Document:

ex1021.htm

EXHIBIT 10.21

 

	
Dated                      1st May             2009

	
 

 

 

WDX Organisation Limited

and

Flex Fuels Energy Inc

 

 

 

	
 

 

 

Loan Agreement

 

	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

37-41 Bedford Row

LONDON

WC1R 4JH

t + 44 (0)20 7242 3191

f + 44 (0)20 7197 8010

DX 177 Chancery Lane

 

 

 

 

 

 

 

  

1

  

 

 

Contents

 

	
1.

	
Definitions and interpretations

	
1

	 	 	 
	
2.

	
Facility

	
4

	 	 	 
	
3.

	
Drawdown

	
5

	 	 	 
	
4.

	
Interest

	
5

	 	 	 
	
5.

	
Security

	
6

	 	 	 
	
6.

	
Repayment and Prepayment

	
6

	 	 	 
	
7.

	
External Factors

	
7

	 	 	 
	
8.

	
Warranties

	
7

	 	 	 
	
9.

	
Covenants

	
9

	 	 	 
	
10.

	
Events of Default

	
9

	 	 	 
	
11.

	
Indemnities

	
10

	 	 	 
	
12.

	
Payments

	
11

	 	 	 
	
13.

	
Confidentiality

	
11

	 	 	 
	
14.

	
Assignment

	
11

	 	 	 
	
15.

	
Severance

	
12

	 	 	 
	
16.

	
Variation, Delays and Waiver

	
12

	 	 	 
	
17.

	
Whole Agreement

	
12

	 	 	 
	
18.

	
Notices

	
12

	 	 	 
	
19.

	
Counterparts

	
13

	 	 	 
	
20.

	
Governing Law and Jurisdiction

	
14

	 	 	 
	
21.

	
Third Party Rights

	
14

 

  

2

  

 

 

	
Schedule 1 

	
- Conditions Precedent

	15
	 	 	 
	
Schedule 2 

	
- Drawdown Notice

	16
	 	 	 
	
Schedule 3 

	
- Business Plan

	17

 

 

 

  

3

  

 

Loan Agreement

 

 

Dated      1st May                          2009

 

 

Between

 

	
(1)  

	
WDX Organisation Limited incorporated and registered in England and Wales with company number 06584607 whose registered office is at 83 Askew Crescent, Shepherds Bush, London  W12 9DW, United Kingdom (the Borrower); and

 

	
(2)  

	
Flex Fuels Energy, Inc. a Nevada Corporation (IRS Employer Identification No -20-5242826) having a principal office at Oceana House, 34-39 Commercial Road, Southampton, Hampshire  SO15 1GA, United Kingdom and whose registered agent in Nevada is CSC Services of Nevada Inc., SO2 East John Street, Carson City NV89706 (the Lender).

 

Recitals

 

	
(A)  

	
The Borrower wishes to produce, market and sell the Product.

 

	
(B)  

	
The Lender has agreed to make available to the Borrower a term loan  for the purpose of developing, marketing and selling the Product in accordance with the Business Plan, on the terms and subject to the conditions of this Agreement.

 

	
(C)  

	
In consideration for the loan, the Borrower will issue to the Lender the Subscription Shares and will grant to the Lender a call option to subscribe for the Call Option Shares subject to certain conditions, in each case upon the terms and subject to the conditions of the Investment Agreement.

 

	
(D)  

	
Simultaneously with the execution of this Agreement the parties will enter into the Option and Funding Agreement pursuant to which the Borrower will grant to the Lender an option to make available to the Borrower further funding pursuant to its terms.  If such option is exercised by the Lender, the Borrower will issue to the Lender further shares in the share capital of the Borrower on the terms and subject to the conditions of the Option and Funding Agreement.

 

 

Operative Provisions

 

 

	
1.  

	
Definitions and interpretations

 

	
1.1  

	
In this Agreement, except where a different interpretation is necessary in the context, the following expressions shall have the following meanings:

 

	
Articles

	
as such expression is defined in the Investment Agreement;

 

	
Business Day

	
a day (other than a Saturday) on which banks are open for business in London;

 

	
Business Plan

	
the business plan of the Company in the agreed form a copy of which is attached as Schedule 3 to this Agreement;

 

	
Call Option Shares

	
as such expression is defined in the Investment Agreement;

 

 

 

  

4

  

 

 

	
Completion

	
as such expression is defined in the Investment Agreement;

 

	
Completion Date

	
as such expression is defined in the Investment Agreement;

 

	
Debenture

	
the debenture in the agreed form to be granted by the Borrower in favour of the Lender dated on or about the date of this Agreement;

 

	
Drawdown Notice

	
the notice substantially in the form set out in Schedule 2;

 

	
Encumbrance

	
any mortgage, charge (fixed or floating), pledge, hypothecation or lien and any other arrangement or interest (whether by way of assignment, trust, title retention or otherwise) which has the effect of creating security or payment priority;

 

	
Event of Default

	
any one of the events specified in Clause 10.1 or any event which would, with the expiry of a grace period, the giving of notice, the satisfying of any conditions, or any combination of the foregoing constitute an Event of Default;

 

	
Facility

	
the facility available to the Borrower pursuant to Clause 2.1;

 

	
Finance Documents

	
each of the following documents:

(a) this Agreement;

 

(b) the Debenture;

 

(c) the Option and Funding Agreement; and

 

(d) any other document designated as such by the Lender and the Borrower;

 

	
Founders

	
the parties described as such in the Investment Agreement;

 

	
Free Cash

	
means such cash comprised in the current assets of the Borrower from time to time generated from profitable operations of the Borrower as is available for use by the Borrower after provision for all applicable taxes have been made in excess of that required to service the Loan and after provision has been made for the budgeted cash flow requirements of the Borrower as determined by reference to the Business Plan;

 

	  	  
	
Indebtedness

	
any obligation for the payment or repayment of money, whether actual or contingent, present or future, incurred as principal or as surety;

 

 

 

 

  

5

  

 

 

 

	
Investment Agreement

	
the investment agreement relating to the Borrower in the agreed form between the Founders (1); the Lender (2); and the Borrower;

 

	
IP Assignment

	
as such expression is defined in the Investment Agreement;

 

	
Lender’ Solicitors

	
Teacher Stern LLP of 37-41 Bedford Row, London WC1R 4JH;

 

	
Loan

	
the aggregate amount advanced to the Borrower by the Lender under this Agreement and not repaid;

 

	
Month End Date

	
the last Business Day of each calendar month;

 

	
Option and Funding Agreement

	
as such expression is defined in the Investment Agreement;

 

	
Product

	
derivative product, to be know as “Wocu” comprising a derivative currency quotation formed from a basket of real-time currency pair quotations weighted by national output;

 

	
Repayment Date

	
the date upon which the Loan together with all interest accrued thereon is repaid in full in accordance with the terms of this Agreement whether as part of a refinance or otherwise;

 

	
Service Agreements

	
as such expression is defined in the Investment Agreement;

 

	
Subscription Shares

	
as such expression is defined in the Investment Agreement;

 

	
Tax

	
any form of taxation, levy, duty, charge, contribution or impost of whatever nature (including any applicable fine, penalty, surcharge or interest);

 

	
Tax Deduction

	
a deduction or withholding for or on account of Tax from any payment due from the Borrower to the Lender under this Agreement;

 

 

  

6

  

 

 

 

	
Transaction Document

	
each of the following documents:

the Finance Documents;

the Investment Agreement;

the IP Assignment;

the Option and Funding Agreement;

the Service Agreements;

the Articles; and

any other document designated as such by the Lender and the Borrower;

 

	
Warranties

	
the warranties, representations and undertakings given pursuant to Clause 8, and references to a particular Warranty shall be construed accordingly.

	
1.2  

	
Clause, Schedule and paragraph headings shall not affect the interpretation of this Agreement.

 

	
1.3  

	
A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality).

 

	
1.4  

	
The Schedules form part of this Agreement and shall have effect as if set out in full in the body of this Agreement.  Any reference to this Agreement shall include the Schedules.

 

	
1.5  

	
A reference to a company shall include any company, corporation or other body corporate, wherever and however incorporated or established.

 

	
1.6  

	
Words in the singular shall include the plural and vice versa.

 

	
1.7  

	
A reference to one gender shall include a reference to the other genders.

 

	
1.8  

	
A reference to a statute, statutory provision or subordinated legislation is a reference to it as it is in force from time to time, taking account of any amendment or re-enactment and includes any statute, statutory provision or subordinate legislation which it amends or re-enacts; provided that, as between the parties, no such amendment or re-enactment shall apply for the purposes of this Agreement to the extent that it would impose any new or extended obligation, liability or restriction on, or otherwise adversely affect the rights of, any party.

 

	
1.9  

	
A reference to writing or written includes faxes but not e-mail.

 

	
1.10  

	
Documents in agreed form are documents in the form agreed by the parties and initialled by or on behalf of them for identification.

 

	
1.11  

	
A reference to a document is a reference to that document as varied or novated (in each case, other than in breach of this Agreement) at any time.

 

	
1.12  

	
References to Clauses and Schedules are to the Clauses and schedules of this Agreement; references to paragraphs are to paragraphs of the relevant Schedule.

 

 

  

7

  

 

 

	
2.  

	
Facility

 

	
2.1  

	
Subject to the terms of this Agreement, including in particular but without limitation to Clause 2.2, the Lender agrees to make available to the Borrower a term loan facility of £150,000 (one hundred and fifty thousand pounds sterling).  In making the loan, the Lender is relying on the Warranties.

 

	
2.2  

	
The Borrower shall apply all amounts borrowed by it under this Agreement for the purpose of financing the development, marketing and sale of the Product in accordance with the Business Plan and to reimburse the Founders for such costs as they have properly and reasonably incurred in relation to the Borrower as are approved by the Lender and generally upon the terms and subject to the conditions of this Agreement.

 

	
2.3  

	
The Lender shall not be obliged to monitor or verify whether the Loan is used in accordance with Clause 2.2.

 

 

	
3.  

	
Drawdown

 

Conditions Precedent

 

	
3.1  

	
The obligations of the Lender to make the Facility available to the Borrower under this Agreement shall only arise immediately after:

 

	
3.1.1  

	
the Lender confirms to the Borrower that it has received those items set out in Schedule 1 in form and substance acceptable to it;

 

	
3.1.2  

	
the Borrower confirms to the Lender that no Event of Default has occurred and is continuing or would result from the proposed drawdown; and

 

	
3.1.3  

	
the Borrower confirms to the Lender that each of the Warranties is true and accurate in all material respects on the date of the drawdown.

 

Mechanics

 

	
3.2  

	
Subject to Clause 3.1 the Borrower may drawdown the Facility in one amount within upon Completion:

 

	
3.3  

	
The drawdown referred to in Clause 3.2 shall be made subject to:

 

	
3.3.1  

	
the Lender having received from the Borrower no later than 11am on the Completion Date a duly executed completed and executed Drawdown Notice;

 

	
3.3.2  

	
no Event of Default has occurred and is continuing or would result from the proposed drawdown; and

 

	
3.3.3  

	
each of the Warranties is true and accurate in all respects on the date of any Drawdown Notice and the date of the drawdown.

 

	
3.4  

	
A Drawdown Notice is irrevocable and the Borrower shall be obliged to borrow in accordance with its terms.

 

	
3.5  

	
A Drawdown Notice is effective upon actual receipt by the Lender.

 

Payment

 

	
3.6  

	
The Lender shall make the Facility available to the Borrower by payment in cleared and available funds to such bank account as the Borrower may specify in writing.

 

 

 

  

8

  

 

 

	
4.  

	
Interest

 

Calculating interest

 

	
4.1  

	
Interest shall accrue from day to day on the Loan outstanding and shall be calculated at the applicable rate (as set out in Clause 4.2) compounded semi-annually from the date of this Agreement until the Repayment Date on the basis of the actual number of days elapsed in a 365-day year.  Interest shall be payable by the Borrower to the Lender on the Repayment Date.

 

Applicable rates

 

	
4.2  

	
The rate of interest applicable to the Loan is 0.5% (zero point five per cent) per annum.

 

Default Rate

 

	
4.3  

	
If the Borrower shall fail to pay any amount payable by it under this Agreement on its due date, the Borrower will on demand by the Security Trustee pay interest on such overdue amount from its due date up to its date of actual payment in full at the rate of 10% (ten per cent) per annum.

 

 

	
5.  

	
Security

 

	
5.1  

	
The Loan and all interest and other sums payable under or in respect of this Agreement shall at all times be secured by the Debenture.

 

	
5.2  

	
The Borrower shall forthwith on demand by the Lender, do and execute any and all further acts, deeds, documents and things as may from time to time be necessary or advisable to perfect the Debenture and to protect the interests of the Lender under the Debenture and under this Agreement.

 

 

	
6.  

	
Repayment and Prepayment

 

Repayment

 

	
6.1  

	
The Borrower shall repay the Loan and all accrued interest thereon to the Lender as soon as possible from its Free Cash in accordance with Clause 6.2.

 

	
6.2  

	
Within three (3) Business Days of each Month End Date during the period from the date of this Agreement until the Repayment Date the Borrower shall pay to the Lender an amount which shall be no lower than fifty percent (50%) of the Free Cash held by the Borrower as at the Month End Date unless the balance of the Loan together with all interest which has been accrued is lower than such amount, in which event the balance of the Loan and all interest accrued thereon shall be repayable in full.

 

	
6.3  

	
When making the payment (s) referred to in Clause 6.1 above, the Borrower shall simultaneously send to the Lender a statement in reasonable detail setting out the Free Cash held by the Borrower together with details of all sums received by the Borrower less all payments made by the Borrower during the calendar month ending on the Month End Date.

 

	
6.4  

	
The Lender, its directors and/or a firm of accountants nominated by the Lender (the Expert) shall be entitled at the Borrower’s expense (provided that these expenses are to be reasonable) to attend at the Borrower’s premises to examine the books, records and accounts of the Borrower for the purposes of calculating the amount of Free Cash held by the Borrower at any time.  The Borrower shall co-operate fully with the Lender, its directors, accountants or Expert to enable them to verify the level of Free Cash from time to time. In the event that there is any dispute in relation to the level of Free Cash available to the Borrower in respect of any particular Month, such dispute shall be fully and finally determined by the Expert.  When the Expert determines that the Free Cash available to the Borrower in respect of any Month End Date is higher than that calculated by the Borrower, the Borrower shall immediately pay the shortfall to the Lender by way of repayment of the Loan.

 

 

  

9

  

 

 

	
6.5  

	
In the event that the Loan together with all interest which has accrued is repaid by the Borrower on or before the date which is two (2) years from the date of this Agreement then such event shall constitute an Early Repayment for the purposes of the Investment Agreement.

 

No redrawing

 

	
6.6  

	
For the avoidance of doubt, any amounts repaid or prepaid by the Borrower under this Agreement shall not be available for redrawing by the Borrower.

 

 

	
7.  

	
External Factors

 

Withholdings

 

	
7.1  

	
The Borrower shall make all payments under or in respect of this Agreement without set-off or counter claim and free and clear of any Tax Deduction, save as may be required by law.

 

	
7.2  

	
The Borrower shall promptly on becoming aware that it must make a Tax Deduction in accordance with Clause 7.1 (or that there is any change in the rate or the basis of the Tax Deduction) notify the Lender accordingly.

 

Illegality

 

	
7.3  

	
If at any time it becomes unlawful for the Lender to allow the Loan to remain in effect or to make, fund or allow the Loan to remain outstanding then the Lender shall promptly notify the Borrower and:

 

	
7.3.1  

	
the Lender shall not be required to make the Loan; and

 

	
7.3.2  

	
if the Lender so requires by no less than twenty (20) Business Days’ notice to the Borrower, the Borrower will repay the Loan and pay to the Lender all accrued interest, fees and other sums owed by the Borrower under this Agreement all on such date as the Lender has specified in such notice.

 

 

	
8.  

	
Warranties

 

	
8.1  

	
The Borrower acknowledges that the Lender has been induced to enter into this Agreement on the basis of and in reliance upon the Warranties.

 

	
8.2  

	
The Borrower represents and warrants to the Lender that each and every warranty set out in this Clause 8.2 is, at the date of this Agreement and on the date of the drawdown, true, accurate and not misleading:

 

	
8.2.1  

	
The Borrower is duly constituted under the laws of England and Wales and has the appropriate power and authority to own property and assets and to carry on its business as now conducted;

 

	
8.2.2  

	
No step has been taken to initiate any process by or under which:

 

 

 

 

  

10

  

 

 

	
(a)  

	
the ability of the creditors of the Borrower to take action to enforce their debts is suspended, restricted or prevented; or

 

	
(b)  

	
some or all of the creditors of the Borrower accept, by agreement or under a court order, an amount less than the sums owing to them in satisfaction of those sums with a view to preventing the dissolution of the Borrower; or

 

	
(c)  

	
a person is appointed to manage the affairs, business and assets of the Borrower on behalf of the Borrower’s creditors; or

 

	
(d)  

	
the holder of a charge over the Borrower’s assets is appointed to control the business and assets of the Borrower.

 

	
8.2.3  

	
In relation to the Borrower:

 

	
(a)  

	
no administrator has been appointed;

 

	
(b)  

	
no documents have been filed with the court for the appointment of an administrator; and

 

	
(c)  

	
no notice of an intention to appoint an administrator has been given by the relevant company, its directors or by a qualifying floating charge holder (as defined in paragraph 14 of Schedule B1 to the Insolvency Act 1986).

 

	
8.2.4  

	
No distress, execution or other process has been levied on an asset of the Borrower.

 

	
8.2.5  

	
The Borrower has the appropriate power to enter into and perform its obligations under this Agreement and has taken all necessary action to authorise the execution, delivery and performance of the Finance Documents;

 

	
8.2.6  

	
The obligations expressed as being assumed by the Borrower under the Finance Documents are valid, legal and binding obligations and performance of such obligations shall not contravene:

 

	
8.2.7  

	
any law or other obligation binding upon it;

 

	
8.2.8  

	
its memorandum and articles of association; and

 

	
8.2.9  

	
any agreement or instrument binding upon it or any assets owned by it.

 

	
8.3  

	
Each approval, authorisation, consent, licence, permit or registration of or with any governmental, judicial or other authority or other third party that is required or desirable in connection with the execution, performance, validity, admissibility or enforceability of the Finance Documents have been obtained or effected and are in full force and effect.

 

	
8.4  

	
The Borrower holds, and has at all times complied with in all material respects, all authorisations required to carry on its business.

 

	
8.5  

	
Other than the Debenture, there are no Encumbrances affecting the Borrower.

 

	
8.6  

	
No Event of Default is continuing or would reasonably be expected to result from the proposed drawdown.

 

	
8.7  

	
Neither the Borrower, nor any person for whose acts or omissions it may be vicariously liable, is engaged in or subject to any:

 

 

 

 

  

11

  

 

 

	
8.7.1  

	
litigation, administrative, mediation or arbitration proceedings in relation to the Borrower, its business or any of them; or

 

	
8.7.2  

	
is the subject of any investigation, inquiry or enforcement proceedings by any governmental, administrative or regulatory body.

 

	
8.8  

	
No such proceedings, investigation or inquiry as are mentioned in Clause 8.7 have been threatened or are pending by or against the Borrower or against any such person and there are no facts or circumstances likely to give rise to any such proceedings.

 

	
8.9  

	
There are no existing or pending judgements or rulings against the Borrower which affect (or may affect) its business or any part of it and the Borrower has not given any undertakings arising from legal proceedings to a court, governmental agency or regulator or third party which could affect its business or any part of it.

 

 

	
9.  

	
Covenants

 

Positive covenants

 

	
9.1  

	
The Borrower shall:

 

	
9.1.1  

	
procure that its liabilities under this Agreement rank all times at least pari passu with all its other Indebtedness except Indebtedness preferred solely by law;

 

	
9.1.2  

	
promptly give notice to the Lender of the occurrence of any Event of Default; and

 

	
9.1.3  

	
procure that the Borrower shall utilise [cash] to repay all sums due to the Lender in accordance with this Agreement.

 

Negative covenants

 

	
9.2  

	
The Borrower shall not without the prior written consent of the Lender:

 

	
9.2.1  

	
create or permit to arise or continue any Encumbrance (except for the Debenture) affecting its property, assets or undertaking;

 

	
9.2.2  

	
incur any Indebtedness, provided that this shall not operate to exclude the Borrower from incurring any indebtedness:

 

	
(a)  

	
to the Lender;

 

	
(b)  

	
under any finance or capital leases of vehicles, plant, equipment or computers subject to approval in accordance with the Investment Agreement;

 

	
(c)  

	
to a third party in circumstances where the Lender does not exercise its Option;

 

	
9.2.3  

	
make, or permit to be made, any change in the nature of the Borrower’s business as carried on at the date of this Agreement or as anticipated by the Business Plan;

 

	
9.2.4  

	
enter into any amalgamation, demerger, merger or corporate reconstruction;

 

	
9.2.5  

	
make any loans, grant any credit (save in the ordinary course of business) or give any guarantee, indemnity or other assurance against loss to or for the benefit of any person; or

 

	
9.2.6  

	
pay a cash distribution (whether by way of dividend or other member distribution) to its shareholders unless and until the Loan and all other accrued interest is repaid to the Lender in full.

 

 

 

  

12

  

 

 

	
10.  

	
Events of Default

 

	
10.1  

	
Each of the following shall be an Event of Default:

 

	
10.1.1  

	
if the Borrower fails to make payment of any amount payable by them under a Finance Document in the manner and at the time provided unless the failure to pay is caused by administrative or technical error and payment is made within three (3) Business Days of the due date;

 

	
10.1.2  

	
if any Warranty made by the Borrower proves to have been incorrect in any material  respect as of the time made;

 

	
10.1.3  

	
if the Borrower fails to perform any of their other obligations under a Finance Document  or under the Investment Agreement and, if capable of performance, remains unperformed for a period of twenty (20) Business Days after notice from the Lender has been given to the Borrower requiring such performance;

 

	
10.1.4  

	
if any Indebtedness of the Borrower becomes due and payable or capable of being declared due and payable prior to its due date and is not paid on such date;

 

	
10.1.5  

	
if the Borrower stops payment of its debts or ceases or threatens to cease to carry on its business or is unable to pay its debts as they fall due or is deemed unable to pay its debts or enters into any arrangements with its creditors generally;

 

	
10.1.6  

	
if any step is taken to initiate any process by or under which:

 

	
(a)  

	
the ability of the creditors of the Borrower to take action to enforce their debts is suspended, restricted or prevented; or

 

	
(b)  

	
some or all of the creditors of the Borrower accept, by agreement or under a court order, an amount less than the sums owing to them in satisfaction of those sums with a view to preventing the dissolution of the Borrower; or

 

	
(c)  

	
a person is appointed to manage the affairs, business and assets of the Borrower on behalf of the Borrower’s creditors; or

 

	
(d)  

	
the holder of a charge over the Borrower’s assets is appointed to control the business and assets of the Borrower.

 

	
10.1.7  

	
if in relation to the Borrower:

 

	
(a)  

	
an administrator is appointed;

 

	
(b)  

	
a document is filed with the court for the appointment of an administrator; or

 

	
(c)  

	
a notice of an intention to appoint an administrator has been given by the relevant company, its directors or by a qualifying floating charge holder (as defined in paragraph 14 of Schedule B1 to the Insolvency Act 1986).

 

	
10.1.8  

	
if any distress, execution or other process levied on any asset of the Borrower; and

 

	
10.1.9  

	
if it becomes unlawful for the Borrower to perform all or any of its obligations under a Finance Document or under any Transaction Document.

 

Remedies

 

	
10.2  

	
If an Event of Default occurs the Lender may by notice to the Borrower:

 

 

  

13

  

 

 

	
10.2.1  

	
declare the Loan together with interest accrued, fees and other sums owed by the Borrower under this Agreement to be immediately due and payable and the same shall become so due and payable within five (5) Business Days of such notice; and/or

 

	
10.2.2  

	
take steps to enforce the Debenture (without prejudice to such rights as it may already have had to take such steps prior to the occurrence of an Event of Default).

 

 

	
11.  

	
Indemnities

 

General Costs

 

	
11.1  

	
The Borrower shall reimburse the Lender for all costs and expenses (including legal fees and any VAT chargeable on them) incurred in or in connection with the enforcement of a Finance Document.

 

Default

 

	
11.2  

	
The Borrower shall indemnify the Lender against any loss or reasonable expenses (including legal fees and any VAT chargeable on them) sustained or incurred as a consequence of any failure by the Borrower to perform any of its obligations under a Finance Document.

 

 

	
12.  

	
Payments

 

No Set-off

 

	
12.1  

	
Neither the Lender nor the Borrower shall be entitled to set off any liability owing to it against any liability owing by the other at any time.

 

Currency

 

	
12.2  

	
The Borrower’s liability under this Agreement is to discharge its payment obligations in sterling.  If at any time the Lender receives any payment referable to any of the Borrower’s liabilities under this Agreement from any source in a currency other than sterling then such payment shall take effect as a payment to the Lender of the amount in sterling which the Lender is able to purchase (after deduction of any relevant costs) with the amount of the payment so received in accordance with its usual practice.

 

Indemnity

 

	
12.3  

	
The Borrower as a separate and independent obligation shall indemnify the Lender against any shortfall under Clause 12.2.

 

Funds

 

	
12.4  

	
All payments made by the Borrower to the Lender shall be made in sterling in immediately available cleared funds on the due date (and, if such date is not a Business Day, on the next succeeding Business Day) to the credit of such account as the Lender shall have notified the Borrower.  Such payments shall be made in full without set off or counter-claim and free and clear of any deduction or withholding for or on account of any Tax (save for such deductions or withholdings as are required by law).

 

 

	
13.  

	
Confidentiality

 

	
13.1  

	
Except as provided elsewhere in this Agreement, and excluding any information which is in the public domain (other than through the wrongful disclosure of any party), or which any party is required to disclose by law or by the rules of any regulatory body to which it is subject, each party agrees to keep secret and confidential and not to use, disclose or divulge to any third party (other than a party's professional advisers) any:

 

 

  

14

  

 

 

	
13.1.1  

	
confidential information relating to the other party (including intellectual property, customer lists, reports, notes, memoranda and all other documentary records pertaining to the other party or its business affairs, finances, suppliers, customers or contractual or other arrangements); or

 

	
13.1.2  

	
information relating to the negotiation, provisions or subject matter of this Agreement (or any document referred to in it).

 

 

	
14.  

	
Assignment

 

	
14.1  

	
Subject to Clause 14.3, this Agreement is personal to the Borrower and the Borrower shall not:

 

	
14.1.1  

	
assign any of its rights under this Agreement; or

 

	
14.1.2  

	
transfer any of its obligations under this Agreement; or

 

	
14.1.3  

	
sub-contract or delegate any of its obligations under this Agreement; or

 

	
14.1.4  

	
charge or deal in any other manner with this Agreement or any of its rights or obligations.

 

	
14.2  

	
Any purported assignment, transfer, sub-contracting, delegation, charging or dealing in contravention of Clause 14.1 shall be ineffective.

 

	
14.3  

	
The Lender may assign any of its rights and/or transfer any of its obligations under this Agreement to any person to whom it transfers all of its shares in the share capital of the Borrower, provided that such share transfer is carried out in accordance with the Articles and the Investment Agreement.

 

 

	
15.  

	
Severance

 

	
15.1  

	
If any provision of this Agreement (or part of a provision) is found by any court or administrative body of competent jurisdiction to be invalid, unenforceable or illegal, the other provisions shall remain in force.

 

	
15.2  

	
If any invalid, unenforceable or illegal provision would be valid, enforceable or legal if some part of it were deleted or modified, that provision shall apply with whatever modification is necessary to give effect to the commercial intention of the parties.

 

 

	
16.  

	
Variation, Delays and Waiver

 

Variation

 

	
16.1  

	
A variation of this Agreement shall only be valid if it is in writing and signed by the Borrower and the Lender.

 

Delays

 

	
16.2  

	
The rights and powers of the Lender under this Agreement shall not be affected or impaired by any delay or omission by it in exercising them or by any previous exercise of any such rights or powers.

 

 

 

  

15

  

 

 

Waiver

 

	
16.3  

	
The rights of the Lender under this Agreement shall not be capable of being waived or varied otherwise than by an express waiver or variation in writing.

 

 

	
17.  

	
Whole Agreement

 

	
17.1  

	
This Agreement and the documents referred to or incorporated in it or executed contemporaneously with it, constitute the whole agreement between the parties relating to the subject matter of this Agreement, and supersede any previous arrangement, understanding or agreement between them relating to the subject matter that they cover.

 

	
17.2  

	
Nothing in this Clause 17 operates to exclude or limit any liability for fraud.

 

 

	
18.  

	
Notices

 

	
18.1  

	
A notice given under this Agreement:

 

	
18.1.1  

	
shall be in writing;

 

	
18.1.2  

	
shall be sent for the attention of the person, and to the address or fax number, given in this Clause 18 (or such other address, fax number or person as the relevant party may notify to the other party); and

 

	
18.1.3  

	
shall be:

 

	
(a)  

	
delivered personally; or

 

	
(b)  

	
sent by fax; or

 

	
(c)  

	
sent by pre-paid first-class post or recorded delivery.

 

	
18.2  

	
The addresses for service of notice are:

 

	
18.2.1  

	
Borrower

 

Address:                  83 Askew Crescent, Shepherds Bush, London W12 9DW

 

For the attention of:  Edward Michael King

 

Fax number:  020 7194 7501

 

	
18.2.2  

	
Lender

 

Address:  Flex Fuels Energy Inc, Oceana House, 34-39 Commercial Road, Southampton, Hampshire SO15 1GA

 

For the attention of:  The Chief Executive Officer

 

Fax number:  +44 (0) 29 2050 4001

 

	
18.3  

	
A notice is deemed to have been received:

 

	
18.3.1  

	
if delivered personally, at the time of delivery; or

 

	
18.3.2  

	
in the case of fax, at the time of transmission; or

 

	
18.3.3  

	
in the case of pre-paid first-class post or recorded delivery, 48 hours from the date of posting.

 

 

  

16

  

 

 

	
18.3.4  

	
provided always that if deemed receipt under the previous paragraphs of this Clause 18.3 is not within business hours (meaning 9.00 am to 5.30 pm Monday to Friday on a day that is a Business Day), then such receipt shall be deemed to have occurred when business next starts.

 

	
18.4  

	
To prove service, it is sufficient to prove that the notice was transmitted by fax to the fax number of the party or, in the case of post, that the envelope containing the notice was properly addressed and posted.

 

 

	
19.  

	
Counterparts

 

This Agreement may be executed in any number of counterparts, each of which is an original and which, when executed shall be an original and which together shall have the same effect as if each party had executed the same document.

 

 

	
20.  

	
Governing Law and Jurisdiction

 

	
20.1  

	
This Agreement and any dispute or claim arising out of or in connection with it or its subject matter (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales.

 

	
20.2  

	
The parties irrevocably agree that the courts of England and Wales shall have non-exclusive jurisdiction to settle any dispute or claim that arises out of or in connection with this Agreement or its subject matter (including non-contractual disputes or claims).

 

 

	
21.  

	
Third Party Rights

 

	
21.1  

	
This Agreement does not confer any rights on any person that is not a party to this Agreement pursuant to the Contracts (Rights of Third Parties) Act 1999.

 

 

 

  

17

  

 

 

As Witness this Deed has been duly executed as a deed and delivered the day and year first above written.

	
Executed as a Deed and Delivered by

	
)

	
/s/ Edward Michael King

	WDX Organisation Limited	
)

	Edward Michael King  

Director

	 	 	 
	  	  	  
	
Executed as a Deed and Delivered by

	
)

	
/s/ Thomas Barr

	Flex Fuels Energy Inc	)	Thomas Barr 
	 	 	Director

 

 

  

18

  

 

Schedule 1 - Conditions Precedent

 

	
1  

	
Copies, certified as true, complete and up to date by the Borrower’s professional advisers of the following:

 

	
1.1  

	
a file copy of the certificate of incorporation of the Borrower;

 

	
1.2  

	
a resolution of the Borrower approving its entry into and performance of its obligations under the Finance Documents and giving details of its authorised signatures, together with their specimen signatures;

 

	
1.3  

	
the register of charges of the Borrower;

 

	
1.4  

	
the Investment Agreement, the IP Assignment, the Option and Funding Agreement and the Service Agreements in each case duly executed by the parties to each agreement.

 

	
2  

	
The Debenture duly executed by the Borrower.

 

 

 

 

  

19

  

 

Schedule 2 – Drawdown Notice

 

 

To:         Flex Fuels Energy Inc (the Lender)

[address for service of notices]

From:     WDX Organisation Limited (the Borrower)

83 Askew Crescent

Shepherds Bush

London  W12 9DW

United Kingdom

 

Date:      [                 ] 2009

 

 

Dear Sirs

 

Loan Agreement dated [                                                                                 ] 2009 between the Borrower (1); the Lender (2) (the Loan Agreement)

 

	
1  

	
We refer to the above Loan Agreement.  Expressions defined in the Loan Agreement will have the same meaning in this notice.

 

	
2  

	
We hereby give to you notice that we wish to drawdown the sum of £150,000 (one hundred and fifty thousand pounds sterling) upon the terms and subject to the conditions contained in the Loan Agreement as follows:

 

	
2.1  

	
Payment Instructions:

 

Bank Name:                       [insert]

Bank Address:                    [insert]

Sort Code:                          [insert]

Account Number:               [insert]

Account Name:                  [insert]

	
3  

	
As at the date of this Drawdown Notice:

 

	
3.1  

	
the Warranties are true, accurate and not misleading in all material respects; and

 

	
3.2  

	
no Event of Default has occurred and is continuing or would result from the proposed drawdown.

 

 

Yours faithfully

 

 

 

Signed for and on behalf of

WDX Organisation Limited

 

 

 

  

20

  

 

 

 

Schedule 3  - Business Plan

 

 

 

 

21Exhibit 10.2

 

THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON ONE OR MORE EXEMPTIONS
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND APPLICABLE STATE SECURITIES LAW, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER TO SUCH EFFECT.

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN
THE EVENT OF A PARTIAL REDEMPTION, REPAYMENT OR CONVERSION. AS A RESULT,
FOLLOWING ANY REDEMPTION, REPAYMENT OR CONVERSION OF ANY PORTION OF THIS NOTE,
THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN
THE PRINCIPAL AMOUNT SET FORTH BELOW.

 

4.5% CONVERTIBLE NOTE

OF

WORLDHEART, INC.

 

	
  Original Principal Amount:

  	
  $1,000,000.00

  
	
  Issuance Date: 
  December 2, 2009

  	
  Salt Lake City, Utah

  

 

FOR VALUE RECEIVED,
WorldHeart, Inc., a Delaware corporation (the “Company”), hereby
promises to pay to LaunchPoint Technologies, Inc., a California
corporation (the “Holder”), the principal sum of One Million Dollars ($1,000,000.00),
together with accrued but unpaid interest thereon, payable as set forth
herein.  Interest on the unpaid principal
balance hereof shall accrue at the rate of 4.5% per annum from the date of
original issuance hereof (the “Issuance Date”) until the final maturity
date of December 2, 2014, or such earlier date by conversion, repayment or
redemption in accordance with the terms hereof. 
This Note may not be prepaid in whole or in part except as specifically
provided herein.

 

This Note
is issued pursuant to the terms and conditions of that certain Assignment
Agreement dated as of September 15, 2008, between the Holder and the
Company, as amended by that certain Amendment Agreement dated as of November 2,
2009, between the Holder and the Company (the “Assignment Agreement”).  The following is a statement of the rights of
the Holder of this Note and the terms and conditions to which this Note is
subject, and to which the Holder, by acceptance of this Note, agrees:

 

 

Section 1. Definitions.

 

For
purposes hereof, the following terms shall have the meanings ascribed to them
below:

 

“Bankruptcy
Event” means any of the following events: (a) World Heart or the Company
commences a case or proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to World Heart or the
Company; (b) there is commenced against World Heart or the Company any
such case or proceeding that is not dismissed within sixty (60) days after
commencement; (c) World Heart or the Company is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) World Heart or the Company suffers any
appointment of any trustee, custodian or the like for it or any substantial
part of its property that is not discharged or stayed within sixty (60) days; (e) World
Heart or the Company makes a general assignment for the benefit of creditors; (f) World
Heart or the Company fails to pay, or is unable to pay, its debts (excluding
those reasonably disputed in good faith by World Heart or the Company in the
case of failure to pay and for which it has reserves on its books and financial
statements) generally as they become due; (g) World Heart or the Company
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (h) World Heart or the
Company, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.

 

“Change
in Control Transaction” will be deemed to exist if (a) there occurs any
consolidation, merger, amalgamation or other business combination of World
Heart with or into any other corporation or other entity or person (whether or
not World Heart is the surviving corporation), or any other corporate
reorganization or transaction or series of related transactions in which in any
of such events the persons who are holders of the voting stock of World Heart
immediately prior to such event cease to own more than 50% of the voting stock,
or corresponding voting equity interests, of the surviving corporation or other
entity immediately after such event (including, without limitation, any “going
private” transaction under Rule 13e-3 promulgated pursuant to the Exchange
Act), (b) any person (as defined in Section 13(d) of the
Exchange Act), together with its affiliates and associates (as such terms are
defined in Rule 405 under the Securities Act), beneficially owns or is
deemed to beneficially own (as described in Rule 13d-3 under the Exchange
Act without regard to the 60-day exercise period) 50% or more of the voting
power of World Heart’s voting stock or corresponding voting securities, (c) there
is a replacement of more than one-half of the members of the Board of Directors
of World Heart which is not approved by a majority of those individuals who are
either members of the Board of Directors on the date thereof or individuals
approved by a majority of such members, or (d) in one or a series of
related transactions, there is a sale or transfer of all or substantially all
of the assets of World Heart, determined on a consolidated basis.

 

“Common
Stock” means the common stock, no par value, of World Heart.

 

“Conversion
Price” means with respect to the Common Stock as of a specified date, the
weighted average Market Price of the Common Stock, on a per share basis, for
the sixty (60) Trading Days preceding such date,  subject to adjustment as set forth herein.

 

2

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Market
Price” means with respect to the Common Stock as of a specified Trading Day: (i) the
closing price as reported on the Nasdaq Stock Market; or (ii) if the
principal trading market for the Common Stock is not the Nasdaq Stock Market,
but is another national or regional securities exchange, the closing price as
reported on such exchange; or (iii) if neither (i) nor (ii) above
are applicable, and if bid and ask prices for shares of Common Stock are
reported in the over-the-counter market by the OTC Bulletin Board (or, if not
so reported, by the Pink Sheets, LLC or any successor thereto), the average of
the high bid and low ask prices so reported. 
In the event there is no established market for the Common Stock, then
the Market Price shall be the fair market value of the Common Stock as
reasonably determined in good faith by the Board of Directors of the Company.

 

“SEC”
means the United States Securities and Exchange Commission.

 

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

 

“Trading
Day” means a day on which the New York Stock Exchange and the Nasdaq Stock
Market are open for the general trading of securities.

 

“Underlying
Shares” means the shares of Common Stock issued or issuable upon conversion of,
in lieu of cash payment of principal of, or interest on, as repayment of
principal or interest under, or otherwise pursuant to, this Note in accordance
with the terms hereof.

 

“World
Heart” means World Heart Corporation, of which the Company is a wholly owned
subsidiary.

 

Section 2. Payments of Principal and
Interest.

 

(a)           Interest. The Company shall pay
interest accruing on the outstanding principal of this Note, on each
anniversary of the Issuance Date, commencing on December 2, 2010 and
ending on December 2, 2014, by issuing, on a converted basis, fully paid
and nonassessable shares of Common Stock (the “PIK Interest”). PIK
Interest shall be paid by delivering to the Holder the number of shares of
Common Stock determined by dividing (i) the total dollar amount of
interest due on the applicable anniversary date by (ii) the applicable
Conversion Price. The Company shall not issue fractional shares of Common Stock
to which the Holder may become entitled pursuant to this subparagraph, but in
lieu thereof, the Company shall round the number of shares to be issued up to
the next whole number.

 

(b)           Principal. The Company shall pay
principal installments equal to twenty percent (20%) of the original principal
of this Note, on each anniversary of the Issuance Date, commencing on December 2,
2010 and ending on December 2, 2014, by issuing, on a converted basis,
fully paid and nonassessable shares of Common Stock. Each annual principal
installment shall be paid by delivering to the Holder the number of shares of
Common Stock determined by dividing (i) Two Hundred Thousand Dollars
($200,000) by (ii) the applicable Conversion Price. The Company shall not
issue fractional shares of Common Stock to which the Holder may 

 

3

 

become
entitled pursuant to this subparagraph, but in lieu thereof, the Company shall
round the number of shares to be issued up to the next whole number.  Any principal of this Note that is converted
into shares of Common Stock and repaid pursuant to this Section 2(b) shall
be applied to reduce the principal payable hereunder.

 

(c)           Prepayment. Notwithstanding any other provision of this Note, at any time prior to
the second anniversary of the Issuance Date, upon delivery of a written notice
to the Holder (the “Prepayment Notice”), the Company shall be entitled
to prepay in cash any of the then outstanding principal of this Note, plus any
accrued and unpaid interest thereon, at a fifteen percent (15%) discount, which
discount shall be applied against both the principal and interest portions
hereof.  The prepayment set forth in this
Section 2(c) shall be made within thirty (30) days of delivery of the
Prepayment Notice.

 

Section 3. Conversion.

 

(a)           Common Stock Issuance Upon Conversion.

 

(i)            Conversion Procedures. The Holder shall not be
required physically to surrender this Note to the Company upon the conversion
pursuant to Section 2.  The Holder
and the Company shall maintain records showing the outstanding principal so
converted and repaid and the outstanding interest so converted and paid and the
dates of such conversions, repayments and payments or shall use such other
method, reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of this Note upon each such conversion, repayment
and payment. The Holder agrees that, if the outstanding principal of this Note
is less than the original principal amount stated on the face of this Note, the
Holder will not transfer this Note at any time without first surrendering this
Note to the Company for issuance, without charge to the Holder, of a
replacement instrument that reflects the outstanding principal of this Note.
The Company will deliver such replacement instrument to the Holder as promptly
as practical, but in no event later than ten (10) Trading Days, after
surrender by the Holder.

 

(ii)           Stock Certificates. The Company will deliver
to the Holder not later than ten (10) Trading Days after a particular
conversion date, a certificate or certificates, which shall contain restrictive
legends and trading restrictions as set forth herein, for the number of shares
of Common Stock issuable upon such conversion, repayment and payment.

 

(b)           Conversion Price Adjustments.

 

(i)            Stock Dividends, Splits and
Combinations. In the event that World Heart shall (A) pay a dividend or make a
distribution to all its stockholders, in shares of Common Stock, on any class
of capital stock of World Heart or any subsidiary which is not directly or
indirectly wholly owned by World Heart, (B) split or subdivide its
outstanding Common Stock into a greater number of shares, or (C) combine
its outstanding Common Stock into a smaller number of shares; then in each such
case the applicable Conversion Price shall be adjusted so that the Holder of
this Note shall be entitled to receive the number of shares of Common Stock
that such Holder would have 

 

4

 

owned or
have been entitled to receive after the occurrence of any of the events
described above had this Note been fully converted immediately prior to the
occurrence of such event. An adjustment made pursuant to this Section 3(b)(i) shall
become effective immediately after the close of business on the record date in
the case of a dividend or distribution and shall become effective immediately
after the close of business on the effective date in the case of such
subdivision, split or combination, as the case may be.

 

(ii)           Rounding of Adjustments. No adjustment in the
Conversion Price shall be required unless the adjustment would require an
increase or decrease of at least one percent (1%) in the applicable Conversion
Price; provided, however, that
any adjustments that by reason of this Section 3(b) are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 3 or Section 2 shall
be made to the nearest cent or nearest 1/100th of a share.

 

(iii)         Notice of Adjustments. Whenever the Conversion
Price is adjusted pursuant to this Section 3(b), the Company shall
promptly deliver to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment, provided that any failure to so provide such notice
shall not affect the automatic adjustment hereunder.

 

(iv)          Notice of Certain Events.  If (A) World
Heart shall declare a dividend (or any other distribution) on its Common Stock;
(B) World Heart shall declare a special nonrecurring cash dividend on or a
tender offer for, offer to purchase or redemption of its Common Stock; (C) World
Heart shall authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights; (D) the approval of any stockholders of World Heart
shall be required in connection with any reclassification of the Common Stock,
any consolidation, amalgamation or merger to which World Heart is a party, any
sale or transfer of all or substantially all of the assets of World Heart, or
any compulsory share of exchange whereby the Common Stock is converted into
other securities, cash or property; (E) World Heart shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of World Heart; or (F) there exists an agreement to which World Heart is a
party or by which it is bound providing for a Change in Control Transaction, or
a Change in Control Transaction has occurred; then the Company shall cause to
be mailed to the Holder at its last address as it shall appear upon the books
of the Company, within five (5) business days of the date notice of such
matter to World Heart’s stockholders generally is given, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, tender offer, offer to purchase, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, tender offer,
offer to purchase, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, amalgamation, merger, sale,
transfer, share exchange or Change in Control Transaction is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other 

 

5

 

property
deliverable upon such reclassification, consolidation, amalgamation, merger,
sale, transfer, share exchange or Change in Control Transaction.

 

(c)           Reservation and Issuance of Underlying
Securities. The Company covenants that
World Heart will at all times reserve from its authorized and unissued Common
Stock a sufficient number of shares solely for the purpose of issuance upon
conversion in full of this Note.  The
Company represents, warrants and covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid, and nonassessable.

 

(d)           Charges, Taxes and Expenses.  Issuance of shares of Common Stock upon the conversion of this Note
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such shares, all of
which taxes and expenses shall be paid by the Company.

 

(e)           Cancellation. After the entire principal and any accrued but unpaid interest have been
paid in full or converted into Common Stock, this Note shall automatically be
deemed canceled and the Holder shall promptly surrender this Note to the
Company at the Company’s principal executive offices; provided, however, that the failure to
surrender this Note shall not delay or limit such cancellation.

 

(f)            Notice Procedures. Any and all notices or other communications or deliveries to be provided
by the Holder or the Company under this Note shall be in writing and delivered
personally, by facsimile, or by a nationally recognized overnight courier
service to the other party as provided in the Assignment Agreement.

 

Section 4. Defaults and Remedies.

 

(a)           Events of Default. An “Event of Default” is:  (i) a failure to issue Underlying
Shares upon and in accordance with the terms hereof, which failure continues
for ten (10) business days after the Company has received written notice
from the Holder of such failure; (ii) a failure by the Company to cure any
breach or default of this Note, which failure continues for twenty (20) days
after the Company has received written notice from the Holder of such breach or
default, other than as provided in the immediately preceding clause (i); or (iii) if
the Company or World Heart is subject to any Bankruptcy Event.

 

(b)           Remedies. If an Event of Default occurs and is continuing, the Holder may declare
all of the then outstanding principal of this Note, and any accrued and unpaid
interest thereon, to be due and payable by delivering a written notice of demand
to the Company (the “Demand Notice”), whereby the Holder’s sole and exclusive
remedy under this Note shall be the issuance, on a converted basis, of fully
paid and nonassessable shares of Common Stock as set forth in this Section 4(b).
The Company shall deliver to the Holder, no later than five (5) Trading
Days after the date of the Demand Notice, the number of shares of Common Stock
determined by dividing (i) the total principal and accrued but unpaid
interest then due and payable by (ii) the Conversion Price as of the Date
of the Demand Notice. The Company shall not issue fractional shares of Common
Stock to which the Holder may become entitled pursuant to this 

 

6

 

subparagraph,
but in lieu thereof, the Company shall round the number of shares to be issued
to the next whole number.

 

Section 5. Securities Law Compliance. By acceptance of this
Note, the Holder hereby represents, warrants and acknowledges as follows with
respect to this Note and the Underlying Shares (collectively, the “Securities”):

 

(a)           The Securities have
not been and will not be registered under the Securities Act or any applicable
state securities laws, and the sale contemplated by this Note is being made in
reliance on one or more exemptions from registration under the Securities Act
and under applicable registration exemptions from state securities laws.

 

(b)           No agency,
governmental authority, regulatory body, stock market or other entity
(including, without limitation, the SEC or any state securities commission) has
made any finding or determination as to the merit for investment of, nor have
any such agencies or governmental authorities made any recommendation or
endorsement with respect to, the Securities.

 

(c)           No information
furnished by the Company, or any of the Company’s agents or representatives,
constitutes investment, accounting, legal or tax advice, and Holder is relying
solely upon itself and its professional advisors, if any, for such advice.

 

(d)           Holder is acquiring
the Securities for its own account, for investment purposes only, and not with
a view to any resale or distribution in violation of the registration
requirements of the Securities Act; and Holder will not offer, sell or
otherwise transfer any of the Securities except under circumstances which will
not result in a violation of the Securities Act and only after all other
restrictions set forth in this Note have been satisfied.

 

(e)           Holder has been given
a reasonable opportunity to review all periodic reports filed by World Heart
with the SEC and all other documents, books and records of the Company and
World Heart pertaining to the investment represented hereby, has been supplied
with all additional information concerning the Company, World Heart and the
Securities that it has requested, has had a reasonable opportunity to ask
questions of and receive answers from the Company or its representatives
concerning such investment, and all such questions have been answered to its
full satisfaction.

 

(f)            An investment in the Securities
is speculative and subject to substantial risks.

 

(g)           Holder has not
purchased the Securities as a result of any general solicitation or general
advertising (as such terms are used in Regulation D under the Securities
Act), including advertisements, articles, press releases, notices or other
communications published in any newspaper, magazine or similar media or
broadcast over radio or television or any seminar or meeting whose attendees
have been invited by general solicitation or general advertising.

 

7

 

(h)           There are significant
restrictions and limitations on transferability of the Securities, and the
Securities may not be transferable under certain circumstances. In the event
Holder decides to offer, sell or otherwise transfer any of the Securities, it
will comply strictly with the transfer restrictions and limitations as set
forth herein.

 

(i)            Holder consents to
World Heart giving instructions to its transfer agent and/or registrar in order
to implement the restrictions and limitations on transfer as set forth herein.

 

(j)            Holder is either (i) an
“accredited investor” (as such term is used in paragraph (a) of Rule 501
of Regulation D under the Securities Act) and has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Securities and making an informed investment
decision, or (ii) an investor who either alone or together with a
purchaser representative such as its accountant, attorney, investment advisor
or similar professional, has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Securities and making an informed investment decision.

 

Section 6. Transfer Restrictions.

 

(a)           Limitation on Resales. All Underlying Shares
issued to Holder pursuant to this Note shall be subject to resale restrictions
as set forth herein.  Upon any issuance
of Underlying Shares to Holder, Holder’s right of resale with respect to such
shares shall be limited such that Holder shall be entitled to resell no more
than one-twelfth (1/12) of such shares in each of the subsequent twelve (12)
months following issuance of such Underlying Shares.  Holder’s resale rights hereunder are not
cumulative, whereby if Holder does not sell any Underlying Shares in a given
month, such fact shall not affect the number of shares that may be resold in
any subsequent month.  Notwithstanding
the foregoing, after twelve (12) months from the issuance of any Underlying
Shares to Holder, such shares shall have no contractual resale restrictions
hereunder, and may be freely resold subject to compliance with applicable
federal and state securities laws.

 

(b)           Securities
Law Restrictions.  Without
limiting any of the restrictions set forth in Section 6(a) above or
any other section hereof, if the Holder is able to transfer the Underlying
Shares in accordance herewith, the Holder shall not offer, sell or otherwise
transfer any of the Securities, directly or indirectly, unless (i) the
transfer is made to the Company; (ii) the transfer is made pursuant to an
effective Registration Statement under the Securities Act and in compliance
with applicable state securities laws; (iii) the transfer is made pursuant
to an exemption from registration under the Securities Act provided by Rule 144
thereunder and in compliance with applicable state securities laws; or (iv) the
transfer is made pursuant to another exemption from registration under the Securities
Act and in compliance with applicable state securities laws, and the Company is
provided an opinion of counsel, of recognized standing reasonably satisfactory
to the Company, confirming compliance with the foregoing.

 

8

 

(c)           Restrictive
Legends.  Upon the issuance
of the Underlying Shares to the Holder, and until such time as the same is no
longer required hereunder or under applicable requirements of the Securities
Act or applicable state securities laws, certificates representing the
Underlying Shares, and all certificates issued in exchange therefor or in
substitution thereof, shall bear legends in substantially the following form:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THE HOLDER HEREOF, BY ACCEPTING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE ISSUER, (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN
COMPLIANCE WITH APPLICABLE STATES SECURITIES LAWS, (C) IN ACCORDANCE WITH
RULE 144 UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, OR (D) IN ACCORDANCE WITH ANY OTHER EXEMPTION UNDER THE
SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS UPON
THE DELIVERY OF A LEGAL OPINION, REASONABLY SATISFACTORY TO THE ISSUER, TO THE
FOREGOING EFFECT.”

 

“THE OFFER, SALE OR OTHER TRANSFER OF THE SECURITIES REPRESENTED HEREBY
ARE ALSO RESTRICTED UNDER THE TERMS OF A 4.5% CONVERTIBLE PROMISSORY NOTE DATED
DECEMBER 2, 2009, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE
ISSUER.”

 

Section 7. General.

 

(a)           Attorneys’ Fees. The Company agrees to pay all charges and expenses, including attorneys’
fees and expenses, which may be incurred by the Holder in seeking to enforce
this Note.

 

(b)           Savings Clause. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Note will not in any way be affected or
impaired thereby.  In no event shall the amount of interest paid hereunder
exceed the maximum rate of interest on the unpaid principal balance hereof
allowable by applicable law.  If any sum is collected in excess of the
applicable maximum rate, the excess collected shall be applied to reduce the
principal debt.  If the interest actually collected hereunder is still in
excess of the applicable maximum rate, the interest rate shall be reduced so as
not to exceed the maximum allowable under law.

 

9

 

(c)           Amendment. Neither this Note nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the Company and
Holder.

 

(d)           Assignment. The Holder may not assign or transfer this Note without the prior written
consent of the Company. The Company may not assign or transfer its rights or
obligations under this Note without the prior written consent of the Holder;
provided, however, the Company may assign or transfer its rights or obligations
under this Note to any other affiliate of World Heart or in the context of any
sale of all or substantially all of the assets of the Company, any
consolidation, merger, amalgamation or other business combination of the
Company with or into another entity, or any other corporate reorganization or
similar transaction. This Note shall be binding upon the Company and its
successors and permitted assigns and shall inure to the benefit of the Holder
and its successors and permitted assigns.

 

(e)           No Waiver.  No failure on the part of the Holder to exercise, and no delay in
exercising any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Holder of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power.  Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.

 

(f)            Governing Law.  This Note will be governed
by and construed in accordance with the laws of the State of Utah without
regard to any conflicts of laws principles thereof that would otherwise require
the application of the law of any other jurisdiction.

 

(g)           Replacement Notes. This Note may be exchanged by Holder at any time and from time to time
for a Note or Notes with different denominations representing an equal
aggregate outstanding principal amount, as reasonably requested by Holder, upon
surrendering the same.  No service charge will be made for such
registration or exchange.  In the event that Holder notifies the Company
that this Note has been lost, stolen or destroyed, a replacement Note identical
in all respects to the original Note shall be issued to the Holder, without
requirement for any surety bond, provided that the Holder executes and delivers
to the Company an agreement reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection with this Note.

 

IN WITNESS WHEREOF, the
Company has caused this Note to be duly executed on the day and in the year
first above written.

 

	
   

  	
  WorldHeart, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: 

  	
   

  
	
   

  	
  Title:

  	
   

  

 

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}]]