Document:

exv10w4

 

Exhibit 10.4

WARRANT NO. 2006-1

To Purchase Shares of Common Stock

of

SUTURA, INC.

     This Warrant and the Securities issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933 (the “1933 Act”) or under any state securities or “Blue
Sky” laws (“Blue Sky Laws”). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities issuable upon exercise of this Warrant or any
interest therein may be made except (a) pursuant to an effective registration statement under the
1933 Act and any applicable Blue Sky Laws or (b) if the Corporation has been furnished with an
opinion of counsel for the holder, which opinion and counsel shall be reasonably satisfactory to
the Corporation, to the effect that no registration is required because of the availability of an
exemption from registration under the 1933 Act and applicable Blue Sky laws.

     THIS CERTIFIES THAT, for good and valuable consideration Pandora Select Partners, L.P., a
British Virgin Islands limited partnership (the “Holder”), or the Holder’s registered assigns, is
entitled to subscribe for and purchase from Sutura, Inc., a Delaware corporation (the
“Corporation”), at any time on or after August 25, 2006, to and including August 25, 2011, the
number of fully paid and nonassessable shares of the Common Stock of the Corporation computed below
at the price per share computed below (the “Warrant Exercise Price”), subject to the anti-dilution
and price protection provisions of this Warrant.

     The shares which may be acquired upon exercise of this Warrant are referred to herein as the
“Warrant Shares.” As used herein, the term “Holder” means the Holder, any party who acquires all
or a part of this Warrant as a registered transferee of the Holder, or any record holder or holders
of the Warrant Shares issued upon exercise, whether in whole or in part, of the Warrant. The term
“Common Stock” means the common stock, $0.001 par value per share, of the Corporation.

     This Warrant is subject to the following provisions, terms and conditions:

1. Computing the Number of Warrant Shares. The number of Warrant Shares that the Holder may
acquire upon the full exercise hereof (subject to adjustment as otherwise provided by this Warrant)
shall be equal to 1,653,600.

2. Computing the Warrant Exercise Price. The Warrant Exercise Price per share shall be equal to
$0.0913, subject to adjustment as otherwise provided by this Warrant.

3. Exercise for Cash or on Cashless Basis; Transferability.

     (a) The rights represented by this Warrant may be exercised by the Holder hereof, in whole or
in part (but not as to a fractional share of Common Stock), by written notice of exercise (in the
form attached hereto) delivered to the Corporation at the principal office of the
Corporation prior to the expiration of this Warrant and accompanied or preceded by the surrender of
this Warrant along with a check in payment of the Warrant Exercise Price for such Warrant Shares.

 

 

     (b) In the alternative, payment may be made at the option of Holder by instructing the
Corporation to withhold from the shares of Common Stock to be issued upon exercise of this Warrant
a number of whole or fractional shares of Common Stock equal to the number of shares for which the
Warrant is being exercised (including any shares to be surrendered) multiplied by the Warrant
Exercise Price per share, and then divided by the “Market Price” (as defined in Section 10 below)
of a share of Common Stock.

     (c) Except as provided in Section 9 hereof, this Warrant may not be sold, transferred,
assigned, hypothecated or divided into two or more Warrants of smaller denominations, nor may any
Warrant Shares issued pursuant to exercise of this Warrant be transferred. In no event may this
Warrant be transferred and divided (without any exercise hereof) into any denomination(s) of less
than 100 Warrant Shares.

4. Exchange and Replacement. Subject to Sections 3 and 9 hereof, this Warrant is exchangeable upon
the surrender hereof by the Holder to the Corporation at its office for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of Warrant Shares
purchasable hereunder, each of such new Warrants to represent the right to purchase such number of
Warrant Shares (not to exceed the aggregate total number purchasable hereunder) as shall be
designated by the Holder at the time of such surrender. Upon receipt by the Corporation of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon surrender and cancellation of this Warrant, if mutilated, the
Corporation will make and deliver a new Warrant of like tenor, in lieu of this Warrant. This
Warrant shall be promptly canceled by the Corporation upon the surrender hereof in connection with
any exchange or replacement. The Corporation shall pay all expenses, taxes (other than stock
transfer taxes), and other charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Section 4.

5. Issuance of the Warrant Shares.

     (a) The Corporation agrees that the Warrant Shares shall be and are deemed to be issued to the
Holder as of the close of business on the date on which this Warrant shall have been surrendered
and the payment made for such Warrant Shares as aforesaid. Subject to the provisions of paragraph
(b) of this Section 5, certificates for the Warrant Shares so purchased shall be delivered to the
Holder within a reasonable time after the rights represented by this Warrant shall have been so
exercised, and, unless this Warrant has expired, a new Warrant representing the right to purchase
the number of Warrant Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the Holder.

     (b) Notwithstanding the foregoing, however, the Corporation shall not be required to deliver
any certificate for Warrant Shares upon exercise of this Warrant except in accordance with
exemptions from the applicable securities registration requirements or registrations under
applicable securities laws. Except as described in Section 11, nothing herein shall obligate the

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Corporation to effect registrations under federal or state securities laws. If registrations are
not in effect and if exemptions are not available when the Holder seeks to exercise the Warrant,
the Warrant exercise period will be extended, if need be, to prevent the Warrant from expiring,
until such time as either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days from the date the
Corporation delivers to the Holder written notice of the availability of such registrations or
exemptions. The Holder agrees to execute such documents and make such representations, warranties
and agreements as may be required solely to comply with the exemptions relied upon by the
Corporation, or the registrations made, for the issuance of the Warrant Shares.

6. Covenants of the Corporation. The Corporation covenants and agrees that all Warrant Shares
will, upon issuance, be duly authorized and issued, fully paid, non-assessable and free from all
taxes, liens and charges with respect to the issue thereof. The Corporation further covenants and
agrees that during the period within which the rights represented by this Warrant may be exercised,
the Corporation will at all times have authorized and reserved for the purpose of issue or transfer
upon exercise of the subscription rights evidenced by this Warrant a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this Warrant.

7. Anti-dilution Adjustments. The provisions of this Warrant are subject to adjustment as provided
in this Section 7. No adjustment shall be made pursuant to this Section 7 if the same adjustment
has already been made pursuant to another provision of this Warrant.

     (a) Stock Splits, Dividends and Combinations. The otherwise applicable Warrant
Exercise Price shall be adjusted from time to time such that in case the Corporation shall
hereafter:

          (i) pay any dividends on any class of stock of the Corporation payable in Common Stock or
securities convertible into Common Stock;

          (ii) subdivide its then outstanding shares of Common Stock into a greater number of shares;
or

          (iii) combine outstanding shares of Common Stock, by reclassification or otherwise;

then, in any such event, the Warrant Exercise Price in effect immediately prior to such event shall
(until adjusted again pursuant hereto) be adjusted immediately after such event to a price
(calculated to the nearest full cent) determined by dividing (A) the number of shares of Common
Stock outstanding immediately prior to such event, multiplied by the then existing Warrant Exercise
Price, by (B) the total number of shares of Common Stock outstanding immediately after such event
(including in each case the maximum number of shares of Common Stock issuable in respect of any
securities convertible into Common Stock), and the resulting quotient shall be the adjusted Warrant
Exercise Price per share. An adjustment made pursuant to this Subsection shall
become effective immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a

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subdivision,
combination or reclassification. If, as a result of an adjustment made pursuant to this
Subsection, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to
receive shares of two or more classes of capital stock or shares of Common Stock and other capital
stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall
determine the allocation of the adjusted Warrant Exercise Price between or among shares of such
classes of capital stock or shares of Common Stock and other capital stock. All calculations under
this Subsection shall be made to the nearest cent or to the nearest 1/100 of a share, as the case
may be. In the event that at any time as a result of an adjustment made pursuant to this
Subsection, the holder of any Warrant thereafter surrendered for exercise shall become entitled to
receive any shares of the Corporation other than shares of Common Stock, thereafter the Warrant
Exercise Price of such other shares so receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in this Section.

     (b) Mechanics of Adjustment for Stock Splits, Dividends and Combinations. Upon each
adjustment of the Warrant Exercise Price pursuant to Section 7(a) above, the Holder of each Warrant
shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the
Warrant Exercise Price in effect prior to such adjustment) by the Warrant Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the adjusted Warrant Exercise
Price.

     (c) Consolidations, Mergers and Reorganization Events. In case of any consolidation
or merger to which the Corporation is a party other than a merger or consolidation in which the
Corporation is the continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Corporation 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 Corporation), there
shall be no adjustment under Subsection (a) of this Section 7; but the Holder of each Warrant then
outstanding shall have the right thereafter to convert such Warrant into the kind and amount of
shares of stock and other securities and property which he would have owned or have been entitled
to receive immediately after such consolidation, merger, statutory exchange, sale or conveyance had
such Warrant been 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 any Holders of the Warrant, 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 on the exercise of the Warrant. The provisions of this Subsection shall similarly
apply to successive consolidations, mergers, statutory exchanges, sales or conveyances.

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     (d) Adjustments for Diluting Issues. In addition to the adjustments of the Warrant
Exercise Price provided above, the Warrant Exercise Price shall be subjected to further adjustment
from time to time as follows (the main operative provision hereof is in Section 7(d)(iii) below):

          (i) Special Definitions:

               (A) “Options” shall mean rights, options or warrants (other than as excluded by
Section 7(d)(i)(D) below) to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities (as defined herein).

               (B) “Original Issue Date” shall mean the date hereof.

               (C) “Convertible Securities” shall mean securities (other than as excluded by Section
7(d)(i)(D) below) convertible, either directly or indirectly, into or exchangeable for Common
Stock.

               (D) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued
(or, deemed to be issued) by the Corporation after the Original Issue Date other than shares of
Common Stock issued (or deemed to be issued):

                    1. to employees, consultants or directors pursuant to stock option, stock grant, stock
purchase or similar plans or arrangements approved by the Corporation’s Board of Directors;

                    2. as a dividend or other distribution in connection with which an adjustment to the Warrant
Exercise Price is made;

                    3. in a merger, consolidation, acquisition or similar business combination that is approved by
the Corporation’s Board of Directors;

                    4. pursuant to credit, lease or other commercial financing arrangements with parties not
affiliated with the Corporation that are approved by the Corporation’s Board of Directors;

                    5. in exchange for technology or other non-cash assets as approved by the Corporation’s Board
of Directors;

                    6. pursuant to any rights or agreements outstanding on the Original Issue Date (including
those rights relating to the Series Notes and the Series Warrants);

                    7. if the Holder agrees in writing that such shares shall not constitute Additional Shares of
Common Stock.

          (ii) Deemed Issue of Additional Shares of Common Stock. Except as otherwise provided
in Section 7(d), in the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of any holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set forth in the

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instrument relating thereto without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such record date shall have been fixed, as of the close of business on such
record date, provided that in any such case in which Additional Shares of Common Stock are deemed
to be issued:

               (A) no further adjustment in the Warrant Exercise Price shall be made upon the subsequent
issue of such Convertible Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;

               (B) if such Options or Convertible Securities by their terms provide, with the passage of time
or otherwise, for any increase or decrease in the consideration payable to the Company, or increase
or decrease in the number of shares of Common Stock issuable upon the exercise, conversion or
exchange thereof, the Warrant Exercise Price computed upon the original issue thereof or upon the
occurrence of a record date with respect thereto, and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to reflect such
increase or decrease;

               (C) upon the expiration of any such Option or any rights of conversion or exchange under such
Convertible Securities which shall not have been exercised, the Warrant Exercise Price computed
upon the original issue thereof or upon occurrence of a record date with respect thereto, and any
subsequent adjustments based thereon, shall, upon such expiration:

                    1. in the case of Convertible Securities or Options for Common Stock, be recomputed as though
the only Additional Shares of Common Stock issued were shares of Common Stock, if any, actually
issued upon the exercise of such Options or the conversion or exchange of such Convertible
Securities, and the consideration received therefor was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for the issue of all such Convertible
Securities, whether or not converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange; and

                    2. in the case of Options for Convertible Securities, be recomputed as though only the
Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time
of issue of such Options and the consideration received by the Company for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually received by the Company
for the issue of all such Options, whether or not exercised, plus the consideration deemed to have
been received by the Company upon the issue of the Convertible Securities with respect to which
such Options were actually exercised.

               (D) no readjustment pursuant to Section 7(d) shall have the effect of increasing the Warrant
Exercise Price to an amount which exceeds the Warrant Exercise Price existing immediately prior to
the original adjustment with respect to the issuance of such Options
or Convertible Securities, as
adjusted for any Additional Shares of Common Stock issued (or deemed to be issued) between such
original adjustment date and such readjustment date; and

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               (E) in the case of any Option or Convertible Security with respect to which the maximum number
of shares of Common Stock issuable upon exercise or conversion or exchange thereof is not
determinable, no adjustment to the Warrant Exercise Price shall be made until such number becomes
determinable.

          (iii) Adjustments for Issuance of Additional Shares of Common Stock. If the Company,
at any time after the issuance of this Warrant, shall issue any Additional Shares of Common Stock
(otherwise than as provided in the Sections 7(a) and 7(c) above) at a price per share less than the
applicable Warrant Exercise Price then in effect or without consideration, then the applicable
Warrant Exercise Price upon each such issuance shall be adjusted to that price (rounded to the
nearest cent) determined by multiplying the applicable Warrant Exercise Price then in effect by a
fraction, (i) the numerator of which shall be equal to the sum of (A) the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional Shares of Common
Stock plus (B) the number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the applicable Warrant Exercise Price then in
effect, and (ii) the denominator of which shall be equal to the number of shares of Common Stock
outstanding immediately after the issuance of such Additional Shares of Common Stock.

               In addition to the other limitations provided herein, the provisions of this Section 7(d)(iii)
shall not apply under any of the circumstances for which an adjustment is provided in Sections
7(a), 7(b) or 7(c) above. No adjustment of the applicable Warrant Exercise Price shall be made
under this Section 7(d) upon the issuance of any Additional Shares of Common Stock which are issued
pursuant to any Options or Convertible Securities if upon the issuance of such Options or
Convertible Securities (x) any adjustment shall have been made pursuant to Section 7(d)(ii) above
or (y) no adjustment was required pursuant to this Section 7(d)(iii). No adjustment of the
applicable Warrant Exercise Price shall be made under this Section 7(d)(iii) in an amount less than
$.01 per share, but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment, if any, which together with any adjustments
so carried forward shall amount to $.01 per share or more; provided, however, that
upon any adjustment of the applicable Warrant Exercise Price as a result of any dividend or
distribution payable in Common Stock or Convertible Securities or the reclassification, subdivision
or combination of Common Stock into a greater or smaller number of shares, the foregoing figure of
$.01 per share (or such figure as last adjusted) shall be adjusted (to the nearest one-half cent)
in proportion to the adjustment in the applicable Warrant Exercise Price.

          (iv) Determination of Consideration. For purposes of this Section 7(d), the
consideration received by the Corporation for any Additional Shares of Common Stock issued (or
deemed to be issued) shall be computed as follows:

               (A) Cash and Property. Such consideration shall:

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                    (i) insofar as it consists of cash, be computed at the aggregate amount of cash received by
the Corporation;

                    (ii) insofar as it consists of securities and the value of such securities is not determinable
by reference to a separate agreement, (A) if the securities are then traded on a national
securities exchange or the Nasdaq Stock Market (or a similar national quotation system), then the
value shall be computed based on the average of the closing prices of the securities on such
exchange or system over the thirty (30)-day period ending on the date of receipt by the
Corporation, (B) if the securities are actively traded over-the-counter, then the value shall be
computed based on the average of the closing bid prices over the thirty (30) day ending on the date
of receipt by the Corporation, and (C) if there is no active public market, then the value shall be
computed based on the fair market value thereof on the date of receipt by the Corporation, as
determined in good faith by the Board of Directors;

                    (iii) insofar as it consists of property other than cash and securities, be computed at the
fair market value thereof at the time of such issuance, as determined in good faith by the Board of
Directors; and

                    (iv) if Additional Shares of Common Stock are issued (or deemed to be issued) together with
other shares or securities or other assets of the Corporation for consideration which cover both,
by the proportion of such consideration so received, computed as provided in the immediately
preceding Sections 7(d)(iv)(A)(i), 7(d)(iv)(A)(ii) and 7(d)(iv)(A)(iii), as determined in good
faith by the Board of Directors.

               (B) Options and Convertible Securities. The consideration received by the Corporation
for Additional Shares of Common Stock deemed to have been issued pursuant to Section 7(d) relating
to Option and Convertible Securities, shall be the sum of (x) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus (y) the minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities.

     (e) Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Warrant Exercise Price or the number of Warrants covered hereby pursuant to
this Section 7, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any time of the
Holder, furnish or cause to be furnished to the Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Warrant Exercise Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which at the time would
be received upon the exercise of this Warrant.

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8. No Voting Rights. This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Corporation.

9. Notice of Transfer of Warrant or Resale of the Warrant Shares; Assumption upon Merger.

     (a) Subject to the sale, assignment, hypothecation or other transfer restrictions set forth in
Section 3 hereof, the Holder, by acceptance hereof, agrees to give written notice to the
Corporation before transferring this Warrant or transferring any Warrant Shares of such Holder’s
intention to do so, describing briefly the manner of any proposed transfer. Promptly upon
receiving such written notice, the Corporation shall present copies thereof to the Corporation’s
counsel. If in the opinion of such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the Corporation, as
promptly as practicable, shall notify the Holder of such opinion, whereupon the Holder shall be
entitled to transfer this Warrant or to dispose of Warrant Shares received upon the previous
exercise of this Warrant, all in accordance with the terms of the notice delivered by the Holder to
the Corporation; provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer thereof necessary or
advisable in the opinion of counsel and satisfactory to the Corporation to prevent further
transfers which would be in violation of Section 5 of the 1933 Act and applicable state securities
laws; and provided further that the prospective transferee or purchaser shall execute such
documents and make such representations, warranties and agreements as may be required solely to
comply with the exemptions relied upon by the Corporation for the transfer or disposition of the
Warrant or Warrant Shares.

     (b) If, in the opinion of the Corporation’s counsel, the proposed transfer or disposition of
this Warrant or such Warrant Shares described in the written notice given pursuant to this Section
9 may not be effected without registration or qualification of this Warrant or such Warrant Shares,
the Corporation shall promptly give written notice thereof to the Holder, and the Holder will limit
its activities in respect to such transfer or disposition as, in the opinion of such counsel, are
permitted by law.

     (c) Upon the consummation of the proposed Merger of the Corporation with TVG, the rights and
obligations of the Corporation under this Warrant shall be assumed by TVG and any reference to the
Corporation herein shall thereafter be deemed to be a reference to TVG.

10. Fractional Shares. Fractional shares shall not be issued upon the exercise of this Warrant,
but in any case where the holder would, except for the provisions of this Section, be entitled
under the terms hereof to receive a fractional share, the Corporation shall, upon the exercise of
this Warrant for the largest number of whole shares then called for, pay a sum in cash
equal to the sum of (a) the excess, if any, of the Market Price of such fractional share over the
proportional part of the Warrant Exercise Price represented by such fractional share, plus (b) the
proportional part of the Warrant Exercise Price represented by such fractional share. For purposes
of this Section and Section 3(b) above, the term “Market Price” with respect to shares of Common
Stock of any class or series means the last reported sale price or, if none, the average

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 of the
last reported closing bid and asked prices on any national or regional securities exchange or
quoted in the National Association of Securities Dealers, Inc.’s Automated Quotations System
(“Nasdaq”), or if not listed on a national or regional securities exchange or quoted in Nasdaq, the
closing bid price as reported by bigcharts.com (or if this service is discontinued, such other
reporting service acceptable to the Holder), or if no quotations in such Common Stock are
available, the fair market value of the shares as determined in good faith by the Board of
Directors of the Corporation.

11. Registration Rights. Holder shall have registration rights for the Warrant Shares as described
in the Second Amended Registration Rights Agreement of this same date.

     IN WITNESS WHEREOF, Sutura, Inc. has caused this Warrant to be signed by its duly authorized
officer and this Warrant to be dated August ___, 2006.

	 	 	 	 	 
	 	SUTURA, INC.

 	 
	 	By  	 	 
	 	 	Anthony A. Nobles, President and 	 
	 	 	   Chief Executive Officer 	 

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EXERCISE FORM

(To Be Executed by the Registered Holder in Order to Exercise the Warrant)

To: Sutura, Inc.

     The undersigned hereby irrevocably elects to exercise the attached Warrant to purchase for cash,
                     of the shares issuable upon the exercise of such Warrant, and requests that
certificates for such shares (together with a new Warrant to purchase the number of shares, if any,
with respect to which this Warrant is not exercised) shall be issued in the name of:

	 	 	 	 	 	 	 
	 

	 	NAME:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	SOC. SEC. or

TAX I.D. NO.	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ADDRESS:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date:                     , 20                     .

	 	 	 	 

Signature *
	 	 

 

			
	*	 	The signature on the Notice of Exercise of Warrant must correspond to the name as written
upon the face of the Warrant in every particular without alteration or enlargement or any
change whatsoever. When signing on behalf of a corporation, partnership, trust or other
entity, please indicate your position(s) and title(s) with such entity.

 

 

ASSIGNMENT FORM

(To be Executed by the Registered Holder in Order to Transfer the Warrant)

     To: Sutura, Inc.

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
                                         the right to purchase the securities of Sutura, Inc. to which the
within Warrant relates and appoints                                         , attorney, to transfer said right on
the books of Sutra, Inc. with full power of substitution in the premises.

	 	 	 	 	 
	Dated:                     20                     

	 	 	 	 
	 
	 	 

(Signature)
	 	 
	 
	 	 	 	 
	 

	 	Address:exv10w1

 

Exhibit 10.1

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE (COLLECTIVELY WITH THIS
NOTE, THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”) OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED, UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR UPON DELIVERY TO THE ISSUER OF THE SECURITIES OF AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THE SECURITIES THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS PURSUANT TO AVAILABLE EXEMPTIONS THEREFROM.
THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS HEREOF.

Claimsnet.com Inc.

Unsecured Convertible Promissory Note

	 	 	 
	$100,000.00

	 	Dallas, Texas
	 

	 	August 29, 2006 

     Claimsnet.com Inc., a Delaware corporation (the “Company”), for value received, hereby
promises unconditionally to pay to Elmira United Corporation, or its permitted transferees or
assigns (collectively, the “Holder”), in immediately available and lawful money of the United
States of America (“Dollars” or “$”), the principal amount of One Hundred Thousand Dollars
($100,000) (the “Principal”), plus any accrued and unpaid Interest thereon, on the Maturity Date
(as such terms are defined below).

     This Unsecured Convertible Promissory Note (this “Note”) is issued to the Holder in connection
with the issuance by the Company, from time to time of substantially identical Unsecured
Convertible Promissory Notes, provided that such other promissory notes may vary as to their
principal amounts and the dates of issuance thereof, which other promissory notes, in the aggregate
together with this Note, are not greater in principal amount than $300,000 (such other Unsecured
Convertible Promissory Notes, collectively with this Note, the “Investor Notes”, and the holders of
such Investor Notes, collectively with the Holder, the “Investors”). The following is a statement
of the rights of the Holder and the conditions to which this Note is subject, and to which the
Holder, by the acceptance of this Note, agrees.

     1. Certain Definitions; Certain Interpretations.

          1.1. Certain Definitions. As used herein, the following terms shall have the
following meanings:

          “Business Day” means any day that is not a Saturday, Sunday or a legal holiday in the State of
Texas.

          “Common Stock” means the common stock, par value $0.001 per share, of the Company.

 

 

          “Conversion Price” means $0.25 per share, subject to adjustment as provided in this Note.

          “Conversion Securities” means the shares of Common Stock issuable upon conversion of this Note
in accordance with Sections 5.1 and 5.2(d).

          “Event of Default” shall have the meaning assigned to such term in Section 4.

          “Interest” shall have the meaning assigned to such term in Section 2.2.

          “Investors” shall have the meaning assigned to such term in the Preamble.

          “Investor Notes” shall have the meaning assigned to such term in the Preamble.

          “Issue Date” means the first date written above, which is the date of execution and issuance
of this Note.

          “Maturity Date” means December 31, 2008.

          “Person” means any individual, corporation, limited liability company, partnership, limited
partnership, limited liability partnership, firm, joint venture, association, joint stock company,
trust or other entity or organization, including a government or political subdivision or an agency
or instrumentality thereof.

          “Securities Act” means the Securities Act of 1933, as amended.

          1.2. Certain Interpretations. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference to any law, rule or
regulation herein shall be construed as referring to any amendment or modification of such law,
rule or regulation, (c) any reference herein to any Person shall be construed to include such
Person’s permitted successors and assigns, (d) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Note in its entirety and not to any
particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement, except as otherwise expressly provided, and (f) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and contract rights.

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     2. Repayment.

          2.1. Principal. Unless earlier paid, converted or accelerated in accordance with the
provisions hereof, the entire outstanding Principal shall be due and payable on the Maturity Date.
Promptly following the payment in full of this Note, the Holder shall surrender this Note to the
Company for cancellation.

          2.2. Interest. Interest on the unpaid Principal (“Interest”) during the period from
the Issue Date through the Maturity Date, shall accrue at a rate of seven and one-half percent
(7.5%) per annum, non-compounding. Interest shall be computed on the basis of a 365-day year
applied to actual days elapsed. Unless the Interest on this Note is earlier paid, converted or
accelerated in accordance with the provisions hereof, all Interest then accrued and unpaid shall be
due and payable in cash on the Maturity Date (concurrently with the payment of Principal as
provided in Section 2.1).

          2.3. Location and Extension of Time for Repayments. All payments (including any
prepayments) of Principal, Interest and other amounts due and payable by the Company pursuant to
this Note shall be paid to the Holder at such Holder’s address for notice pursuant to Section 7.8.
If the outstanding Principal and Interest become due and payable on any day other than a Business
Day, the payment date thereof (including, without limitation, the Maturity Date) shall be
automatically extended to the next succeeding Business Day, and to such payable amounts shall
automatically be added the Interest which shall have accrued during such extension period at the
rate per annum herein specified.

     3. Prepayments.

          3.1. Optional Prepayment. Outstanding amounts under this Note may be prepaid, in
whole or in part, at any time at the option of the Company upon at least thirty days’ prior written
notice to the Holder (a “Prepayment Notice”), which Prepayment Notice shall set forth the amount of
Principal and Interest to be prepaid by the Company and the date thereof; provided, that, such
prepayment is made substantially simultaneously and pari passu with prepayment of the other
Investor Notes, in each case, as provided in Section 3.2.

          3.2. Application of Prepayments. Prepayments made by the Company pursuant to this
Section 3 shall be applied as follows:

     (i) First, to repayment of accrued and unpaid interest on the Investor Notes, pro rata
based on each Investor’s share of the aggregate amount of accrued interest then owed to the
Investors under all Investor Notes; and

     (iii) Second, to repayment of the unpaid principal under the Investor Notes, pro rata
based on each Investor’s share of the aggregate principal amount then owed to the Investors
under all Investor Notes.

          3.4. No Premiums, Penalties or Consent. No premium or penalty shall be payable, and
no consent of the Holder or the other Investors shall be required, in connection with

-3-

 

any prepayment of this Note or other Investor Notes.

     4. Events of Default.

          If one or more of the following events shall have occurred and be continuing (each, an “Event
of Default”):

          (a) the Company shall fail to pay within ten (10) days of when due any principal of, or
accrued interest on, this Note or any of the other Investor Notes;

          (b) the Company shall consummate the sale of all or substantially all of its assets, or
liquidate, dissolve or wind up;

          (c) the Company shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall take any corporate action to authorize any of the foregoing;
or

          (d) an involuntary case or other proceeding shall be commenced against the Company seeking
liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed for a period of
sixty (60) days; or an order for relief shall be entered against the Company under the federal
bankruptcy laws as now or hereafter in effect.

then, and in each and every such Event of Default, the Holder may, by written notice to the
Company, declare this Note to be, and this Note shall thereupon become, immediately due and payable
in full without presentment, demand, protest or other notice of any kind, all of which are hereby
waived by the Company; provided, however, that in the case of any of the Events of Default
specified in clauses (c) or (d) above, without any notice to the Company or any other act by the
Holder or the other Investors, this Note shall become immediately due and payable in full without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Company.

     5. Conversion.

          5.1. Conversion. At the option of the Holder, exercised in accordance with
this Section 5, at any time or from time to time prior to the Maturity Date, all or any portion of
the outstanding Principal and Interest shall be converted into a number of shares of Common Stock equal to the quotient obtained by dividing (i) the aggregate Principal and Interest then

-4-

 

outstanding by (ii) the Conversion Price. Notwithstanding anything herein to the contrary, Holder
shall have the right to exercise its conversion rights hereunder after receipt of a Prepayment
Notice and on or prior to the date of any such prepayment by the Company in accordance with such
Prepayment Notice.

          5.2. Adjustment of Conversion Price. (a) In case the Company shall at any time issue
shares of Common Stock for no consideration by way of dividend or other distribution on the
outstanding Common Stock of the Company or subdivide or combine the outstanding shares of Common
Stock of the Company, the Conversion Price shall forthwith be proportionately decreased in the case
of such dividend, distribution or subdivision, or increased in the case of combination and, in
either case, rounded up or down to the nearest one cent. An adjustment made pursuant to this
Section 5.2 shall become effective when such dividend, distribution, subdivision or combination, as
the case may be, is actually made or becomes effective.

          (b) No adjustment in the Conversion Price or in the number of shares of Common Stock issuable
upon conversion pursuant to Section 5.1 shall be made by reason of the issuance in exchange for
cash, property or services of shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, Common Stock, or carrying the right to purchase any of the
foregoing.

          (c) In case of any reorganization, recapitalization or reclassification of the Company or the
outstanding Common Stock or in the case of any consolidation or merger of the Company with another
entity as a result of which the Company is not the surviving entity, or in the case of any sale of
all, or substantially all, of its property, the Holder shall instead thereafter have the right
pursuant to Section 5.1 to convert the outstanding Principal and Interest under this Note into the
kind and amount of shares of stock or other securities or property receivable upon such
reorganization, reclassification, consolidation, merger or sale by a holder of the number of shares
of Common Stock which the Holder would have had the right to convert this Note into immediately
prior to such reorganization, reclassification, consolidation, merger or sale, at a price equal to
the Conversion Price then in effect pertaining to this Note (the kind, amount and price of such
stock or other securities or property to be subject to subsequent adjustment as provided in this
Section 5.2). Notwithstanding anything contained herein to the contrary, no adjustment of the
Conversion Price shall be made by reason of the issuance of Common Stock or other securities
pursuant to the acquisition by the Company of all or substantially all of the stock, other
securities or property of any other entity.

          (d) Irrespective of any adjustments in the Conversion Price, this Note and any replacement
notes theretofore or thereafter issued may continue to express the same price and number and kind
of shares as are stated in this Note.

          5.3. Mechanics of Conversion. If the Holder determines to convert all or any portion
of this Note pursuant to Section 5.1, the Holder shall (i) notify the Company, in writing, at least
three (3) Business Days prior to the contemplated date, of the Holder’s election to convert all or
any portion of this Note, and (ii) surrender this Note for cancellation, duly
endorsed, at the office of the Company, or at such other place designated by the Company. Such

-5-

 

conversion shall be deemed to have been made immediately prior to the close of business on the
date of the surrender of this Note as provided in the immediately preceding sentence.

          5.4. Issuance of Certificates; Issuance Tax. Promptly upon conversion of any
outstanding Principal and Interest, the Company shall issue to the Holder certificates representing
the number of shares of Common Stock into which such Principal and Interest, have been converted.
Upon conversion of an amount less than the total outstanding Principal and Interest then, subject
to Section 5.5, the Company shall issue to the Holder a duly authorized, validly issued replacement
note evidencing the portion of the outstanding Principal and Interest that was not so converted.
The issuance of certificates for Conversion Securities or a replacement note shall be made without
charge to the Holder for any issuance tax in respect thereof, if any, other than taxes in
connection with the issuance of a certificate for Conversion Securities in the name of any Person
other than the Holder.

          5.5. No Fractional Shares; Release of Obligations under Note. No fractional
Conversion Securities shall be issued upon conversion of the outstanding Principal and Interest
under this Note; rather, the Company shall round the number of Conversion Securities to be issued
to the nearest whole number. Upon conversion or payment in full of the outstanding Principal and
Interest and any other amounts due and payable under this Note and the issuance of any securities
or other property issuable in connection with the conversion hereof, the Company shall be forever
released from all of its obligations, undertakings and liabilities under this Note.

     6. Replacement of Note.

          Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Note, and in case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (with or without requirement of a surety bond in the Company’s sole discretion),
and upon reimbursement to the Company of all reasonable expenses incidental thereto, and (if
mutilated) upon surrender and cancellation of this Note, the Company shall make and deliver to the
Holder a new promissory note of like tenor in lieu of this Note. Any replacement promissory note
made and delivered in accordance with this Section 6 shall be dated as of the date hereof.

     7. Miscellaneous.

          7.1. Survival. All agreements and covenants contained in this Note shall survive the
execution hereof and shall remain in full force and effect until the earlier to occur of (i) the
payment in full of all outstanding Principal and Interest, and any other amounts due and payable,
under this Note, and (ii) the conversion of all outstanding Principal and Interest under this Note,
if applicable, into Conversion Securities in accordance with Section 5.

          7.2. Assignment. The Holder may not assign or otherwise dispose of this Note or the
rights and obligations hereunder (including by operation of law) without the prior written consent
of the Company. Notwithstanding anything to the contrary in the foregoing, this Note may not be
assigned or otherwise disposed of by the Holder unless (i) registered under the Securities Act and applicable state securities laws or (ii) the Company receives an opinion of

-6-

 

counsel to the proposed transferor in form and substance satisfactory to the Company, to the effect
that such proposed assignment or other disposition is exempt from the registration requirements of
the Securities Act and applicable state securities laws. Any instrument purporting to make an
assignment or other disposition in violation of this Section 7.2 shall be void.

          7.3. Benefits of Note. The terms and provisions of this Note shall be binding upon
the successors, assigns, heirs, executors and administrators of the Company and the Holder and
shall inure to the benefit of, and be enforceable by, each Person who shall be a registered holder
of this Note from time to time. The Holder shall have no rights as a member of the Company solely
by virtue of the ownership of this Note.

          7.4. Severability. In case any provision of this Note shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

          7.5. Further Assurances. The Holder agrees to execute such other documents,
instruments, agreements and consents, and take such other actions as may be reasonably requested by
the Company hereto to effectuate the purposes of this Note.

          7.6. Amendment and Waiver. The terms and provisions of this Note may only be
modified, amended or waived in writing signed by the Company and the Holder. All modifications,
amendments, waivers and consents shall be effective only in the specific instance for the purpose
for which given.

          7.7. Delays or Omissions. No delay by the Holder or the Holder’s agents in exercising
any powers or rights hereunder shall operate as a waiver of such power or right, nor shall any
single or partial exercise of any power or right preclude other or further exercise thereof, or the
exercise of any other power or right hereunder or otherwise.

          7.8. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b)
when sent by confirmed facsimile transmission if sent during normal business hours of the
recipient, if not, then on the next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent as follows:

	 	 	 
	If to the Company:

	 	Claimsnet.com Inc.
	 

	 	14860 Montfort Drive, Suite 250 
	 

	 	Dallas, Texas 75254 
	 

	 	Attention: Chief Executive Officer
	 

	 	Facsimile: (214) 458-1737 
	 
	 	 
	With a copy to:

	 	Reitler Brown & Rosenblatt LLC
	 

	 	800 Third Avenue, 21st Floor

-7-

 

	 	 	 
	 

	 	New York, New York 10022 
	 

	 	Attention: John F. Watkins, Esq.
	 

	 	Facsimile: (212) 371-5500 
	 
	 	 
	If to Holder:

	 	Elmira United Corporation
	 

	 	53rd Street
	 

	 	Urbanizacion Obarrio
	 

	 	Swiss Tower, 16th Floor
	 

	 	Panama City, Republic of Panama
	 

	 	Attention: Hans Schellenberg

or, to such other address or facsimile number as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith.

          7.9. Titles and Subtitles. The titles of the sections and subsections of this Note
are for convenience of reference only and are not to be considered in construing this Note.

          7.90. Governing Law. This Note shall be construed in accordance with, and governed
by, the laws of the State of Delaware (without giving effect to conflict of laws principles).

          7.11. Consent to Exclusive Jurisdiction and Service of Process. The Company and the
Holder each hereby irrevocably and unconditionally submits to the jurisdiction of the courts of the
State of Texas and of the Federal courts sitting in the State of Texas in any action or proceeding
directly or indirectly arising out of or relating to this Note or the transactions contemplated
hereby (whether based in contract, tort, equity or any other theory). The Company and the Holder
each agrees that all actions or proceedings arising out of or relating to this Note must be
litigated exclusively in any such court that sits in the County of Dallas, and accordingly, each
party irrevocably waives any objection which he or it may now or hereafter have to the laying of
the venue of any such action or proceeding in any such court. The Company and the Holder each
further irrevocably consents to service of process in the manner provided for notices in Section
7.8. Nothing in this Note will affect the right of the Company or the Holder to serve process in
any other manner permitted by law.

[Signature Page Follows]

-8-

 

     In Witness Whereof, the Company has caused its duly authorized representative to
execute this Note, and the Company has caused this Note to be issued, each as of the date first set
forth above.

	 	 	 	 	 
	 	Claimsnet.com inc.

 	 
	 	By:  	 	 
	 	 	Name:  	Don Crosbie 	 
	 	 	Title:  	CEO 	 
	 

Signature Page — Unsecured Convertible Promissory Note

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