Document:

EXHIBIT
10.83

POSITRON
CORPORATION

NOTE
PURCHASE AGREEMENT

 

THIS NOTE
PURCHASE AGREEMENT (the "Agreement") is
made as of February 28, 2005 by and between Positron Corporation, a Texas
corporation (the "Company"), and
Solaris Opportunity Fund, L.P. ("Investor"). All
numbers expressed herein as "$" or "dollars" are in United States
dollars.

 

R E C
I T A L S :

 

WHEREAS,
the Company desires to issue Secured Convertible Promissory Notes in the
aggregate principal amount of $1,000,000, subject to the terms and conditions
set forth in this Agreement.

 

WHEREAS,
the Investor desires to purchase the Secured Convertible Promissory Notes,
subject to the terms and conditions set forth in this Agreement.

 

NOW,
THEREFORE, in consideration of the respective undertakings, covenants and
agreements of the parties set forth herein, the parties hereby agree as
follows:

 

SECTION
1   PURCHASE
AND SALE OF THE NOTES.

 

1.1  Issuance
of the Notes. The
Company has authorized the issuance and sale to the Investor of, and, subject to
and in reliance upon the representations, warranties, terms and conditions of
this Agreement, the Investor the have agreed to purchase, the Company's Secured
Convertible Promissory Notes (individually, a "Note," and
collectively, the "Notes"), in
the principal amount of $1,000,000. Each Note shall be substantially in the form
set forth in Exhibit A
hereto.

 

1.2  Closing. The
Company agrees to issue and sell to the Investor, and, subject to and in
reliance upon the representations, warranties, terms and conditions of this
Agreement, the Investor agrees to purchase, the Notes for the aggregate purchase
price of $1,000,000. Such purchase and sale shall take place (a) at the initial
closing (the "First
Closing") to be
held at the offices of the Company on March 7, 2005, at 10:00 A.M. (the
"First
Closing Date"), or on
such other dates and at such times as may be mutually agreed upon; (b) at a
second closing (the "Second
Closing") to be
held at the offices of the Company on April 7, 2005, at 10:00 A.M. (the
"Second
Closing Date"), or on
such other dates and at such times as may be mutually agreed upon; (c) at a
third closing (the "Third
Closing") to be
held at the offices of the Company on May 6, 2005, at 10:00 A.M. (the
"Third
Closing Date"), or on
such other dates and at such times as may be mutually agreed upon; (d) at a
fourth closing (the "Fourth
Closing") to be
held at the offices of the Company on June 7, 2005, at 10:00 A.M. (the
"Fourth
Closing Date"), or on
such other dates and at such times as may be mutually agreed upon; (e) at a
fifth closing (the "Fifth
Closing") to be
held at the offices of the Company on July 7, 2005, at 10:00 A.M. (the
"Fifth
Closing Date"), or on
such other dates and at such times as may be mutually agreed upon; and (f) at a
sixth closing (the "Sixth
Closing") to be
held at the offices of the Company on August 5, 2005, at 10:00 A.M. (the
"Sixth
Closing Date"), or on
such other dates and at such times as may be mutually agreed upon. The First,
Second, Third, Fourth, Fifth and Sixth Closings shall be referred to
individually and collectively hereinafter as the "Closing". At the
First Closing, the Company will issue a Note, dated the First Closing Date,
payable to the order of Investor, in the principal amount of $200,000 in
exchange for cash. At the Second Closing, the Company will issue a Note, dated
the Second Closing Date, payable to the order of Investor, in the principal
amount of $200,000 in exchange for cash. At each Closing thereafter the Company
will issue a Note, dated as of the applicable Closing Date, payable to the order
of Investor, in the principal amount of $150,000 in exchange for
cash.

 

1.3  Payments
and Endorsements.
Payments of principal, interest and premium, if any, on the Notes, shall be made
directly by wire transfer or by checks duly mailed or delivered to the Investor
at address specified in the Notes without any presentment or notation of
payment, except that prior to any transfer of any Note, the holder of record
shall endorse on such Note a record of the date to which interest has been paid
and all payments made on account of principal of such Note.

 

1.4  Payment
on Non-Business Days.
Whenever any payment to be made shall be due on a day which is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest due.

 

1.5  Registration,
etc. The
Company shall maintain at its principal office a register of the Notes and shall
record therein the name and address of the registered holder of the Notes, the
address to which notices are to be sent and the address to which payments are to
be made as designated by the registered holder if other than the address of the
holder, and the particulars of all transfers, exchanges and replacements of the
Notes. No transfer of a Note shall be valid unless made on such register for the
registered holder or his executors or administrators or his or their duly
appointed attorney, upon surrender therefor for exchange as hereinafter
provided, accompanied by an instrument in writing, in form and execution
reasonably satisfactory to the Company. Each Note issued hereunder, whether
originally or upon transfer, exchange or replacement of a Note or Notes, shall
be registered on the date of execution thereof by the Company and shall be dated
the date to which interest has been paid on such Note or Notes. The registered
holder of the Note shall be that Person in whose name the Note has been so
registered by the Company. A registered holder shall be deemed the owner of a
Note for all purposes of this Agreement and, subject to the provisions hereof,
shall be entitled to the principal, premium, if any, and interest evidenced by
such Note free from all equities or rights of set-off or counterclaim among the
Company and the transferor of such registered holder or any previous registered
holder of such Note.

 

1.6  Limitations
on Transferability. The
Investor covenants that in no event will it dispose of any Note or any shares of
capital stock into which such Note is convertible unless and until Investor
shall have complied with Sections 4.7 and 4.8 hereof and (a) the
Investor shall have notified the Company of the proposed disposition and shall
have furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (b) if requested by the Company, the Investor
shall have furnished the Company with an opinion of counsel satisfactory in form
and substance to the Company and the Company's counsel to the effect that
(x) such disposition will not require registration under the Securities Act
and (y) appropriate action necessary for compliance with the Securities Act
and any applicable state, local, or foreign law has been taken.

 

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1.7  Replacement
of Notes. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note and, if requested in the case of any such loss, theft
or destruction, upon delivery of an indemnity bond or other agreement or
security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of such Note, the Company will issue
a new Note, of like tenor and amount and dated the date to which interest has
been paid, in lieu of such lost, stolen, destroyed or mutilated Note;
provided,
however, if any
Note of which an Investor, its nominee, or any of its partners or affiliates is
the registered holder is lost, stolen or destroyed, the affidavit of the
registered holder setting forth the circumstances with respect to such loss,
theft or destruction shall be accepted as satisfactory evidence thereof, and no
indemnification bond or other security shall be required as a condition to the
execution and delivery by the Company of a new Note in replacement of such lost,
stolen or destroyed Note other
than the
registered holder's written agreement to indemnify the Company.

 

1.8  Conversion
of Note. All or
any portion of the principal amounts of the Notes, may be converted at the
option of the Investor, into shares of Series E Preferred Stock (as defined
herein) at a conversion price and on such terms as are provided in the
Notes.

 

SECTION
2   DEFINITIONS.

 

For
purposes of this Agreement the following terms shall have the following
meanings:

 

2.1  "Articles" shall
mean the Company's Articles of Incorporation, as amended, as of the First
Closing, and including the Series A Statement, Series C Statement,
Series D Statement and Series E Statement thereto.

 

2.2  "Business
Day" shall
mean a day other than Saturday, Sunday or a public holiday under the laws of the
State of Texas.

 

2.3  "Commission" shall
mean the Securities and Exchange Commission.

 

2.4  "Common
Stock" shall
mean the Common Stock of the Company, par value $0.01 per share.

 

2.5  "GAAP" shall
mean United States generally accepted accounting principles.

 

2.6  "Intellectual
Property" shall
mean patents, patent applications, trademarks, service marks, mask works, trade
names, copyrights, trade secrets, information, proprietary rights and
processes.

 

2.7  "Material
Adverse Event" shall
mean any change, event or effect that is materially adverse to the general
affairs, business, operations, assets, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries taken as a whole;
provided, however, that the following shall not be taken into account in
determining a "Material
Adverse Event":
(a) any adverse change, event or effect that is directly attributable to
conditions affecting the United States economy generally unless such conditions
adversely affect the Company in a materially disproportionate manner, and
(b) any adverse change, event or effect that is directly attributable to
conditions affecting the Company's industry generally, unless such conditions
adversely affect the Company in a materially disproportionate manner.

 

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2.8  "Person" shall
mean an individual, corporation, partnership, joint venture, limited liability
company, trust, or unincorporated organization, or a government or any agency or
political subdivision thereof, or any other entity or business
form.

 

2.9  "Preferred
Stock" shall
mean the Company's Series A Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock.

 

2.10  "Registration
Rights Agreement" shall
mean the Registration Rights Agreement dated as of the First Closing by and
between the Company and the Investor in the form attached hereto as Exhibit B.

 

2.11  "Schedule of
Exceptions" shall
mean the schedule of exceptions to the representations and warranties of the
Company in Section 3. The Schedule of Exceptions is attached as
Schedule
1
hereto.

 

2.12  "Securities
Act" shall
mean the Securities Act of 1933, as amended and the rules and regulations of the
Commission promulgated thereunder.

 

2.13  "Security
Agreement" shall
mean the Security Agreement dated as of the First Closing by and between the
Company and the Investor in the Form attached hereto as Exhibit C.

 

2.14  "Series
A Preferred Stock" shall
mean the Series A Preferred Stock of the Company, par value $1.00 per
share.

 

2.15  "Series
A Statement" shall
mean the Statement of Designation Establishing Series A 8% Cumulative
Convertible Redeemable Preferred Stock of Position Corporation, filed with the
Texas Secretary of State on February 29, 1996.

 

2.16  "Series
C Preferred Stock" shall
mean the Series C Preferred Stock of the Company, par value $1.00 per
share.

 

2.17  "Series
C Statement" shall
mean the Statement of Designation Establishing Series C Preferred Stock of
Positron Corporation, filed with the Texas Secretary of State on May 21,
2004.

 

2.18  "Series
D Preferred Stock" shall
mean the Series D Preferred Stock of the Company, par value $1.00 per
share.

 

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2.19  "Series
D Statement" shall
mean the Statement of Designation Establishing Series D Preferred Stock of
Positron Corporation, filed with the Texas Secretary of State on May 21,
2004.

 

2.20  "Series
E Preferred Stock" shall
mean the Series E Preferred Stock of the Company, par value $1.00 per
share.

 

2.21  "Series
E Statement" shall
mean the Statement of Designation Establishing Series E Preferred Stock of
Positron Corporation, to be filed with the Texas Secretary of State following
the Closing. 

 

2.22  "Subsidiary" shall
mean any corporation, partnership or other entity, more than 50% of whose equity
interests (measured by virtue of voting rights) in the aggregate is owned by the
Company.

 

2.23  "Transactional
Agreements" shall
mean this Agreement, the Notes, the Security Agreement, and the Registration
Rights Agreement.

 

SECTION
3   REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

 

The
Company hereby represents and warrants to the Investor that:

 

3.1  Corporate
Organization and Authority. The
Company:

 

3.1.1  is a
corporation duly organized, validly existing, authorized to exercise all its
corporate powers, rights and privileges, and in good standing in the State of
Texas;

 

3.1.2  has the
corporate power and corporate authority to own and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted;

 

3.1.3  has made
available to the Investor or their counsel a copy of the minute books of the
Company, and said copies are true, correct, and complete and contain all
amendments and all minutes of meetings and actions taken by the shareholders and
directors of the Company through the date of this Agreement.

 

3.2  Subsidiaries. The
Company does not presently own, have any equity interest or investment in, or
control, directly or indirectly, any other corporation, partnership or entity.
The Company is not a participant in any joint venture or
partnership.

 

3.3  SEC
Filings; Financial Statements. The
Company has filed (i) its Annual Report on Form 10-K for the fiscal
year ended December 31, 2003 (the "Company
Current 10-K"), and
(ii) its Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 2004, June 30, 2004 and September 30, 2004 (the
"Company
Current 10-Qs" and,
together with the Company Current 10-K and the "Company
SEC Reports"), all
of which complied when filed in all material respects with all applicable
requirements of the Securities Act and the Exchange Act of 1934, as amended. The
audited financial statements and unaudited interim financial statements
of the Company included or incorporated by reference in such Company SEC Reports
were prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Company at the respective dates and for the
respective periods indicated (and in the case of all such financial statements
that are interim financial statements, contain all adjustments so to present
fairly). Except to the extent that information contained in any Company SEC
Report was revised or superseded by a later filed report, none of the Company
SEC Reports contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

 

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3.4  Corporate
Power. The
Company will have at the Closing Date all requisite legal and corporate power
and authority to execute and deliver the Transactional Agreements, to sell and
issue the Notes hereunder, to issue the Series E Preferred Stock upon
conversion of the Notes, to issue the Common Stock issuable upon conversion of
the Series E Preferred Stock (subject to stockholder approval as set forth
in Section 7.1 hereof), and to carry out and perform its obligations under
the terms of the Transactional Agreements.

 

3.5  Authorization. All
corporate action on the part of the Company, its officers, directors, and
stockholders necessary for the authorization, execution, delivery, and
performance of all obligations under the Transactional Agreements, and for the
authorization, issuance, and delivery of the Notes, of the Series E
Preferred Stock issuable upon conversion of the Notes (subject to filing the
Series E Statement immediately following the Closing), and of the Common Stock
(subject to stockholder approval as set forth in Section 7.1 hereof)
issuable upon conversion of the Series E Preferred Stock has been taken.
The Transactional Agreements constitute legally binding and valid obligations of
the Company enforceable in accordance with their respective terms, except to the
extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and laws concerning
equitable remedies.

 

3.6  Validity
of Shares. Upon
the filing of the Series E Statement, the Series E Preferred Stock issuable
upon conversion of the Notes will be duly and validly reserved and, assuming
such Series E Preferred Stock is issued in accordance with the Articles and
the terms of this Agreement, will be duly and validly issued (including, without
limitation, issued in compliance with applicable federal and state securities
laws) and non-assessable and will be free of any liens or encumbrances other
than any liens or encumbrances created by or imposed thereon under this
Agreement, the Notes, or the Registration Rights Agreement. Subject to
stockholder approval, as set forth in Section 7.1 hereof, the Common Stock
issuable upon conversion of the Series E Preferred Stock has been duly and
validly reserved and, assuming such Common Stock is issued in accordance with
the Articles, will be duly and validly issued (including, without limitation,
issued in compliance with applicable federal and state securities laws) and
non-assessable and will be free of any liens or encumbrances other than any
liens or encumbrances created by or imposed thereon by the holders; provided,
however, that the Series E Preferred Stock (and the Common Stock issuable
upon conversion thereof) shall be subject to restrictions on transfer under
state and/or federal securities laws. Except as set forth in the Articles and
the Notes, the Series E Preferred Stock issuable upon conversion of the
Notes and the Common Stock issuable upon conversion of the Series E
Preferred Stock are not subject to any preemptive or other similar statutory or
contractual rights and will not conflict with any provisions of any agreement or
instrument to which the Company is a party or by which it is bound.

 

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SECTION
4   REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR.

 

The
Investor represents and warrants to the Company as follows:

 

4.1  Authorization. When
executed and delivered by the Investor, and assuming execution and delivery by
the Company, the Transactional Agreements will each constitute a valid
obligation of the Investor, enforceable in accordance with its terms, except to
the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and laws concerning
equitable remedies.

 

4.2  Brokers
and Finders. The
Investor has not retained any investment banker, broker, or finder in connection
with the transactions contemplated by this Agreement.

 

4.3  Investment. This
Agreement is made with the Investor in reliance upon the Investor's
representation to the Company, which by the Investor's execution of this
Agreement the Investor hereby confirms, that the Notes (including capital stock
issuable upon conversion thereunder) to be received by the Investor will be
acquired for investment for the Investor's own account, not as a nominee or
agent, and not with a view to the sale or distribution of any part thereof, and
that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing any of the Notes (including capital
stock issuable upon conversion thereunder). By executing this Agreement, the
Investor further represents that it has no contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person, with respect to any of the Notes (including
capital stock issuable upon conversion thereunder).

 

4.4  No
Public Market. The
Investor understands that no public market now exists for the Series E
Preferred Stock and that the Company has given no assurances that a public
market will ever exist for the Series E Preferred Stock. The investor
understands that the Company's Common Stock is currently quoted by the Nasdaq
OTC Bulletin Board and that although the Company will use its best efforts to
obtain listing on the Nasdaq SmallCap Market and Toronto Street Exchange, no
assurance can be given that the Company's securities will be approved for
listing on such exchanges. 

 

4.5  Experience. The
Investor represents that: (a) it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its prospective investment in the Notes; (b) it believes it has
received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to obtain the Notes; (c) it
has had the opportunity to discuss the Company's business, management, and
financial affairs with the Company's management; (d) it understands the economic
implications of the transactions contemplated by this Agreement and confronting
the Company; (e) it has had the full opportunity to seek advice of counsel and
any other appropriate advice with respect to the transactions contemplated by
this Agreement; (f) it has the ability to bear the economic risks of its
prospective investment; and (g) it is able, without materially impairing
its financial condition, to hold the Notes for an indefinite period of time and
to suffer a complete loss on its investment.

 

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4.6  Accredited
Investor. The
Investor presently qualifies and will as of the Closing qualify as an
"accredited investor" within the meaning of Regulation D of the rules and
regulations promulgated under the Securities Act.

 

4.7  Limitations
on Transferability.
The
Investor covenants that in no event will it dispose of the Notes (other than
pursuant to Rule 144 promulgated by Securities and Exchange Commission under the
Securities Act ("Rule
144") or any
similar or analogous rule) unless and until (a) the Investor shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the proposed
disposition, and (b) if requested by the Company, the Investor shall have
furnished the Company with an opinion of counsel satisfactory in form and
substance to the Company and the Company's counsel to the effect that
(x) such disposition will not require registration under the Securities Act
and (y) appropriate action necessary for compliance with the Securities Act
and any applicable state, local, or foreign law has been taken. Notwithstanding
the limitations set forth in the foregoing sentence, if the Investor is a
partnership or limited liability company it may transfer Notes (or portions
thereof) to its constituent partners or a retired partner of such partnership
who retires after the date hereof, or its constituent members or retired members
of such limited liability company who retires after the date hereof, as the case
may be, or to the estate of any such partner, member or retired partner or
member or transfer by gift, will, or intestate succession to any such partner's
or member's spouse or lineal descendants or ancestors without the necessity of
registration or opinion of counsel if the transferee agrees in writing to be
subject to the terms of this Agreement to the same extent if such transferee
were an Investor; provided, however, that Investor hereby covenants not to
effect such transfer if such transfer either would invalidate the securities
laws exemptions pursuant to which the Notes were originally offered and sold or
would itself require registration and/or qualification under the Securities Act
or applicable state securities laws. Each Note transferred as above provided
shall bear the appropriate restrictive legend set forth in Section 5 below,
except that such Note shall not bear such legend if the transfer was made in
compliance with subsection (k) of Rule 144 or if the opinion of counsel
referred to above is to the further effect that such legend is not required in
order to establish compliance with any provisions of the Securities
Act.

 

4.8  Ownership
Change Under Section 382 of the Internal Revenue Code; Special Restrictions Upon
Transfer.

 

4.8.1  Special
Restrictions Upon Transfer. The
following restrictions shall apply to the transfer of shares of Common Stock,
issuable directly or indirectly upon the conversion of any Note.

 

4.8.2  Definitions. For
purposes of this Section 4.8 the following terms shall have the following
meanings:

 

"Board" means
the Company's Board of Directors.

 

-8-

"Common
Stock" shall
mean the Common Stock of the Company, par value $0.01 per share.

 

"Section
382" means
Section 382 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.

 

"Special
Board Approval" shall
mean the approval by the Board of Directors of the Company acting in accordance
with applicable law.

 

4.8.3  Purported
Transfers Not Effective. Unless
such transfer shall have been preceded by Special Board Approval, any purported
transfer of Common Stock into which any Note is directly or indirectly
convertible in excess of the number of shares that can be transferred without
increasing the transferee's ownership interest percentage above 4.5% is not
effective to transfer ownership of such excess shares (the "Prohibited
Shares") from
the transferor (the "Initial
Transferor") to the
purported acquiror (the "Purported
Acquiror"). For
this purpose a transferee's ownership interest percentage shall be calculated
pursuant to Section 382. By way of explanation, a transferees ownership interest
is generally the sum of the transferee's direct ownership interest percentage as
calculated pursuant to Section 382 and the transferee's indirect ownership
interest as calculated pursuant to Section 382, with adjustments made to include
ownership interests that, under ordinary circumstances, are not included in
measuring ownership interests. In the event a Initial Transferor seeks a Special
Board Approval, to the extent that the transaction reflected in the proposed
request for a Special Board Approval does not result in an "ownership shift" in
excess of 40% and does not result in an "ownership change" as those terms are
used in Section 382, the approval of the Board will not be unreasonably
withheld. Moreover, to the extent that the proceeds of any "ownership shift" of
up to 40% results directly or indirectly in the receipt of cash by the Company,
the transaction will be presumed to be in the interest of the Company unless it
results in an "ownership change".

 

4.8.4  Transfer
to Agent of Prohibited Shares; Sale by Agent; Payment of
Proceeds. On
demand by the Company (which demand must be made within 30 days of the time
Company learns of the transfer of Prohibited Shares), a Purported Acquiror must
transfer any certificate or other evidence of ownership of the Prohibited Shares
within the Purported Acquiror's possession or control, together with any
dividends or other distributions that were received by the Purported Acquiror
from Company with respect to the Prohibited Shares ("Prohibited
Distributions"), to an
agent designated by Company (the "Agent"). The
Agent will sell the Prohibited Shares in an arms-length transaction (over a
public exchange, if reasonable possible), and the Purported Acquiror will
receive an amount of sales proceeds not in excess of the price paid or
consideration surrendered by the Purported Acquiror for the Prohibited Shares
(or the fair market value of the Prohibited Shares at the time of an attempted
transfer to the Purported Acquiror by gift, inheritance, or a similar transfer).
If the Purported Acquiror has resold the Prohibited Shares prior to receiving
the Company's demand to surrender the Prohibited Shares to the Agent, the
Purported Acquiror shall be deemed to have sold the Prohibited Shares as agent
for the Initial Transferor and shall be required to transfer to the Agent any
Prohibited Distributions and the proceeds of such sale, except to the extent
that the Agent grants written permission to the Purported Acquiror to retain a
portion of such sales proceeds not exceeding the amount that the Purported
Acquiror would have received from the Agent if the Agent rather than the
Purported Acquiror had resold the Prohibited Shares. If the Initial Transferor
can be identified, the Agent will pay to the Initial Transferor any sales
proceeds in excess of those due to the Purported Acquiror, together with any
amounts received by the Agent from the Purported Acquiror that are attributable
to Prohibited Distributions. If the Initial Transferor cannot be identified
within 90 days, the Agent may pay any amounts due to the Initial Transferor into
a court or governmental agency, if applicable law permits, and otherwise must
transfer such amounts to a charity designated by Company. In no event shall
amounts due to the Initial Transferor pursuant to Article inure to the benefit
of Company or the Agent, but such amounts may be used to cover expenses incurred
by Agent in attempting to identify the initial Transferor. If the Purported
Acquiror fails to surrender the Prohibited Shares within the next 30 business
days from demand by Company, then the Company will institute legal proceedings
to compel the surrender.

 

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4.8.5  Legend. The
Investor understands and agrees that each certificate held by the Investor
representing the Notes, and Series E Preferred Stock and the Common Stock
issuable upon conversion thereof, or any other securities issued in respect of
the Notes, and Series E Preferred Stock and Common Stock issuable upon
conversion thereof upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall bear the following legend ((in
addition to any legend required by this Agreement, the other Agreements or under
applicable state securities laws):

 

"THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF, AND ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND RIGHTS OF SALE AS PROVIDED IN A NOTE
PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER HEREOF, OR ITS SUCCESSOR,
A COPY OF WHICH IS AVAILABLE FROM THE COMPANY."

 

SECTION
5   CONDITIONS
OF INVESTOR'S OBLIGATIONS AT CLOSING.

 

The
obligations of the Investor under Section 1 of this Agreement are subject
to the fulfillment at or before each of the Closings of the following
conditions, any of which may be waived in writing by such Investor:

 

5.1  Representations
and Warranties. The
representations and warranties of the Company contained in Section 3 shall
be true in all respects on and as of the Closing with the same effect as if made
on and as of the Closing.

 

5.2  Performance. The
Company shall have performed or fulfilled in all material respects all
agreements, obligations, and conditions contained herein required to be
performed or fulfilled by the Company before the Closing.

 

5.3  Qualifications. All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or any state that are required in
connection with the lawful issuance and sale of the Notes pursuant to this
Agreement shall be duly obtained effective as of the Closing.

 

5.4  Compliance
Certificate. The
Company shall have delivered to the Investor a certificate dated as of the
Closing, signed by the Company's Secretary, certifying as to (a) the
Company's Articles, (b) the Company's Bylaws, (c) the resolutions
adopted by, and other consents and approvals of, the Company's Board of
Directors and stockholders in connection with the Transactional Agreements and
the transactions contemplated hereby and thereby, and (d) the names of the
officers of the Company authorized to sign the Transactional Agreements and the
other documents or certificates to be delivered pursuant to this Agreement by
the Company, or any of its officers, together with the true signatures of such
officers. The Company shall have delivered to the Investor a certificate dated
as of the Closing, signed by the Company's President, certifying that the
conditions set forth in Sections 5.1, 5.2 and 5.3 have been
satisfied.

 

-10-

5.5  Notes. The
Company shall have executed and delivered to Investor the original
Notes.

 

5.6  Security
Agreement. The
Company shall have executed and delivered to Investor the Security
Agreement.

 

5.7  Registration
Rights Agreement. The
Company shall have executed and delivered to Investor the Registration Rights
Agreement.

 

SECTION
6   CONDITIONS
OF THE COMPANY'S OBLIGATIONS AT CLOSING.

 

The
obligations of the Company under Section 1 of this Agreement are subject to
the fulfillment at or before the Closing of the following conditions, any of
which may be waived in writing by the Company:

 

6.1  Representations
and Warranties. The
representations and warranties of the Investor contained in Section 4 shall
be true in all respects on and as of the Closing with the same effect as though
said representations and warranties had been made on and as of the
Closing.

 

6.2  Blue
Sky Compliance. The
Company shall have complied with the securities laws of the State of Texas and
any other applicable states as necessary to offer and sell the Notes to the
Investor.

 

6.3  Legal
Matters. All
material matters of a legal nature which pertain to the Transactional Agreements
and the transactions contemplated hereby and thereby shall have been reasonably
approved by counsel to the Company.

 

6.4  Registration
Rights Agreement.
Investor shall have executed and delivered to the Company the Registration
Rights Agreement.

 

6.5  Security
Agreement.
Investor shall have executed and delivered to the Company the Security
Agreement.

 

SECTION
7   POST-CLOSING
COVENANTS OF THE COMPANY.

 

7.1  Stockholder
Approval. The
Company shall use reasonable efforts to obtain all required stockholder approval
of the transactions contemplated by the Transactional Agreements, including
amending the Articles to increase the number of shares of authorized Common
Stock to account for conversion of the Series E Preferred Stock and all
other series of Preferred Stock.

 

-11-

7.2  Securities
Laws Compliance. Within
15 days after the Closing the Company shall make any filings necessary under the
securities or blue sky laws of any applicable jurisdiction.

 

7.3  Private
Offering. The
Company agrees that neither the Company nor anyone acting on its behalf will
offer the Notes or any similar securities for issuance or sale to, or solicit
any offer to acquire any of the same from, anyone or take any other action so as
to make the issuance and sale of the Notes subject to the registration
requirements of Section 5 of the Securities Act.

 

7.4  Properties,
Business, Insurance. The
Company shall maintain, and cause each of its subsidiaries to maintain, as to
their respective properties and business, insurance against such casualties and
contingencies and of such types and in such amounts as is customary for
companies similarly situated, of similar size, scope and financial condition,
which insurance shall be deemed by the Company to be sufficient. 

 

7.5  Restrictive
Agreements Prohibited. Neither
the Company nor any of its subsidiaries shall become a party to any agreement
which by its terms restricts the Company's performance of the Transactional
Agreements or the Articles.

 

7.6  Use of
Proceeds. The
Company agrees to use the proceeds from the sale of the Notes for (i) payment of
expenses related to the transactions contemplated by the Transactional
Agreements, (ii) payment of outstanding accounts payable, and (iii) current
operating expenses.

 

7.7  Material
Changes and Litigation. The
Company shall promptly notify the Investor of any Material Adverse Event and of
any litigation or governmental proceeding or investigation brought or, to the
Company's knowledge, threatened in writing against the Company, officer,
director, key employee or principal stockholder of the Company which, if
adversely determined, would result in a Material Adverse Event.

 

7.8  Punctual
Payment. The
Company shall pay the principal of, premium, if any, and interest on the Notes
at the times and place and in the manner provided in the Notes and
herein.

 

7.9  Preservation
of Corporate Existence. The
Company shall preserve and maintain its corporate existence and all rights,
franchises and privileges in the jurisdiction of its organization, and qualify
and remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties, except where the failure to qualify would
not constitute a Material Adverse Event. The Company shall preserve and maintain
all licenses and other rights to use patents, processes, licenses, trademarks,
trade names, inventions, intellectual property rights or copyrights owned or
possessed by it, and material to the conduct of its business.

 

7.10  Compliance
with Laws. The
Company shall comply, and cause each Subsidiary to comply, with all applicable
laws, rules, regulations and orders of any governmental authority, noncompliance
with which could materially adversely affect its business or condition,
financial or other.

 

-12-

7.11  Keeping
of Records and Books of Account. The
Company shall keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied, reflecting
all material financial transactions of the Company and in which, for each fiscal
year, are proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.

 

7.12  Compliance
with ERISA. The
Company shall comply with all minimum funding requirements applicable to any
pension or other employee benefit or employee contribution plans which are
subject to ERISA or to the Code, and comply in all material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. The Company will not permit any event or
condition to exist which could permit any such plan to be terminated under
circumstances which would cause the lien provided for in Section 4068 of
ERISA to attach to the assets of the Company.

 

7.13  Foreign
Corrupt Practices Act. The
Company shall comply and cause each officer, director, partner, employee and
agent of the Company, each Subsidiary to comply, at all times with the
prohibitions on certain acts and practices set forth in the Foreign Corrupt
Practices Act of 1977, and any rules or regulations promulgated
thereunder.

 

7.14  Exchange
Relisting. The
Company shall use its best efforts to obtain listing of its Common Stock on the
Nasdaq SmallCap Market and the Toronto Stock Exchange.

 

7.15  Negative
Covenants. Without
limiting any other covenants and provisions hereof, the Company covenants and
agrees that, as long as any of the Notes remains outstanding, it will comply
with and observe the following covenants and provisions, and will cause each
Subsidiary to comply with and observe such of the following covenants and
provisions as are applicable to such Subsidiary, and will not, without the prior
written consent of the holder of the Notes:

 

7.15.1  Distributions. Except
as required by the Notes and the Articles, declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its stockholders as such, or make any
distribution of assets to its stockholders as such, or permit any Subsidiary to
do any of the foregoing (such transactions being hereinafter referred to as
"Distributions"),
except that the Subsidiaries may declare and make payment of cash and stock
dividends, return capital and make distributions of assets to the Company;
and,
except that
nothing herein contained shall prevent the Company from effecting a stock split
or declaring or paying any dividend consisting of shares of any class of capital
stock pro rata to the holders of shares of such class of capital
stock.

 

7.15.2  Extraordinary
Corporate Transactions. Take
any corporate action, enter into any agreement to take such action, or obligate
itself to take any such action, if such action would: (i) provide for the
voluntary liquidation, dissolution or winding up of the Company; (ii) enter
into any transaction that expressly prohibits or limits the Company's right to
perform its obligations under this Agreement or the Notes; or
(iii) transfer, sell or license any material amount of its assets other
than in the ordinary course of business or other than obsolete equipment or
unsaleable inventory.

 

-13-

7.15.3  Dealings
with Affiliates. Except
for transactions involving the Company and Investor, enter or permit any
Subsidiary to enter into any transaction with any holder of five percent (5%) or
more of any class of capital stock of the Company, or any member of their
families or any corporation or other entity in which anyone or more of such
stockholders or members of their immediate families, directly or indirectly
holds five percent (5%) or more of any class of capital stock or other ownership
interest, except in the ordinary course of business and on terms not less
favorable to the Company or any Subsidiary than it would obtain in a transaction
between unrelated parties.

 

7.15.4  Change
in Nature of Business. Make
any material change in the nature of the Company's business as carried on at the
date hereof, without the prior approval of its Board of Directors.

 

7.16  Articles. The
Company shall file the Series E Statement with the Secretary of State of
the State of Texas and deliver to the Investor a certified copy of the
Series E Statement.

 

SECTION
8   MISCELLANEOUS.

 

8.1  Governing
Law. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Texas, excluding those laws that direct the application of the laws
of another jurisdiction.

 

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

 

8.3  Headings. The
headings of the sections of this Agreement are for convenience and shall not by
themselves determine the interpretation of this Agreement.

 

8.4  Notices. Any
notice required or permitted hereunder shall be given in writing and shall be
conclusively deemed effectively given upon personal delivery or delivery by
courier, or on the first business day after transmission if sent by confirmed
facsimile transmission or electronic mail transmission, or five days after
deposit in the United States mail, by registered or certified mail, postage
prepaid, addressed (i) if to the Company, as set forth below the Company's
name on the signature page of this Agreement, and (ii) if to an Investor,
at such Investor's address as set forth on the Signature page of this Agreement,
or at such other address as the Company or such Investor may designate by 10
days' advance written notice to the other parties hereto.

 

8.5  Survival
of Warranties. The
warranties and representations of the parties contained in or made pursuant to
this Agreement shall survive for two years after the execution and delivery of
this Agreement and the First Closing; provided, however, that such
representations and warranties need only be accurate as of the date of such
execution and delivery and as of the Closing.

 

8.6  Amendments,
Waivers and Consent. Any
provision in this Agreement or the Notes to the contrary notwithstanding,
changes in or additions to this Agreement may be made, and compliance with any
covenant or provision herein or therein set forth may be omitted or waived, if
the Company shall obtain consent thereto in writing from the holder of the
Notes; provided that no
such consent shall be effective to reduce or to postpone the date fixed for the
payment of the principal (including any required redemption) or interest payable
on the Notes, without the consent of the holder thereof. Any waiver or consent
may be given subject to satisfaction of conditions stated therein and any waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. Written notice of any waiver or consent effected under
this subsection shall promptly be delivered by the Company to any holder who did
not execute the same. No failure or delay on the part of the Investor, or any
other holder of the Notes in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.

 

-14-

8.7  Finders'
Fees. The
Company and the Investor will indemnify the other against all liabilities
incurred by the indemnifying party with respect to claims related to investment
banking or finders' fees in connection with the transactions contemplated by
this Agreement, arising out of arrangements between the party asserting such
claims and the indemnifying party, and all costs and expenses (including
reasonable fees of counsel) of investigating and defending such
claims.

 

8.8  Expenses. The
Company and the Investor will bear their respective legal and other fees and
expenses with respect to this Agreement and the transactions contemplated
hereby.

 

8.9  Confidentiality. Each
party hereto agrees that, except with the prior written permission of the
Company, it shall at all times keep confidential and not divulge or furnish or
make accessible to anyone any confidential information concerning or relating to
the business or financial affairs of the Company to which such party has become
privy by reason of this Agreement, discussions or negotiations relating to this
Agreement or the exhibits to this Agreement, provided that an Investor may
disclose confidential information if (i) the information is publicly known
through publication or otherwise through no wrongful act of the Investor;
(ii) the information is received from a third party who rightfully
discloses it to the Investor without restriction on its subsequent disclosure;
(iii) the information is disclosed pursuant to the lawful requirement of a
governmental agency or by order of court of competent jurisdiction, provided
that in such event, Investor will provide prior written notice of such proposed
disclosure to the Company; or (iv) the information is reasonably required
to be disclosed in order for the Investor or their transferee to market an
interest in the capital stock of the Company, provided that in such instance the
person to whom the information is provided shall be required to hold such
information in confidence.

 

8.10  Further
Assurances. From
and after the date of this Agreement, upon the request of the Investor, the
Company and each Subsidiary shall execute and deliver such instruments,
documents and other writings as may be necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement and
the Notes.

 

8.11  Jury
Waiver. THE
COMPANY AND THE INVESTOR AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR
SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT
OR ANY OF THE OTHER TRANSACTIONAL AGREEMENTS, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR
(B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED; PROVIDED, HOWEVER, THAT THE
FOREGOING SHALL NOT PRECLUDE ANY PARTY OR ITS SUCCESSORS FROM ASSERTING ANY
COUNTERCLAIM WHICH WOULD OTHERWISE BE BARRED OR FORFEITED. EXCEPT AS STATED IN
THE PRECEDING SENTENCE, THE PROVISIONS OF THIS SECTION SHALL BE SUBJECT TO NO
EXCEPTIONS. NEITHER THE COMPANY NOR ANY OF THE INVESTOR HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.

 

8.12  Entire
Agreement; Successors and Assigns. This
Agreement (and the exhibits hereto) constitutes the entire contract between the
Company and the Investor relative to the subject matter hereof. Any prior and
contemporaneous agreement, discussion, understanding or correspondence between
the Company and the Investor regarding the purchase of the Notes is superseded
by this Agreement. Subject to the exceptions specifically set forth in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective executors, administrators, heirs,
successors, and assigns of the parties. All subsequent transferees or assigns of
the Notes shall be deemed a party to this Agreement and bound by the obligations
imposed upon Investor herein.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

-15-

 

IN
WITNESS WHEREOF, the parties hereto have executed this Note Purchase Agreement
as of the date first above written.

 

	 	 	 
	COMPANY:	POSITRON
      CORPORATION
	 
 	 
 	 
 
		By:  	/s/ Gary H.
  Brooks
	 	 	
      

    
	 	 	Gary
      H. Brooks, President
	 	 	 
	 	Address:	
      1304
      Langham Creek Drive, #300,
Houston, Texas
77084

 

	 	 	 
	INVESTOR:	SOLARIS OPPORTUNITY
      FUND, L.P.
	 
 	 
 	 
 
		By:  	/s/ Patrick G.
    Rooney
	 	 	
      

    
	 	 	Name:
      Patrick G. Rooney
Its: Managing Director
	 	 	 
	 	Address:	
      700
      Commerce Drive
Oak Brook, Illinois 60523

-16-

SCHEDULES
AND EXHIBITS

 

	Schedule
      1	Schedule
      of Exceptions

 

	Exhibit
      A	Secured
      Convertible Promissory Note

 

	Exhibit
      B	Registration
      Rights Agreement

 

	Exhibit
      C	Security
      AgreementExhibit
10.84

 

 

THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, AND APPLICABLE STATE
SECURITIES LAWS, COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES,
(B) THE COMPANY RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF
THESE SECURITIES SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION, OR (C) THE COMPANY OTHERWISE SATISFIES ITSELF
THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

 

THIS
NOTE IS RESTRICTED BY THE TERMS OF, AND IS SUBJECT TO RESTRICTIONS ON TRANSFER
AND RIGHTS OF SALE AS PROVIDED IN A NOTE PURCHASE AGREEMENT BETWEEN THE COMPANY
AND THE HOLDER HEREOF, OR ITS SUCCESSOR, A COPY OF WHICH IS AVAILABLE FROM THE
COMPANY.

 

 

POSITRON
CORPORATION

 

SECURED
CONVERTIBLE PROMISSORY NOTE

 

 

	$200,000.00	
      Houston, Texas

	 	
      March 7, 2005

	 	 

 

POSITRON
CORPORATION, a Texas corporation (the "Company"), the
principal office of which is located at 1304 Langham Creek Drive, #300, Houston,
Texas 77084, for value received hereby promises to pay to Solaris Opportunity
Fund, L.P., located at 700 Commerce Drive, Oak Brook, Illinois 60523, or its
registered assigns (the "Holder"), the
sum of Two Hundred Thousand Dollars ($200,000), or such lesser amount as shall
then equal the outstanding principal amount hereof on the terms and conditions
set forth hereinafter. The principal hereof and any unpaid accrued interest
hereon, as set forth below, shall be due and payable on the earlier to occur of
(i) March 6, 2007 (the "Maturity
Date") or
(ii) when declared due and payable by the Holder upon the occurrence of an
Event of Default (as defined below). Commencing on the Maturity Date, all
principal and accrued interest hereunder shall be payable upon demand. Payment
for all amounts due hereunder shall be made by mail to the registered address of
the Holder. All numbers expressed herein as "$" or "dollars" are in United
States dollars.

 

-1-

 

The
following is a statement of the rights of the Holder of this Note and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:

 

1.  Definitions. Except
as otherwise defined herein, each capitalized term used herein shall have the
meaning assigned to it in the Note Purchase Agreement dated as of February 28,
2005 (the "Purchase
Agreement"). As
used in this Note, the following terms, unless the context otherwise requires,
have the following meanings:

 

(a)  "Business
Day" shall
mean a day other than Saturday, Sunday or a public holiday under the laws of the
State of Texas.

 

(b)  "Company"
includes any corporation that shall succeed to or assume the obligations of the
Company under this Note.

 

(c)  "Holder," when
the context refers to a holder of this Note, shall mean any person who shall at
the time be the registered holder of this Note.

 

(d)  "Operating
Cash Flow" shall
mean the sum of net income, depreciation, change in accruals and change in
accounts payable, minus change in accounts receivable, minus change in
inventories.

 

2.  Interest. Simple
interest shall accrue at the rate of ten percent (10%) per annum on the
principal of this Note outstanding during the period beginning the date of this
Note and ending on the date that the principal amount of this Note is repaid.
Interest shall be calculated on the basis of a 365-day year for the actual
number of days elapsed. Accrued interest shall be payable in cash annually on
the anniversary date of this note; provided however, that in the event the
accrued interest on this Note together with the aggregate accrued interest on
all other outstanding notes, including without limitation the notes issued
pursuant to the Purchase Agreement (such notes collectively being hereinafter
referred to as the "Investor
Notes"),
exceeds 50% of the Company’s Operating Cash Flow during the twelve month period
ending on the last completed calendar quarter which preceded the interest
payment date by at least 60 days ("50% of
cash flow"), at
the Company's option, the accrued interest shall be payable (i) in cash in an
amount equal to the product of (x) accrued interest and (y) a fraction, with (A)
the numerator of such fraction equal to unpaid principal on the Note and (B) the
denominator of such fraction equal to unpaid principal owing under the Investor
Notes, up to an aggregate amount equal to 50% of cash flow, and (ii) by issuance
to Holder of a new note identical in form to this Note and in an amount equal to
the accrued interest not otherwise paid in cash. In the event that a payment
date falls on a non-Business Day, payment shall be made on the next Business
Day, while taking into account such extra days in calculating the accrued
interest. In the event of an earlier conversion, acceleration or payment of the
Note, interest shall be payable in cash on such date.

 

3.  Events
of Default. If any
of the events specified in this Section 3 shall occur (herein individually
referred to as an "Event
of Default"), the
Holder of the Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable, by
notice in writing to the Company:

 

-2-

(a)  The
Company shall default in the payment of any part of the principal or accrued and
unpaid interest on this Note after it shall become due and payable, whether at
maturity or at a date fixed for prepayment or by acceleration or otherwise;
or

 

(b)  The
institution by the Company of proceedings to be adjudicated as bankrupt or
insolvent, or the consent by it to institution of bankruptcy or insolvency
proceedings against it or the filing by it of a petition or answer or consent
seeking reorganization or release under the federal Bankruptcy Act, or any other
applicable federal or state law, or the consent by it to the filing of any such
petition or the appointment of a receiver, liquidator, assignee, trustee or
other similar official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the taking of corporate action by the Company in furtherance of any such action;
or

 

(c)  If,
within sixty (60) days after the commencement of an action against the
Company, without the consent or acquiescence of the Company (and service of
process in connection therewith on the Company) seeking any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such action shall not have been
resolved in favor of the Company or all orders or proceedings thereunder
affecting the operations or the business of the Company stayed, or if the stay
of any such order or proceeding shall thereafter be set aside, or if, within
sixty (60) days after the appointment without the consent or acquiescence
of the Company of any trustee, receiver or liquidator of the Company or of all
or any substantial part of the properties of the Company, such appointment shall
not have been vacated; or 

 

(d)  Any
material breach by the Company of any representation, warranty or covenant
contained in the Purchase Agreement or this Note.

 

(e)  As of
January 1, 2006, the Company shall not have obtained stockholder approval to
amend its Articles of Incorporation to increase the number of shares of its
authorized Common Stock to account for the conversion of Series E Preferred
Stock issuable upon conversion of this Note.

 

In the
case of an Event of Default pursuant to (b) or (c) above, all amounts shall
automatically, without notice, become immediately due and payable and
collectible by Holder pursuant to applicable law. 

 

4.  Conversion.

 

4.1  Conversion. The
principal amount of this Note, or any portion thereof may be converted by the
Holder at any time prior to Maturity into the number of fully paid shares of the
Company's Series E Preferred Stock as is determined by dividing the unpaid
principal under the Note by the Conversion Price (as hereinafter defined) in
effect at the time of conversion. Accrued but unpaid interest shall be payable
in cash at the time of conversion.

 

-3-

4.2  Conversion
Price. The Conversion Price (the "Conversion Price") applicable per share of
Series E Preferred Stock shall initially be equal to $1.00, subject to
adjustment from time to time in accordance with Section 4.3 below. 

 

4.3  Adjustments
to the Conversion Price. The Conversion Price shall be subject to adjustment
from time to time as follows:

 

4.3.1  Adjustment
Upon Stock Dividends, Subdivisions or Splits. If, at
any time, the number of shares of Series E Preferred Stock outstanding is
increased by a stock dividend payable in shares of Series E Preferred Stock
or by a subdivision or split-up of shares of Series E Preferred Stock,
then, following the record date for the determination of holders of
Series E Preferred Stock entitled to receive such stock dividend, or to be
affected by such subdivision or split-up, the Conversion Price shall be
appropriately decreased so that the number of shares of Series E Preferred
Stock issuable on conversion of Note shall be increased in proportion to such
increase in outstanding shares.

 

4.3.2  Adjustment
Upon Combinations. If, at
any time, the number of shares of Series E Preferred Stock outstanding is
decreased by a combination of the outstanding shares of Series E Preferred
Stock into a smaller number of shares of Series E Preferred Stock, then,
following the record date to determine shares affected by such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Series E Preferred Stock issuable on conversion of the Note shall be
decreased in proportion to such decrease in outstanding shares.

 

4.3.3  Adjustment
Upon Reclassifications, Reorganizations, Consolidations or
Mergers. If, at
any time when the Note is issued and outstanding, there shall be any merger,
consolidation, share exchange, recapitalization, reorganization, business
combination, or other similar event, as a result of which shares of
Series E Preferred Stock shall be changed into the same or a different
number of shares of another class or classes of stock or securities of the
Company or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Company then the Holder shall thereafter
have the right to receive upon conversion of the Note, upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of
Series E Preferred Stock immediately theretofore issuable upon conversion,
such stock, securities, cash or other assets which the Holder of would have been
entitled to receive in such transaction had the Note been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion contained herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder to the end that
the provisions hereof (including, without limitation, provisions for adjustment
of the applicable Conversion Price and of the number of shares of Series E
Preferred Stock issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any securities or
assets thereafter deliverable upon the conversion of the Note. The above
provisions shall similarly apply to successive mergers, consolidations, share
exchanges, recapitalizations, reorganizations, business combinations or other
similar events or sales of assets.

 

4.3.4  Deferral
in Certain Circumstances. In any
case in which the provisions of this Section 4.3 shall require that an
adjustment shall become effective immediately after a record date of an event,
the Company may defer until the occurrence of such event issuing to the Holder
of the Note, converted after such record date and before the occurrence of such
event, the shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event and issuing to such Holder only the shares
of capital stock issuable upon such conversion before giving effect to such
adjustments; provided, however, that the Company shall deliver to such Holder an
appropriate instrument or due bills evidencing such holder's right to receive
such additional shares.

 

-4-

4.3.5  Notice
of Adjustment of Conversion Price.
Whenever the Conversion Price is adjusted as herein provided: (i) the Company
shall compute the adjusted Conversion Price in accordance with this Section 4.3
and shall prepare a certificate signed by the Chief Financial Officer of the
Company setting forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate shall
forthwith be filed at each office or agency maintained for such purpose of
conversion of the Note; and (ii) a notice stating that the Conversion Price has
been adjusted and setting forth the adjusted Conversion Price shall forthwith be
prepared by the Company, and as soon as practicable after it is prepared, such
notice shall be mailed by the Company at its expense to the Holder at the
Holder's last addresses as it shall appear in the Company's
records.

 

4.4  Conversion
Procedure.

 

4.4.1  Notice
of Conversion. In
order to convert this Note (in whole or in part) into full shares of
Series E Preferred Stock, the Holder shall surrender the Note, duly
endorsed, by either overnight courier or by hand, to the principal office of the
Company, and shall give written notice (the "Conversion
Notice") by
facsimile (with the original of such notice forwarded with the foregoing
courier) to the Company at such office that the Company elects to convert the
amount specified therein, which such notice and election shall be irrevocable by
the Holder; provided however, that the Company shall not be obligated to issue
certificates evidencing the shares of the Series E Preferred Stock issuable
upon such conversion unless either the Note evidencing the principal amount is
delivered to the Company as provided above, or the Holder notifies the Company
that such Note(s) have been lost, stolen or destroyed and promptly executes an
agreement reasonably satisfactory to the Company to indemnify the Company from
any loss incurred by its connection with such Note(s).

 

4.4.2  Delivery
of Stock Certificates. Upon
receipt of such Conversion Notice, the Company shall immediately verify the
Holder's calculation of the conversion rate and shall use its best efforts to
cause its transfer agent to issue and deliver as promptly as practical to the
Company of such Note(s), or after receipt of such agreement and indemnification,
to such Holder of Note(s) at the address of the Holder, or to its designee, a
certificate or certificates for the number of shares of Series E Preferred
Stock to which the Holder shall be entitled, together with a Note or Notes for
the principal amount of Notes not submitted for conversion. The issuance of such
certificates upon conversion of this Note shall be made without charge to the
Holder of this Note for any issuance tax in respect thereof or other cost
incurred by the Company in connection with such conversion and the related
issuance of the Series E Preferred Stock. Upon the conversion of this Note,
the Company shall take all such actions as are necessary in order to insure that
the Series E Preferred Stock issuable with respect to such conversion shall
be validly issued and fully paid.

 

-5-

4.4.3  Effect
of Conversion. The
date on which the Conversion Notice is given shall be deemed to be the date the
Company received by facsimile the Conversion Notice, and the person or persons
entitled to receive the shares of Series E Preferred Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Series E Preferred Stock on such date. No
fractional shares of Series E Preferred Stock shall be issued upon
conversion of this Note. In lieu of the Company issuing any fractional shares to
the Holder upon the conversion of this Note, the Company shall pay to the Holder
the amount of outstanding principal that is not converted because its conversion
would require fractional shares, such payment to be in the form as provided
below. Upon conversion of this Note, the Company shall be forever released from
all of its obligations and liabilities under this Note,
except
that the Company shall be obligated to pay the Holder, within ten (10) days
after the date of such conversion, any interest accrued and unpaid or
unconverted to and including the date of such conversion, and no
more.

 

4.5  Notices
of Record Date, etc. In the
event of:

 

4.5.1  Any
taking by the Company of a record of the holders of any class of securities of
the Company for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend payable out of earned
surplus at the same rate as that of the last such cash dividend theretofore
paid) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or

 

4.5.2  Any
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any transfer of all or substantially all
of the assets of the Company to any other person or any consolidation or merger
involving the Company; or

 

4.5.3  Any
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
the
Company will mail to the holder of this Note at least five (5) days prior
to the earliest date specified therein, a notice specifying:

 

4.5.3.1
  The date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right; and

 

4.5.3.2
  The date
on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding-up is expected to become effective
and the record date for determining shareholders entitled to vote
thereon.

 

4.6  Notice
of Prepayment. The
Company shall mail to the holder of this Note at least sixty (60) days prior to
repayment of any principal due hereunder.

 

4.7  Reservation
of Stock Issuable Upon Conversion. The Company shall, prior to conversion of
this Note into Series E Preferred Stock, reserve and keep available out of
its authorized but unissued shares of Series E Preferred Stock solely for
the purpose of effecting the conversion of the Note such number of its shares of
Series E Preferred Stock as shall from time to time be sufficient to effect
the conversion of the Note. The Company shall at all times reserve and keep
available out of its authorized but unissued Common Stock, such number of its
duly authorized Common Stock as shall be sufficient to effect the conversion of
the Series E Preferred Stock into Common Stock in accordance with its
Articles. If at any relevant time the number of authorized but unissued shares
of Series E Preferred Stock (and shares of Common Stock for issuance on
conversion of such Series E Preferred Stock) shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note,
in addition to such other remedies as shall be available to the holder of this
Note, the Company will use its reasonable efforts to forthwith take such
corporate action as may be necessary to increase its authorized but unissued
shares of Series E Preferred Stock (and shares of its Common Stock for
issuance on conversion of such Series E Preferred Stock) to such number of
shares as shall be sufficient for such purposes.

 

-6-

5.  Assignment. Subject
to the restrictions on transfer described in Section 8 below, the rights
and obligations of the Company and the Holder of this Note shall be binding upon
and benefit the successors, assigns, heirs, administrators and transferees of
the parties.

 

6.  Waiver
and Amendment. Any
provision of this Note may be amended, waived or modified (either generally or
in a particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely), upon the written consent of the
Company and of the Holder.

 

7.  Waiver
of Notice. The
Company hereby waives notice, presentment, demand, protest and notice of
dishonor.

 

8.  Transfer
of this Note or Securities Issuable on Conversion Hereof.
Transfer of this Note or the Series E Preferred Stock and Common Stock
issuable upon conversion thereof shall only be made in accordance with Section
4.7 and 4.8 of the Purchase Agreement. All transferees of this Note agree to be
bound by the obligations set forth under Sections 1.6, 1.7 and Section 4 (and
related definitions) of the Purchase Agreement, which Sections are incorporate
herein by reference. In connection with any such transfer, such transferee shall
sign an acknowledgment stating that it will become bound by the terms of such
sections Purchase Agreement. Holder understands and agrees that each certificate
held by Holder representing Series E Preferred Stock and Common Stock
issuable upon conversion of this Note, or any other securities issued in respect
of this Note issuable upon conversion thereof upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall bear
the following legend (in addition to any legend required under applicable
federal or state securities laws): 

 

"THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF, AND ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND RIGHTS OF SALE AS PROVIDED IN A NOTE
PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE HOLDER HEREOF, OR ITS SUCCESSOR,
A COPY OF WHICH IS AVAILABLE FROM THE COMPANY."

 

-7-

9.  Notices. Any
notice, request or other communication required or permitted hereunder shall be
in writing and shall be deemed to have been duly given if personally delivered
or if sent by nationally recognized courier service or mailed by registered or
certified mail, postage prepaid, to the respective addresses of the parties as
set forth herein or if sent by facsimile to the respective facsimile numbers of
the parties set forth herein. Any party hereto may by notice so given change its
address for future notice hereunder. Notice shall conclusively be deemed to have
been given and received when personally delivered or three (3) Business
Days after deposited in the mail or one Business Day after sent by courier or
upon confirmation of facsimile delivery in the manner set forth
above.

 

10.  Loss,
Theft or Destruction of Note. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft or destruction of this Note and of indemnity or security reasonably
satisfactory to it, the Company will make and deliver a new Note which shall
carry the same rights to interest (unpaid and to accrue) carried by this Note,
stating that such Note is issued in replacement of this Note, making reference
to the original date of issuance of this Note, (and any successors hereto) and
dated as of such cancellation, in lieu of this Note.

 

11.  Usury
Disclosure.
Regardless of any provision contained in this Note, it is expressly stipulated
and agreed that the intent of the Holder and the Company is to comply at all
times with all usury and other laws relating to this Note. If the laws of the
State of Texas would now or hereafter render usurious, or are revised, repealed
or judicially interpreted as to render usurious, the indebtedness evidenced by
this Note, or if any prepayment by the Company results in the Company's having
paid any interest in excess of that permitted by law, then it is the Holder's
and the Company's express intent that all excess amounts theretofore collected
by the Holder be credited to the principal balance of this Note (or, if this
Note has been paid in full, refunded to the Company), and the provisions of this
Note immediately be deemed reformed the amounts therefor collectible hereunder
reduced, without the necessity of execution of any new document, so as to comply
with the then applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder.

 

12.  No
Shareholder Rights. Nothing
contained in this Note shall be construed as conferring upon the Holder or any
other person the right to vote or to consent or to receive notice as a
shareholder in respect of meetings of shareholders for the election of directors
of the Company or any other matters or any rights whatsoever as a shareholder of
the Company.

 

13.  Impairment
of Rights. The
Company shall not amend or otherwise modify the terms of the Series E
Preferred Stock without the written consent of the Holder.

 

14.  Security. This
Note is secured pursuant to the terms of the Security Agreement.

 

15.  Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, excluding that body of law relating to conflict of
laws.

 

16.  Heading;
References. All
headings used herein are used for convenience only and shall not be used to
construe or interpret this Note. Except as otherwise indicated, all references
herein to Sections refer to Sections hereof.

 

[Remainder
of page intentionally left blank]

 

-8-

 

IN
WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first set forth above.

	 	 	 
	COMPANY:	POSITRON CORPORATION, a
      Texas corporation
	 
 	 
 	 
 
		By:  	/s/ 
	 	 	
      

    
	 	 	Gary
      H. Brooks, President
	 		 
	 	Address:	
      1304
      Langham Creek Drive, #300
Houston, Texas 77084
Facsimile:
      281-492-2961

	 	
	 	

 

 

-9-

NOTICE
OF CONVERSION

(To Be
Signed Only Upon Conversion of Note)

TO
POSITRON CORPORATION

 

The
undersigned, the holder of the foregoing Note, hereby surrenders such Note for
conversion into ___ shares of Series E Preferred Stock of POSITRON
CORPORATION, to the extent of ________________________ dollars ($____________)
unpaid principal amount of such Note, and requests that the certificates for
such shares be issued in the name of, and delivered to,
_________________________________________, whose address is
__________________________________________________.

 

Dated:
________________________.

 

 

	 	 	 
		
	 
 	 
 	 
 
			
	 	 	
      

    
	 	 	(Signature
      must conform in all respects to name of 
holder as specified on the
      face of the Note)
	 		 
	 	Address

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