreement and each other Loan Document (unless and except to the extent expressly provided otherwise in any such
other Loan Document), and all matters relating hereto or thereto or arising herefrom or therefrom (whether arising under contract
law, tort law or otherwise) shall be governed by and construed in accordance with the laws of the State of New York without regard
to the conflict of laws principles thereof. Any judicial proceeding under this Purchase Agreement or any other Loan Document may
be brought in any court of competent jurisdiction in the County of New York, State of New York. The Company accepts for itself
and in connection with its properties, generally and unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this Purchase Agreement or any other Loan Document.


 


12.Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.


 


13.Amendments and
Waivers. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent
of the Company and the Noteholders.


 


14.Notice.
Any notice or request hereunder may be given to the Company or any Noteholder at their respective addresses set forth below or
at such other address as may hereafter be specified in a notice delivered in accordance with this Section. Any notice, request,
demand, direction or other communication (a “Notice”) to be given to or made upon any party hereto under any
provision of this Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission
(i.e., “e-mail”) or facsimile transmission. Any Notice must be delivered to the applicable parties hereto at the addresses
and numbers set forth below. “Business Day” means a day other than a Saturday, Sunday, or federal or New York
state holiday. Any Notice shall be effective:


 


(a)               
In the case of hand delivery, when delivered;


 


(b)              
If given by mail, four (4) days after such Notice is deposited with the United States Postal Service, with first-class postage
prepaid, return receipt requested;


 


(c)In the case of
a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission (with confirmation of delivery) or an overnight courier
delivery of a confirmatory Notice (received at or before noon on such next Business Day);


 






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(d)In the case of
a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending
such Notice receives confirmation of delivery;


 


(e)In the case of
electronic transmission, when transmitted, if transmitted on a Business Day, or upon commencement of the next succeeding Business
Day, provided that the party sending such Notice receives confirmation of delivery;


 


(f)If given by any
other means (including by overnight courier), when actually received.


 


 





If to the Company:


 


Healthcare
Corporation of America


66 Ford
Road, Suite 230


Denville,
NJ 07834


Attention:
__________________ 


(e-mail)


(fax)


 


If to
the Noteholders:


 


As set forth
in Exhibit A.


 


 


[signature page to follow]




 



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IN WITNESS WHEREOF,
the Company and the Noteholders have executed this Agreement as of the day and year first above written.


 





	COMPANY:	 	HEALTHCARE CORPORATION OF AMERICA
	 	 	 	 	 
	 	 	By:	 	 
	 	 	 	 	 
	 	 	Name:	 	 
	 	 	 	 	 
	 	 	Title:	 	 


 


 





	NOTEHOLDERS:	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	SELWAY CAPITAL
    HOLDINGS LLC	CHARDAN CAPITAL
    MARKETS LLC
	 	 	 	 	 	 
	By:	 	 	By:	 	 
	 	 	 	 	 	 
	Name:	 	 	Name:	 	 
	 	 	 	 	 	 
	Title:	 	 	Title:	 	 


 





 


[INSERT]


 


	 	 	 
	By:	 	 
	 	 	 
	Name:	 	 
	 	 	 
	Title:	 	 







 







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Exhibit A


 


Noteholders and Respective Note Amounts


 


 


	Name	Address	Note Amount
	Selway Capital Holdings LLC	
        900 Third Avenue, 19th floor

        New York, NY 10022

         

         

         

        With a copy to:

        Pearl Cohen Zedek Latzer Baratz LLP

        1500 Broadway

        New York, NY 10036

        Attn: Oded Kadosh, Esq.

        (e-mail) okadosh@pearlcohen.com

        (fax) (646) 878-0838
	$900,000
	Chardan Capital Markets LLC	
        17 State Street, Suite 1600

        New York, NY 10004

        Attention: Kerry Propper

         

         
	$50,000
	Evan Genack	
         

         

         
	$50,000


 









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