Document:

ex10-4.htm

Exhibit 10.4- Form of Class B.1 Warrant

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

	  	
Right to Purchase ________ shares of Common Stock of Medlink International, Inc. (subject to adjustment as provided herein)

CLASS A COMMON STOCK PURCHASE WARRANT

No. B.1-                                                                                                 Issue Date: November 26, 2010

MEDLINK INTERNATIONAL, INC., a corporation organized under the laws of the State of Delaware (together with any corporation which shall succeed or assume its obligations, the “Company” or “Borrower”), hereby certifies that, for value received, [Insert name of Holder], with an address at [Insert Address], or its successors, representatives and permitted assigns (collectively, “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time after the Issue Date until 5:00 p.m. EST on the fifth anniversary of the Issue Date (the “Expiration Date”), up to [Insert number equal to 50% of the shares of common stock issuable upon full conversion of the Debenture at the initial Conversion Price] fully paid and nonassessable shares (the “Shares”) of Common Stock (as defined herein) of the Company at a per share exercise price of $1.50.  The aforedescribed exercise price per share, as adjusted from time to time as herein provided, is referred to herein as the “Exercise Price.”  The number and character of Shares of Common Stock and the Exercise Price are subject to adjustment as provided herein.  The Company may reduce the Exercise Price for some or all of this class of warrants (each, a “Warrant” and together, the “Warrants”), temporarily or permanently, provided such reduction is made as to all outstanding Warrants for all Holders of such Warrants.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Subscription Agreement, dated as of November 26, 2010 (the “Subscription Agreement”), by and among the Company, Holder and the other signatories thereto.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

 

(a)           “Common Stock” means (i) the Company’s common stock, $0.001 par value per share, as authorized on the date of the Subscription Agreement and (ii) the shares of common stock issuable upon conversion or exchange of any Other Securities pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

 

(b)            “Other Securities” means any capital stock (other than Common Stock) and other securities of the Company or any other Person which Holder at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to the Common Stock of the Company, or which at any time shall be issuable or shall have been issued in exchange for, or in replacement of, Shares of Common Stock of the Company or Other Securities pursuant to Section 4 hereof or otherwise.

 

(c)           “Warrant Shares” means the Shares of Common Stock issuable upon exercise of this Warrant.

 

1.           Exercise of Warrant.

 

1.1.           Number of Shares Issuable Upon Exercise.  From and after the Issue Date and through and including the Expiration Date, Holder shall be entitled to receive, upon exercise of this Warrant in whole in accordance with the terms of subsection 1.2 or upon exercise of this Warrant in part in accordance with subsection 1.3, shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

 

 

  

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1.2.           Full Exercise.  This Warrant may be exercised in full by Holder by delivering to the Company an original or facsimile copy of the form of exercise notice attached as Exhibit A hereto (the “Exercise Form”) duly executed by Holder and payment, in cash, wire transfer or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of Shares of Common Stock for which this Warrant is then exercisable by the Exercise Price then in effect.  The original Warrant is not required to be surrendered to the Company until it has been fully exercised.

 

1.3.           Partial Exercise.  This Warrant may be exercised in part (but not for a fractional share) by Holder by delivering to the Company an Exercise Form in the manner and at the place provided in Section 1.2 hereof, except that the amount payable by Holder on such partial exercise shall be the amount obtained by multiplying (a) the number of whole Shares of Common Stock designated by Holder in the Exercise Form by (b) the Exercise Price then in effect.  Upon the surrender of the original Warrant by Holder for any such partial exercise, the Company, at its sole expense, shall forthwith issue and deliver to, or upon the order of, Holder a new Warrant of like tenor, in the name of Holder or as Holder (upon payment by Holder of any applicable transfer taxes) may request, the whole number of Shares of Common Stock for which such Warrant may still be exercised.

 

1.4.           Fair Market Value. Fair Market Value of a Share of Common Stock as of a particular date (the “Determination Date”) shall mean:

 

(a)           If the Company’s Common Stock is traded on an exchange or on the NASDAQ Global Market, NASDAQ Global Select Market, NASDAQ Capital Market, the New York Stock Exchange or the NYSE Alternext, then the last reported sale price (as reported on Bloomberg L.P.) of Common Stock on the Trading Day immediately preceding the Determination Date;

 

(b)           If the Company’s Common Stock is not traded on an exchange or on the NASDAQ Global Market, NASDAQ Global Select Market, NASDAQ Capital Market, the New York Stock Exchange or the NYSE Alternext, but is traded on the Over-the-Counter Bulletin Board or in the over-the-counter market or Pink Sheets, then the last reported sale price (as reported on Bloomberg L.P.) of Common Stock on the Trading Day immediately preceding the Determination Date;

 

(c)           Except as provided in clause (d) below and Section 3.1 hereof, if the Company’s Common Stock is not publicly traded, then the Fair Market Value shall be as Holder and the Company agree, or in the absence of such an agreement, by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided; or

 

(d)           If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s certificate of incorporation, then the Fair Market Value is equal to all such amounts to be payable per share to holders of the Company’s Common Stock pursuant to the certificate of incorporation in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the certificate of incorporation, assuming for the purposes of this clause (d) that all of the Shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date.

 

1.5.           Company Acknowledgment. The Company will, at the time of the exercise of the Warrant, upon the request of Holder, acknowledge in writing its continuing obligation to afford to Holder any rights to which Holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to Holder any such rights.

 

1.6.           Delivery of Stock Certificates, etc. on Exercise; Buy-In.  (a)  The Company agrees that, provided the full exercise price listed in the Exercise Form is received in accordance with Section 1.2 hereof, the Shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to Holder as the record owner of such Shares as of the close of business on the date on which the Exercise Form is delivered and payment made for such Shares. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter (“Warrant Share Delivery Date”), the Company, at its sole expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to Holder, or as Holder (upon payment by Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and non-assessable Shares of Common Stock or Other Securities to which Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which Holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full Share of Common Stock, together with any other capital stock or other securities or property (including cash, where applicable) to which Holder is entitled upon such exercise pursuant to Section 1 hereof or otherwise.  The Company understands that a delay in the delivery of the Warrant Shares after the Warrant Share Delivery Date could result in economic loss to Holder.  As compensation to Holder for such loss, the Company agrees to pay (as liquidated damages and not as a penalty) to Holder for any late issuance of Warrant Shares after exercise of this Warrant the proportionate amount of $25 per business day after the Warrant Share Delivery Date for each $10,000 amount of the Exercise Price for which this Warrant is exercised which are not timely delivered.  The Company shall pay any payments incurred under this Section in immediately available funds upon demand.  Notwithstanding the foregoing, and in addition to any other remedies which may be available to Holder, in the event that the Company fails for any reason to effect delivery of the Warrant Shares by the Warrant Share Delivery Date, Holder may, in its sole and absolute discretion, revoke all or part of Holder’s Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the liquidated damages described above shall be payable through the date of notice of revocation or rescission is delivered to the Company.

 

 

  

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(b)           In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the shares issuable upon exercise of this Warrant pursuant to an exercise on or before the Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the shares issuable upon exercise of this Warrant which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of shares issuable upon exercise of this Warrant that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of shares issuable upon exercise of this Warrant for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise for shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof.

 

1.7.           Automatic Exercise.   In the event this Warrant is exercisable pursuant to the provisions of Section 2 hereof on a cashless basis as of the close of the last Trading Day on or before the Expiration Date, then this Warrant, to the extent not previously unexercised and subject to the limitation in Section 10 of this Warrant, shall be deemed to have been automatically exercised without the requirement of any notice or delivery of the Exercise Form, pursuant to the terms of Section 2 of this Warrant.  Such Expiration Date will be deemed the exercise date for purposes of determining the Warrant Share Delivery Date and similar terms hereof.

 

2.           Exercise.

 

(a)           Payment upon exercise may be made at the option of Holder in its absolute discretion either in (i) wire transfer payable to the order of the Company equal to the applicable aggregate Exercise Price, (ii) by delivery of Common Stock issuable upon exercise of the Warrants in accordance with Section (b) below, or (iii) by a combination of any of the foregoing methods, for the number of Common Stock specified in such form (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to Holder per the terms of this Warrant) and Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable Shares of Common Stock (or Other Securities) determined as provided herein. Notwithstanding the immediately preceding sentence, payment upon exercise may be made in the manner described in Section 2(b) below commencing one year after the Issue Date, but only with respect to Warrant Shares not included for unrestricted public resale in an effective registration statement.

 

(b)           Subject to the provisions herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being cancelled) by delivery of a properly endorsed Exercise Form delivered to the Company by any means described in Section 14 hereof, in which event the Company shall issue to Holder a number of shares of Common Stock computed using the following formula:

 

X=Y (A-B)

          A

Where                      X=           the number of shares of Common Stock to be issued to Holder

	
  

	
Y=

	
the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation)

 

	
  

	
A=

	
Fair Market Value

 

	
  

	
B=

	
Exercise Price (as adjusted to the date of such calculation)

 

For purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction in the manner described above shall be deemed to have been acquired by Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Subscription Agreement.

 

 

  

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3.           Adjustment for Reorganization, Consolidation, Merger, etc.

 

3.1.           Fundamental Transaction.  If, at any time while this Warrant is outstanding, a Fundamental Transaction (as defined herein) occurs, then, upon any subsequent exercise of this Warrant, Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of Holder in its sole and absolute discretion, (a) upon exercise of this Warrant, the number of Shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by Holder of the number of Shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in (1) a transaction where the consideration paid to holders of the Common Stock consists solely of cash, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act or (3) a transaction involving a Person not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, cash equal to the Black-Scholes Value.  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to Holder a new warrant consistent with the foregoing provisions and evidencing Holder’s right to exercise such warrant into Alternate Consideration.  The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3.1 and ensuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.  “Black-Scholes Value” shall be determined in accordance with the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i) a price per share of Common Stock equal to the volume weighted average price (as determined by Bloomberg L.P.) (“VWAP”) of the Common Stock for the Trading Day immediately preceding the date of consummation of the applicable Fundamental Transaction, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of such request and (iii) an expected volatility equal to the 100 day volatility obtained from the HVT function on Bloomberg L.P. determined as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction.

(a)           A Fundamental Transaction is defined as the occurrence of any of the following (each, a “Fundamental Transaction”):

(i) Borrower effects any merger or  consolidation of Borrower with or into another entity where the other entity acquires more than 50% of the outstanding shares in one or a series of related transactions;

(ii) Borrower effects any sale or transfer of 40% in the aggregate, in one or a series of related transactions, of the properties and assets of Borrower to another Person(s) in any rolling twelve (12) month period;

(iii) any purchase, exchange or tender offer (whether by Borrower or another entity) is completed pursuant to which holders of an aggregate of 50% or more of the outstanding Shares of Common Stock of Borrower are permitted to tender or exchange their Shares for other securities (whether of Borrower or another Person), cash or property;

(iv) Borrower consummates a stock purchase or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Persons whereby such other Persons acquire more than the 50% of the outstanding Shares of Common Stock (not including any Shares of Common Stock held by such other Persons making or party to, or associated or affiliated with, the other Persons making or party to, such stock purchase or other business combination);

(v) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, in one or a series of related transactions, of 50% or more of the aggregate Common Stock of Borrower; or

 

 

  

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(vi)         Borrower effects any reclassification of the Common Stock or any share exchange pursuant to which more than 50% of the Common Stock of Borrower is effectively converted into or exchanged for other securities (whether of Borrower or another Person), cash or property.  The foregoing provision shall similarly apply to successive Fundamental Transactions of a similar nature by any such successor or purchaser.

	
3.2

	
Continuation of Terms.  Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the Other Securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any Other Securities, including, in the case of any such transfer, the Person acquiring all or substantially all of the properties or assets of the Company, whether or not such Person shall have expressly assumed the terms of this Warrant as provided in Section 4 hereof.  In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then only in such event will the Company’s securities and property (including cash, where applicable) receivable by Holder of the Warrants be delivered to the Trustee as contemplated in connection with the events in this Section 3.2.

3.3           Share Issuance.  Until the Expiration Date, if the Company shall issue any Common Stock, except for the Excepted Issuances (as defined herein), prior to the complete exercise of this Warrant for a consideration less than the Exercise Price then in effect at the time of such issuance, then, and thereafter successively upon each such issuance, the Exercise Price shall be reduced to such other lower price for then outstanding Warrants.  For purposes of this adjustment, the issuance of any equity or debt instrument of the Company, other than the Excepted Issuances, carrying the right to convert such security or debt instrument into Common Stock or of any warrant, right or option to purchase Common Stock shall result in an adjustment to the Exercise Price upon the issuance of the above-described security, debt instrument, warrant, right or option if such issuance is at a price lower than the Exercise Price in effect upon such issuance and again at any time upon any actual, permitted, optional or allowed issuances of shares of Common Stock upon any actual, permitted, optional, or allowed exercise of such conversion or purchase rights if such issuance is at a price lower than the Exercise Price in effect upon any actual, permitted, optional, or allowed issuance. Other than with respect to Excepted Issuances, Common Stock issued or issuable by the Company for no consideration or for consideration that cannot be determined at the time of issue will be deemed issuable or to have been issued for $0.001 per share of Common Stock.  The reduction of the Exercise Price described in this Section 3.3 is in addition to the other rights of Holder described in the Subscription Agreement. Upon any reduction of the Exercise Price, the number of Shares of Common Stock that Holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of Shares of Common Stock that would otherwise (but for the provisions of this Section 3.3) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 3.3) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise. For purposes of this Section 3.3, (“Excepted Issuances”) shall mean:  (i) full or partial consideration in connection with a strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or other entity, (ii) the Company’s issuance of securities in connection with strategic license agreements and other partnering arrangements, (iii) the Company’s issuance of restricted Common Stock or the issuances or grants of options to purchase Common Stock to employees, directors, advisory board members, and consultants pursuant to plans approved by the Company’s board of directors, or (iv) as a result of the exercise of Warrants or conversion of Notes which are granted or issued pursuant to this Agreement and related Agreements entered into on the unamended terms in effect on the Closing Date.

 

3.4           Adjustments for Event of Default.  (a)  Adjustment of Exercise Price.  Upon the occurrence of an Event of Default (as defined in the Note), the Exercise Price shall be adjusted to the lower of (i) the VWAP for the five (5) Trading Days immediately preceding the date of the occurrence of the Event of Default and (ii) the then applicable Warrant Exercise Price (the “Default Exercise Price”).

 

(b)           Issuance of Penalty Warrants.  Upon the occurrence of an Event of Default, Holder shall be entitled to receive additional warrants for each ninety (90) day period the Company remains in default for a default that curable by the Company using its best efforts, under the same terms and conditions of this Warrant (including, but not limited to, the adjustment of the Exercise Price to the Default Exercise Price as set forth in Section 3.4(a) above), in an amount equal to 25% of the original amount of the Warrants issued hereunder.  Such additional Warrants shall be issued in accordance with the procedures set forth in Section 1.6 hereof and shall become due on the first day of every such 90 day period

 

4.           Extraordinary Events Regarding Common Stock.  In the event that the Company shall (a) issue additional Shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding Shares of Common Stock or (c) combine its outstanding Shares of the Common Stock into a smaller number of Shares of Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of Shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of Shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 4. The number of Shares of Common Stock that Holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of Shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise.

 

 

  

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5.           Certificate as to Adjustments.  In each case of any adjustment or readjustment in the Shares of Common Stock (or Other Securities) issuable upon exercise of the Warrants, the Company, at its sole expense, shall promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional Shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of Shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding and (c) the Exercise Price and the number of Shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to Holder and any Warrant Agent of the Company that is appointed pursuant to Section 11 hereof.

 

6.           Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements.   The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all Shares of Common Stock (or Other Securities) from time to time issuable upon the exercise of the Warrant.  This Warrant entitles Holder, upon written request, to receive copies of all financial and other information distributed or required to be distributed to holders of the Company’s Common Stock.

 

7.           Assignment; Exchange of Warrant.  Subject to compliance with applicable securities laws, this Warrant and the rights evidenced hereby may be transferred by any registered Holder (a “Transferor”). On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”), and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws, the Company will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of Shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

 

8.           Replacement of Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

 

9.           Registration Rights.  Holder of this Warrant has been granted certain registration rights by the Company, as set forth in the Subscription Agreement.  The terms of the Subscription Agreement are incorporated herein by reference.

 

10.           Maximum Exercise.  Holder shall not be entitled to exercise this Warrant on an exercise date, in connection with that number of Shares of Common Stock which would be in excess of the sum of (i) the number of Shares of Common Stock beneficially owned by Holder and its Affiliates on an exercise date, (ii) the number of Shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an exercise date and (iii) the number of Shares of Common Stock issuable upon the conversion of the Note, which would result in beneficial ownership by Holder and its Affiliates of more than 4.99% of the outstanding Shares of Common Stock on such date.  For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and Rule 13d-3 thereunder.  Subject to the foregoing, Holder shall not be limited to aggregate exercises which would result in the issuance of more than 4.99%.  The restriction described in this paragraph may be waived, in whole or in part, upon sixty-one (61) days’ prior notice from Holder to the Company to increase such percentage to up to 9.99%, but not in excess of 9.99%.  Holder may decide whether to convert a Note or exercise this Warrant to achieve an actual 4.99% or up to 9.99% ownership position as described above, but not in excess of 9.99%.

 

11.           Warrant Agent.  The Company may, by written notice to Holder, appoint an agent (a “Warrant Agent”) for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1 hereof, exchanging this Warrant pursuant to Section 7 hereof and replacing this Warrant pursuant to Section 8 hereof, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

 

12.           Transfer on the Company’s Books.  Until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

 

13.           Redemption of Warrants. (a)  In the event that (i) (A) the closing bid price of the Company's Common Stock (as reported by OTC Bulletin Board or any other quotation medium on which the Common Stock is then traded) or (B) the closing sale price of the Company’s Common Stock on the Principal Market where it is traded and listed) is at least equal to $6.00 (the “Call Value”) (subject to adjustment for stock splits, stock dividends, reorganizations, and the like) for a twenty (20) consecutive trading day period (“Pre-Call Period”), and (ii) for each trading day during the Pre-Call Period, the trading volume for the Company's Common Stock is at least 70,000 shares, then the Company shall have the right, upon at least ten (10) trading days' prior written notice to the Holder (the “Redemption Notice”), to redeem all or any portion of the shares underlying this Warrant (not previously exercised), at a redemption price equal to the difference between (A) the Call Value per share and (B) the then current per share exercise price (subject to adjustment for stock splits, stock dividends, reorganizations, and the like), which Warrant shall thereafter immediately expire. However, the Company may not exercise such redemption right more than once in any calendar quarter.

 

 

  

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(b)           Any redemption hereunder shall occur on the date specified in the Redemption Notice (“Redemption Date”), provided that such Redemption Date shall occur at least  ten (10) trading days following the date on which the Holder received the Redemption Notice (the “Redemption Notice Date”). The period from the Redemption Notice Date to the Redemption Date shall be referred to herein as the “Post-Call Period”. The Holder may exercise this Warrant, including any portion subject to a Redemption Notice, at any time and from time to time during the Post-Call Period, and the Company shall honor all exercises of this Warrant by the Holder during the Post-Call Period. Any Redemption Notice under this Section shall be irrevocable. If the Company intends to redeem less than all of the then outstanding Warrants issued to Holder under the Subscription Agreement, it shall do so on a pro rata basis among all Subscribers in accordance with this Section. Failure by the Company to redeem this Warrant on a timely basis after delivering a Redemption Notice shall result in the Company being prohibited from exercising such right pursuant to this Section again and shall be a material Event of Default.

(c)           Notwithstanding anything to the contrary herein, the Company shall be prohibited from exercising its right to redeem this Warrant pursuant to this Section unless at all times during the Pre-Call Period and Post-Call Period all the Warrant Shares with respect to this Warrant are covered by an effective registration statement under the 1933 Act and a deliverable prospectus, or such Warrant Shares are freely tradable without such registration.

14.           All notices, demands, requests, consents, approvals and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable overnight air courier service with charges prepaid, or (iv) transmitted by hand delivery or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice in accordance with this Section.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received), (b) on the first business day following the date of mailing by reputable overnight air courier service, fully prepaid, addressed to such address or (c) three (3) business days after in the mail or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

 

If to the Company, to:

Medlink International, Inc.

Attn: Ray Vuono, CEO

1 Roebling Court

Ronkonkama, NY 11779

Facsimile: (888)228-3578

If to Holder:

To the address and facsimile number listed on the first paragraph of this Note.

With a copy to (which copy shall not constitute notice):

Anslow & Jaclin LLP

Attn: Joseph M. Lucosky, Esq.

195 Route 9 South, Suite 204

Manalapan, NJ 07726

Facsimile: (732) 577-1188

 

15.           Law Governing This Warrant.  This Warrant shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party hereto against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Company and Holder waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

[Signature page follows]

 

IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

 

	  	
MEDLINK INTERNATIONAL, INC.

 

 

 

By:           

Name:

Title:

 

 

 

	  	  	  

  

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Exhibit A

FORM OF EXERCISE NOTICE

(to be signed only on exercise of Warrant)

TO:  MEDLINK INTERNATIONAL, INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant (No. A-___), hereby irrevocably elects to purchase (check applicable box):

___           ________ Shares of the Common Stock covered by such Warrant; or

___           the maximum number of Shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2 of the Warrant.

The undersigned herewith makes payment of the full exercise price for such Shares at the price per share provided for in the attached Warrant, which is $___________.  Such payment takes the form of (check applicable box or boxes):

___           $__________ in lawful money of the United States; and/or

___           the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ Shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

___           the cancellation of such number of Shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2 of the Warrant, to exercise this Warrant with respect to the maximum number of Shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2 of the Warrant.

The undersigned requests that the certificates for such Shares be issued in the name of and delivered pursuant to DTC instructions below or to _______________________________________________ whose address is _______________________________________________________

______________________________________ .

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the attached Warrant shall be made pursuant to registration of the Common Stock under the 1933 Act, or pursuant to an exemption from registration under the 1933 Act.

DTC Instructions: __________________________________________________________________________________

	
Dated:___________________

	
 

(Signature must conform to name of holder as specified on the face of the Warrant)

 

 

 

(Address)

 

 

  

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Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

For value received, the undersigned hereby sells, assigns and transfers unto the Person(s) named below under the heading “Transferees” the right represented by the attached Warrant to purchase the percentage and number of Shares of Common Stock of Medlink International, Inc. to which the attached Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such Person(s) and appoints each such Person Attorney to transfer its respective right on the books of Medlink International, Inc. with full power of substitution in the premises.

 

	
Transferees

	
Percentage Transferred

	
Number Transferred

	  	  	  
	  	  	  
	  	  	  

	
Dated:  ______________, ___________

 

 

 

Signed in the presence of:

 

 

(Name)

 

 

ACCEPTED AND AGREED:

[TRANSFEREE]

 

 

 

(Name)

 

	
 

(Signature must conform to name of holder as specified on the face of the warrant)

 

 

 

 

 

(address)

 

 

 

(address)

  

9ex10-5.htm

Exhibit 10.5- Form of Security Agreement

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (the “Agreement”) is made as of November 26, 2010 by and among Medlink International, Inc., a Delaware corporation (the “Company”), and the subscribers identified on the signature pages hereto and their respective endorsees, transferees and assigns (each a “Secured Party” and, collectively, the “Secured Parties”).

 

WHEREAS, pursuant to the Subscription Agreement, dated of even date herewith (the “Subscription Agreement”), among the Company and the Secured Parties, the Company issued to each Secured Party a certain 10% Senior Secured Convertible Debenture (the “Note”).

 

                      NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Certain Definitions.  As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.  Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (as hereinafter defined) (such as “general intangibles” and “proceeds”) shall have the respective meanings given such terms in Article 9 of the UCC.  All other capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Subscription Agreement.

 

a. “Collateral” means all assets of the Company of whatever kind or nature, wherever located, whether now owned or hereafter acquired or arising, including, without limitation, Intellectual Property, and all proceeds and products thereof.

 

b. “Copyrights” shall mean all of the following in which the Company now holds or hereafter acquires any interest: (i) all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof or any other country; (ii) registrations, applications and recordings in the United States Copyright Office or in any similar office or agency of the United States, any State thereof or any other country; (iii) any continuations, renewals or extensions thereof; (iv) any registrations to be issued in any pending applications; (v) prior versions of works covered by copyright and all works based upon, derived from or incorporating such works; (vi) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect to copyrights, including, without limitation, damages, claims and recoveries for past, present or future infringement; (vii) rights to sue for past, present and future infringements of any copyright; (viii) any rights in any material which is copyrightable or which is protected by common law, United States copyright laws or similar laws, or any law of any State, and (ix) any other rights corresponding to any of the foregoing rights throughout the world.

 

c. “Copyright License” shall mean any agreement, written or oral, in which the Company now holds or hereafter acquires any interest, granting any right in or to any Copyright or Copyright registration (whether the Company is the licensee or the licensor thereunder), including, without limitation, licenses pursuant to which the Company has obtained the exclusive right to use a copyright owned by a third party.

 

d. “Intellectual Property” shall mean, collectively, the Software Intellectual Property, Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses and Trade Secrets.

 

e. “Obligations” means all of the Company’s obligations, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later decreased, created or incurred, as such obligations may be amended, supplemented, converted, extended or modified from time to time, under the Note.

 

 

  

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f. “Patents” shall mean all of the following in which the Company now holds or hereafter acquires any interest: (i) all patents of the United States or any other country, all registrations and recordings thereof and all applications for patents of the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country; (ii) all reissues, divisions, continuations, renewals, continuations in part or extensions thereof; (iii) all patents to issue in any such applications; (iv) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect to patents, including, without limitation, damages, claims and recoveries for past, present or future infringement; and (v) rights to sue for past, present and future infringements of any patent.

 

g. “Patent License” shall mean any agreement, whether written or oral, in which the Company now holds or hereafter acquires any interest, granting any right with respect to any Patent (whether the Company is the licensee or the licensor thereunder).

 

h. “Software Intellectual Property” shall mean (i) all software programs (including, without limitation, all source code, object code and all related applications and data files), whether now owned, upgraded, enhanced, licensed or leased or hereafter acquired by the Company; (ii) all domain names and domain name rights used in connection with the Company’s business and that of its subsidiaries, all legal and equitable rights in domain names and ownership thereof, domain registry, domain servers, web hosting and related contracts, services and facilities, and all extensions and renewals thereof, (iii) all computers and electronic data processing hardware and firmware associated therewith; (iv) all right, title and interest in and to any and all present and future license agreements with respect to any of the foregoing, (v) all documentation (including, without limitation, flow charts, logic diagrams, manuals, guides and specifications) with respect to such software, hardware and firmware described in the preceding subclauses (i), (iii) and (iv); (vi) all rights with respect to all of the foregoing, including, without limitation, any and all upgrades, modifications, copyrights, licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and substitutions, replacements, additions, or model conversions of any of the foregoing; and (vii) all present and future accounts, accounts receivable and other rights to payment arising from, in connection with or relating to any of the foregoing.

 

i. “Trademarks” shall mean any of the following in which the Company now holds or hereafter acquires any interest: (i) any trademarks, tradenames, corporate names, company names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof and any applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country (collectively, the “Marks”); (ii) any reissues, extensions or renewals thereof, (iii) the goodwill of the business symbolized by or associated with the Marks, (iv) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect to the Marks, including, without limitation, damages, claims and recoveries for past, present or future infringement and (v) rights to sue for past, present and future infringements of the Marks.

 

j. “Trademark License” shall mean any agreement, written or oral, in which the Company now holds or hereafter acquires any interest, granting any right in and to any Trademark or Trademark registration (whether the Company is the licensee or the licensor thereunder).

 

k. “Trade Secrets” shall mean common law and statutory trade secrets and all other confidential or proprietary or useful information and all know-how obtained by or used in or contemplated at any time for use in the business of the Company (all of the foregoing being collectively called a “Trade Secret”), whether or not such Trade Secret has been reduced to a writing or other tangible form, including, without limitation, all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret Licenses, and including, without limitation, the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license.

 

l. “UCC” means the Uniform Commercial Code, as the same may, from time to time, be in effect in the State of New York; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the Secured Parties’ security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection of priority and for purposes of definitions related to such provisions.

 

 

  

2

  

 

2. Grant of Security Interest; Priority.  (i)  As a further inducement for the Secured Parties to enter into the Subscription Agreement and purchase the Note and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, the Company hereby, unconditionally and irrevocably, pledges, grants and hypothecates to the Secured Parties, jointly, a continuing security interest in, a continuing first priority lien senior to all liabilities of the Company (whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later decreased, created or incurred, as such obligations may be amended, supplemented, converted, extended or modified from time to time), upon, a right to possession and disposition of, and a right of set-off against, in each case to the fullest extent permitted by law, all of the Company’s right, title and interest of whatsoever kind and nature in and to the Collateral (the “Security Interest”).  The Company hereby irrevocably appoints the Lead Subscriber as the Company’s attorney-in-fact, with full authority in the place and stead of the Company and in the name of the Company, from time to time in the Lead Subscriber’s discretion, to take any action and to execute any instrument which the Lead Subscriber may deem necessary or advisable in order to perfect the Security Interest, including the filing, in its sole discretion, of one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of the Company where permitted by law.

 

(ii)           Representations, Warranties, Covenants and Agreements of the Company.  Except as set forth on Schedule A attached hereto, the Company represents and warrants to, and covenants and agrees with, the Secured Parties as follows:

 

a. The Company has the requisite corporate power and authority to enter into this Agreement and otherwise carry out its obligations thereunder.  The execution, delivery and performance by the Company of this Agreement and the filings contemplated therein have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company.  This Agreement constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditor’s rights generally, and general principles of equity.

 

b. The Company is the sole owner of the Collateral, free and clear of any pledges, hypothecations, assignments, deposit arrangements, liens, charges, claim, security interests, security titles, mortgages, security deeds or deeds of trust, easements or encumbrances, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, other than those disclosed in the Reports (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction (collectively, the “Liens”), and is fully authorized to grant the Security Interest in and to pledge the Collateral.  There is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice, whether written or oral, of any of the foregoing (other than those that have been filed in favor of the Secured Parties pursuant to this Agreement) covering or affecting any of the Collateral.  No part of the Collateral or rights in connection therewith has been judged, by any governmental body with proper jurisdiction, to be invalid or unenforceable.  No written claim has been received alleging the Company’s use of any Collateral violates the rights of any third party. There has been no adverse decision to the Company’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to the Company’s right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority. So long as this Agreement shall be in effect, without the prior written consent of the Lead Subscriber, the Company shall not execute and shall not knowingly permit to be on file in any such office or agency any such financing statement or other document or instrument (except to the extent filed or recorded in favor of the Secured Parties pursuant to the terms of this Agreement).

 

c. The Company shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and its Collateral at its principal place of business.

 

d. This Agreement creates in favor of the Secured Parties a valid security interest in the Collateral securing the payment and performance of the Obligations and, upon making the filings described in the immediately following sentence, a perfected first priority security interest in such Collateral and, to the extent that it can be perfected through such filings, the Intellectual Property.  Except for the filing of financing statements on Form-1 under the UCC with the jurisdictions indicated on Schedule A attached hereto, no authorization or approval of or filing with or notice to any governmental authority or regulatory body is required either (i) for the grant by the Company of, or the effectiveness of, the Security Interest granted hereby or for the execution, delivery and performance of this Agreement by the Company or (ii) for the perfection of, or exercise by the Secured Parties of, their rights and remedies hereunder.

 

 

  

3

  

 

e. Prior to or promptly after the date hereof, the Secured Parties shall file or cause to be filed one or more executed UCC financing statements on Form-1 with respect to the Security Interest with the appropriate jurisdictions.  Furthermore, upon request of the Lead Subscriber, the Company shall execute and deliver any and all agreements, instruments, documents, and papers as the Lead Subscriber may request to evidence the Secured Parties’ security interest in the Intellectual Property and the goodwill and general intangibles of the Company relating thereto or represented thereby.

 

f. The execution, delivery and performance of this Agreement does not conflict with or cause a material breach or default, or an event that with or without the passage of time or notice, shall constitute a material breach or default, under any agreement to which the Company is a party or by which the Company or any of its assets is bound.  No consent (including, without limitation, from stockholders or creditors of the Company) is required for the Company to enter into and perform its obligations hereunder.

 

g. The Company shall at all times safeguard, protect and maintain the Collateral for the account of the Secured Parties until this Agreement and the Security Interest hereunder shall terminate pursuant to Section 16 hereof. Without limiting the generality of the foregoing, the Company shall pay all governmental fees and taxes necessary to maintain the Collateral and the Security Interest hereunder, and the Company shall obtain and furnish to the Secured Parties from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required to maintain the priority of the Security Interest hereunder.

 

h. The Company will not transfer, pledge, hypothecate, encumber, sell or otherwise dispose of any of the Collateral without the prior unanimous written consent of Subscribers.

 

i. The Company shall, within ten (10) calendar days of obtaining knowledge thereof, advise the Secured Parties promptly, in sufficient detail, of the occurrence of any event which would or could reasonably have a material adverse effect on the value of the Collateral or on the Secured Parties’ security interest therein, and shall be diligent in its affairs such that such knowledge is readily obtained.

 

j. The Company shall promptly execute and deliver to the Secured Parties such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Secured Parties may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Security Interest.

 

k. The Company shall permit the Secured Parties and its representatives and agents to inspect the Collateral no more than once per continuous thirty (30) day period on at least five (5) business days prior notice and to make copies of records pertaining to the Collateral as may be reasonably requested by the Secured Parties.

 

l. The Company will take all steps necessary, as determined by the Lead Subscriber in its absolute discretion, to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes of action and accounts receivable in respect of the Collateral.

 

m. The Company shall immediately notify the Secured Parties in sufficient detail upon becoming aware of any attachment, garnishment, execution or other legal process levied against any Collateral and of any other information received by the Company that may materially adversely affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder, and shall be diligent in its affairs such that such knowledge is readily obtained.

 

n. All information supplied to the Secured Parties by or on behalf of the Company with respect to the Collateral is accurate and complete in all material respects as of the date hereof, and all information supplied after the date hereof to the Secured Parties shall be accurate in all material respects.

 

o. With respect to any of the Company’s Intellectual Property:

 

i. such Intellectual Property is subsisting and the rights in connection with such Intellectual Property have not been adjudged invalid or unenforceable, in whole or in part;

 

 

  

4

  

 

ii. the rights in connection with such Intellectual Property are valid and enforceable;

 

iii. the Company has made all necessary filings and recordations necessary to protect its interest in such Intellectual Property, including, without limitation, recordations of all of its interests in the Patents, Patent Licenses, Trademarks and Trademark Licenses in the United States Patent and Trademark Office and its claims to the Copyrights and Copyright Licenses in the United States Copyright Office;

 

iv. the Company is the exclusive owner of the entire and unencumbered right, title and/or interest, as applicable, in and to such Intellectual Property and no claim has been made that the use of such Intellectual Property infringes on the asserted rights of any third party; and

 

v. the Company has performed and will continue to perform all acts and has paid all required fees and taxes to maintain its rights with respect to each and every item of Intellectual Property in full force and effect throughout the United States, as applicable.

 

p. The Company shall:

 

i. maintain each Trademark and Copyright in full force free from any claim of abandonment for non-use, maintain as in the past the quality of products and services offered under such Trademark or Copyright; employ such Trademark or Copyright with the appropriate notice of registration; not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark or Copyright, unless the Secured Parties shall obtain a perfected security interest in such mark pursuant to this Agreement; and not (and not permit any licensee or sublicensee thereof to) do any act or omit to do any act whereby any Trademark or Copyright may become invalidated;

 

ii. not do any act, or omit to do any act, whereby any Patent may become abandoned; and

 

iii. notify the Secured Parties immediately if it knows, or has reason to know after reasonable due diligence, that any application or registration relating to any Patent, Trademark or Copyright may become abandoned, or of any material adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in the United States) regarding its ownership of any Patent, Trademark or Copyright or its right to register the same or to keep and maintain the same.

 

q. Whenever the Company, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark Office or the United States Copyright Office or acquire rights to any new Patent, Trademark or Copyright whether or not registered, it shall immediately report in the Secured Parties such action or actions.

 

r. The Company shall take all necessary and advisable steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office or the United States Copyright Office, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the Patents, Trademarks and Copyrights, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability.

 

s. In the event that any Intellectual Property is infringed, misappropriated or diluted by a third party, the Company shall immediately notify the Secured Parties after it learns thereof and shall immediately sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as the Lead Subscriber may reasonably deem to be appropriate in its sole and absolute discretion under the circumstances to protect such Intellectual Property.

 

t. None of such Intellectual Property is the subject of any franchise agreement as of the date of this Agreement.  No holding, decision or judgment has been rendered by any governmental authority which would limit, cancel or question the validity of any such Intellectual Property.  No action or proceeding is pending (i) seeking to limit, cancel or question the validity of any such Intellectual Property or (ii) which, if adversely determined, would have a material adverse effect on the value of any Intellectual Property.  The Company has used and will continue to use for the duration of this Agreement, proper statutory notice in connection with its use of any Intellectual Property and consistent standards of quality in products leased or sold under any such Intellectual Property.

 

 

  

5

  

 

3. Defaults.  The following events shall be “Events of Default”, subject to any applicable “cure” periods:

 

a. The occurrence of an Event of Default as defined in the Note;

 

b. If any representation or warranty of the Company in this Agreement, the Subscription Agreement, Series A1 Warrant, Series A2 Warrant or any other document in relation thereto proves to be incorrect in any material respect when made; and

 

c. The failure by the Company to observe or perform any of its obligations hereunder.

 

4. Duty To Hold In Trust.  Upon the occurrence of an Event of Default, and at any time thereafter, the Company shall, upon receipt by it of any revenue, income or other sums subject to the Security Interest, whether payable pursuant to the Notes or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Secured Parties for application to the satisfaction of the Obligations.

 

5. Rights and Remedies Upon Default.  Upon occurrence and continuance of any Event of Default and at any time thereafter, the Secured Parties shall have the right to exercise all of the remedies conferred to the Secured Parties hereunder and under the Notes, and the Secured Parties shall have all the rights and remedies of a secured party under the UCC and/or any other applicable law (including the Uniform Commercial Code of any jurisdiction in which any Collateral is then subject).

 

6. Indemnification of the Secured Parties.  Neither the Secured Parties nor any of its Affiliates or Representatives will be liable for any action taken or omitted to be taken by it or them under this Agreement in good faith and believed by it or them to be within the discretion or power conferred upon it or them by this Agreement or be responsible for the consequences of any error of judgment (except for fraud, gross negligence, or willful misconduct on the part of the Secured Parties, its Affiliates or Representatives).  THE COMPANY SHALL INDEMNIFY THE SECURED PARTIES AND ITS REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THIS AGREEMENT, EXCEPT AS A RESULT OF FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE SECURED PARTIES, ITS AFFILIATES OR REPRESENTATIVES, FOR WHICH THIS INDEMNITY SHALL NOT APPLY TO THE OFFENDING SECURED PARTY, AFFILIATE OR REPRESENTATIVE (AND ONLY TO SUCH OFFENDING SECURED PARTY, AFFILIATE OR REPRESENTATIVE).  SUCH OFFENDING SECURED PARTY SHALL ASSUME ALL THE INDEMINIFCATIONS DESCRIBED HEREIN UNDER THIS SECTION 6 FOR THE OTHER SECURED PARTIES AND APPLY THE SAME RIGHTS AND INDEMINIFICATIONS AS AFFORDED TO THE SECURED PARTIES TO THE COMPANY.

 

7. Applications of Proceeds.  The proceeds of any sale, lease, assignment, disposition or other transfer (“:Sale”) hereunder shall be applied first, to the expenses of retaking, holding, storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the Secured Parties in enforcing their rights hereunder and in connection with collecting, storing and disposing of the Collateral, and then to satisfaction of the Obligations on a pro rata basis based on the Principal Amount of each Secured Parties’ Notes at the time of the default, and to the payment of any other amounts required by applicable law, after which the Secured Parties shall pay to the Company any surplus proceeds.  If, upon the Sale of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally entitled, then the Company will be liable for the deficiency, together with interest thereon, plus interest at the Default Rate as set forth in the Notes, and the reasonable fees of any attorneys employed by the Secured Parties to collect such deficiency.  To the extent permitted by applicable law, the Company waives all claims, damages and demands against the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, except as a result of fraud, gross negligence or willful misconduct on the part of the Secured Parties, its Affiliates or Representatives, for which this waiver shall not apply to the offending Secured Party, Affiliate or Representative (and only to such offending Securities Party, Affiliate or Representative).

 

 

  

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8. Costs and Expenses.                                                      The Company agrees to pay all out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including without limitation, any financing statements, continuation statements, partial releases and/or termination statements related thereto or any expenses of any searches required by the Lead Subscriber.  The Company shall also pay all other claims and charges which would be expected to prejudice, imperil or otherwise affect the Collateral or the Security Interest therein.  Upon the occurrence and continuance of an Event of Default, the Company shall upon demand, pay to the Secured Parties the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Secured Parties incurs in connection with (a) the enforcement of this Agreement, (b) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, or (c) the exercise or enforcement of any of the rights of the Secured Parties under the Notes, including, without limitation, costs of collection.  Until so paid, any fees payable hereunder shall be added to the principal amount of the Notes ands shall bear interest as set forth in the Notes.

 

9. Responsibility for Collateral.  The Company assumes all liabilities and responsibility in connection with all Collateral, and the obligations of the Company hereunder or under the Notes shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason.

 

10. Security Interest Absolute.  All rights of the Secured Parties and all Obligations of the Company hereunder shall be absolute and unconditional, regardless of: (a) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Notes or any other agreement entered into in connection with the foregoing; (b) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guaranty, or any other security, for all or any of the Obligations; or (c) any action by the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral.  The Company expressly waives presentment, protest and notice of protest.  In the event that at any time any Sale of any Collateral or any payment received by the Secured Parties hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, the Company’s Obligations shall survive termination or cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation or termination of this Agreement, but shall remain a valid and binding obligation, enforceable in accordance with the terms and provisions hereof.  The Company waives all right to require the Secured Parties to marshal assets or pursue any other remedy.

 

11. Term of Agreement.  This Agreement and the Security Interest shall terminate on the date on which all Obligations have been indefeasibly satisfied.

 

12. Power of Attorney; Further Assurances.

 

a. The Company authorizes the Secured Parties, and does hereby make, constitute and appoint it, and its respective officers, agents, successors or assigns with full power of substitution, as the Company’s true and lawful attorney-in-fact, with power, in its own name or in the name of the Company, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any notes, checks, drafts, money orders, or other instruments of payment (including, without limitation, payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Secured Parties; (ii) to sign and endorse any UCC financing statement or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes and Liens at any time levied or placed on or threatened against the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; and (v)  do, in connection with the foregoing, at the option of the Secured Parties, and at the Company’s sole expense, at any time, or from time to time, all other acts and things which the Secured Parties deem necessary to protect, preserve and realize upon the Collateral and the Security Interest granted therein in order to effect the intent of this Agreement and the Notes, all as fully and effectually as the Company might or could do.

 

b. On a continuing basis, the Company will cooperate with the Secured Parties to make, execute, acknowledge, deliver, file and record, as the case may be, in the proper filing and recording places in any applicable jurisdiction, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested by the Secured Parties, to perfect the Security Interest granted hereunder and otherwise to carry out the intent and purposes of this Agreement or the Note, or for assuring and confirming to the Secured Parties the grant or perfection of a Security Interest in all the Collateral.

 

13. Notices.  All notices or other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been duly received:

 

a. if given by fax or email, when transmitted and the appropriate confirmation received, as applicable, if transmitted on a business day and during normal business hours of the recipient, and otherwise on the next business day following transmission;

 

 

  

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b. if given by certified or registered mail, return receipt requested, postage prepaid, three business days after being deposited in the U.S. mail; and

 

c. if given by courier, messenger or other means, when received or personally delivered and, in any such case, addressed as indicated herein, or to such other addresses as may be specified by any Party to the other Parties pursuant to notice given by such Party in accordance with the provisions of this Section.

 

Each party shall provide notice to all of the other parties of any change in address.

 

14. Other Security.  To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other Person, then the Secured Parties shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.

 

15. Miscellaneous.

 

a. No course of dealing between the Company and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

b. All of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby or by the Notes or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.

 

c. This Agreement, the Subscription Agreement, Notes, Series A1 Warrants, Series A2 Warrants and any other related document, and the schedules and exhibits hereto and thereto (which shall be deemed a part of the agreement, document or instrument to which it is attached), constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and is intended to supersede all prior negotiations, understandings and agreements with respect thereto, including the prior Agreement.  Any term of this Agreement may be terminated or amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with written consent of the Company and the holders of more than fifty percent (50%) of the then-outstanding principal amount of the Notes or the full satisfaction of the Obligations by the Company.  Any termination, amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of the Notes, each future holder of the Notes, their successors and assigns, and the Company.

 

d. In the event that any provision of this Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction for any reason, unless such provision is narrowed by judicial construction, this Agreement shall, as to such jurisdiction, be construed as if such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid, prohibited or unenforceable.  If, notwithstanding the foregoing, any provision of this Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such invalidity, prohibition or unenforceability without invalidating the remaining portion of such provision or the other provisions of this Agreement and without affecting the validity or enforceability of such provision or the other provisions of this Agreement in any other jurisdiction.

 

e. No waiver of any breach or default or any right under this Agreement shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default or right, whether of the same or similar nature or otherwise.

 

f. This Agreement shall be binding upon and inure to the benefit of each party hereto and its successors and assigns.

 

g. Each party hereto shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.

 

h. The validity and interpretation of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York.  Each of the parties hereto hereby consents to the exclusive jurisdiction and venue of the Courts of the State of New York, located in the City and County of New York and the United States District Court, Southern District, for the State of New York with respect to any matter relating to this Agreement and performance of the parties’ obligations hereunder, the documents and instruments executed and delivered concurrently herewith or pursuant hereto and performance of the parties’ obligations thereunder and each of the parties hereto hereby consents to the personal jurisdiction of such courts and shall subject itself to such personal jurisdiction.  Any action, suit or proceeding relating to such matters shall be commenced, pursued, defended and resolved only in such courts and any appropriate appellate court having jurisdiction to hear an appeal from any judgment entered in such courts.  The parties hereto irrevocably waive the defense of an inconvenient forum to the maintenance of such suit or proceeding.  Service of process in any action, suit or proceeding relating to such matters may be made and served within or outside the State of New York by registered or certified mail to the parties and their representatives at their respective addresses specified in Section 13 hereof, provided that a reasonable time, not less than thirty (30) days, is allowed for response.  Service of process may also be made in such other manner as may be permissible under the applicable court rules.

 

 

  

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i. Each party hereto hereby agrees to waive its respective rights to a jury trial of any claim or cause of action based upon or arising out of this Agreement.  The scope of this waiver is intended to be all encompassing of any disputes that may be filed in any court and that relate to the subject mater of this Agreement, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims.  Each party hereto acknowledges that this waiver is a material inducement for each party to enter into a business relationship, that each party has relied on this waiver in entering into this Agreement and that each party will continue to rely on this waiver in their related future dealings.  Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel, and that such party has knowingly and voluntarily waives its rights to a jury trial following such consultation.  This waiver is irrevocable, meaning that, notwithstanding anything herein to the contrary, it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, renewals and supplements or modifications to this agreement.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

 

j.           The representations and warranties in this Agreement shall survive the Closing Date for a period of one (1) year thereafter.

 

16. Termination; Release. When all the Obligations have been paid in full, this Agreement shall terminate. Upon termination of this Agreement the Collateral shall be released from the lien of this Agreement and proper documents and instruments (including UCC-3 termination financing statements) acknowledging the termination hereof shall be prepared, executed and filed, as applicable..

 

17. Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

 

18. Facsimile Signature.  In the event that any signature is delivered by facsimile transmission, PDF, electronic signature or other similar electronic means, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

 [Remainder of Page Intentionally Left Blank]

 

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed on the day and year first above written.

 

COMPANY:

 

MEDLINK INTERNATIONAL, INC.

By:           ______________________________________

Name:                      ______________________________________

Title:                      ______________________________________

Notices:                      If to the Company:

Medlink International, Inc.

1 Roebling Court

Ronkonkama, NY 11779

Telephone: 631-342-8800

Facsimile: (888) 228-3578

If to the Subscribers: The addresses and fax numbers indicated on the signature page to the Subscription Agreement.

 

 

 

 

[Signature Page to Security Agreement]

  

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ACKNOWLEDGEMENT

STATE OF ________________________                                                                                     )

 

)  ss.:

 

COUNTY OF ______________________                                                                                     )

 

On the ___ day of __________________, 201__, before me, the undersigned, a notary public in and for such state, personally appeared ________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity as an executive officer on behalf of _________________________, and that by his signature on the instrument, he executed the

 

instrument, and that he make such appearance before the undersigned.

 

 

 

 

__________________________________

 

Notary Public

 

 

[Acknowledgement Page to Security Agreement]

  

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ADDITIONAL SIGNATURE PAGES TO SECURITY AGREEMENT

SECURED PARTY:

By:           ______________________________________

Name:                      ______________________________________

Title:                      ______________________________________

	
  

	
Notices:

with copies to (which shall not constitute notice):

Anslow & Jaclin LLP

195 Route 9 South, 2nd Floor

Manalapan, NJ 07726

Attn: Joseph M. Lucosky, Esq.

Telephone: (732) 409-1212

Facsimile: (732) 577-1188

  

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