EXHIBIT B
EXHIBIT
B
THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS
CONVERTIBLE
PROMISSORY NOTE
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$_________________
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_____________,
2009
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FOR VALUE
RECEIVED, the undersigned, APOLLO MEDICAL HOLDINGS, INC. (AMEH.OB),
a company organized under the laws of the State of Delaware (the "Company"),
promises to pay to the order of _________________ or its
registered assigns (the "Holder"), the principal sum of ______________ dollars ($___________), with interest
from the date hereof at the rate of 10% per annum on the unpaid balance hereof
until paid.
1. Principal. If not
earlier converted pursuant to Section 3(a) hereof, the principal of this Note
shall be payable on January 31, 2013 ("Due Date").
2. Interest. The Notes
will bear interest at a rate of 10.0% per year. Interest (including additional
interest, if any) will be paid semi-annually in arrears on January 31st and
July 31st of each
year beginning on January 31st,
2010.
Interest
will be paid to the person in whose name a note is registered at the close of
business on January 15th and
June 15th as the
case may be (whether or not the day is a business day), immediately preceding
the relevant interest payment date. Interest on the Notes will be computed on a
360-day year comprised of twelve 30-day months and will accrue from the date of
the original issuance of the Notes. If any interest payment date falls on a date
that is not a business day, such payment of interest (or principal in the case
of the final maturity date or any earlier repurchase date for the Notes) will be
made on the next succeeding business day, and no interest or other amount will
be paid as a result of any such delay. For purposes herein, an "Event
of Default" exists if the Company fails to make a payment required by Section 1
or 2 hereof, and such failure is not cured within 10 days following written
notice from the Holder.
3. Conversion Events and
Mechanics of Conversion.
(a) Conversion. The
noteholder may convert the principal and unpaid interest to the Company's Common
Stock at any time on or before the maturity date.
(b) Mechanics of
Conversion. The Company shall not be obligated to issue certificates
evidencing the Common Stock issuable upon a Conversion Event unless this Note is
either delivered to the Company, duly endorsed, at the office of the Company, or
the Holder notifies the Company that this Note has been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with this Note. As soon as
practicable after delivery of the Note, or delivery of an agreement and
indemnification in the case of a lost Note, the Company shall issue and deliver
to the Holder a certificate or certificates for the number of shares of Common
Stock to which the Holder shall be entitled (the "Conversion Shares"), and a
check payable to the Holder in the amount equal to the cash amounts payable as a
result of a conversion into fractional shares of such preferred stock. Any
Conversion Event shall be deemed to have occurred immediately prior to the close
of business on the date of the Conversion Event, and the Holder entitled to
receive the preferred stock issuable upon such conversion shall be treated for
all purposes as the record holder of such preferred stock on such
date.
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(c) Conversion
Price Adjustment. At the end of each month
during which the principal of the Note is unpaid; the conversion price (CP),
subject to being no less than the Floor Price, shall be adjusted to the lesser
of:
o the
existing conversion price, or
o an
adjusted conversion price calculated using the following formula: CP = SP x
110%
Where: SP
is the average of the monthly high stock price and low stock price as reported
by Bloomberg, and Where
Floor Price is:
o $0.125
during the period August 1, 2009 through July 31, 2011 and,
o After
July 31, 2011, the lesser of $0.125 or the greater of either $0.05 per share or
8 times Cash EPS. Cash EPS is defined as Net Cash Provided by or used in
Operating Activities minus Depreciation and Amortization divided by fully
diluted share shares outstanding as reported on the most recently filed forms
10-Q or 10-K for the previous twelve months. The Note will be considered to
outstanding for the purposes of calculating Cash EPS.
The
shares of Common Stock underlying the Note will have anti-dilution protection
for stock splits, stock dividends, and/or similar transactions.
(d) Fractional
Shares. No fractional shares of Common Stock shall be issued upon
conversion of this Note. In lieu of any fractional shares to which the Holder
would otherwise be entitled, the Company shall pay cash equal to such fraction
multiplied by the Conversion Price if the amount is greater than
$0.125.
4. Transfer
Restrictions. The Holder shall not transfer the Note or the Conversion
Shares (except to its own affiliate, subsidiary, or shareholders) until (a) it
has first given written notice to the Company, describing briefly the manner of
any such proposed transfer; and (b) (i) the Company has received from counsel
satisfactory to the Company an opinion that such transfer can be made without
compliance with the registration requirements of the Securities Act of 1933, as
amended (the "1933 Act"), and applicable state securities laws, or (ii) a
registration statement filed by the Company under the 1933 Act and applicable
state securities laws is declared effective by the Securities and Exchange
Commission and state securities commissions having jurisdiction.
5. Currency; Payments.
All references herein to "dollars" or "$" are to U.S. dollars, and all
payments of principal of, and interest on, this Note shall be made in lawful
money of the United States of America in immediately available funds. If the
date on which any such payment is required to be made pursuant to the provisions
of this Note occurs on a Saturday or Sunday or legal holiday observed in the
State of California, such payments shall be due and payable on the immediately
succeeding date which is not a Saturday or Sunday or legal holiday so
observed.
6. Representations and
Warranties of Holder. Holder hereby represents and warrants
that:
(a) Securities Not
Registered. Holder is acquiring the Note for its own account, not as an
agent or nominee, and not with a view to, or for sale in connection with, any
distribution thereof in violation of applicable securities laws. By executing
this Note, Xxxxxx further represents that Holder does not have any present
contract, undertaking, understanding or arrangement with any person to sell,
transfer or grant participations to such persons or any third person, with
respect to the Note.
(b) Access to
Information. The Company has made available to Holder the opportunity to
ask questions of and to receive answers from the Company's officers, directors
and other authorized representatives concerning the Company and its business and
prospects, and Xxxxxx has been permitted to have access to all information which
it has requested in order to evaluate the merits and risks of the purchase of
the Note.
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(c) Investment
Experience. Holder is an investor in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the purchase of the Note.
(d) Regulation X. Xxxxxx
is an "accredited investor" as defined in Rule 501 under the 1933 Act. In the
normal course of business, Holder invests in or purchases securities similar to
the Note and the Series A Convertible Preferred Stock and has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of purchasing the Note. The Holder is not a registered broker
dealer or an affiliate of any broker or dealer registered under Section 15(a) of
the Exchange Act of 1934, as amended, or a member of the National Association of
Securities Dealers, Inc. or a Person engaged in the business of being a broker
dealer.
(e) Unregistered. Holder
has been advised that (i) neither the Note nor the Common Stock issuable upon
conversion of the Note has been registered under the 1933 Act or other
applicable securities laws, (ii) the common stock issuable upon conversion of
the Note may need to be held indefinitely, and Holder must continue to bear the
economic risk of the investment in
the common stock issuable upon conversion of the Note is subsequently
registered under the 1933 Act or an exemption from such registration is
available, (iii) when and if the common stock issuable upon conversion of the
Note may be disposed of without registration in reliance on Rule 144 promulgated
under the 1933 Act, such disposition can be made only in limited amounts in
accordance with the terms and conditions of such Rule, and Holder must deliver
an opinion of counsel to the Company reasonably acceptable to the Company in
form, substance and scope to the effect that the common stock may be sold or
transferred under an exemption from such registration, and (iv) if the Rule 144
exemption is not available, public sale without registration will require
compliance with an exemption under the 1933 Act.
(g) Pre-Existing
Relationship. Holder has a pre-existing personal or business relationship
with the Company or any of its officers, directors or controlling persons, or by
his/its business or financial experience or the business or financial experience
of his/its financial advisors who are unaffiliated with and who are not
compensated by the Company, directly or indirectly, could be reasonably assumed
to have the capacity to protect his/its own interest in connection with the
acquisition of the Note and the common stock into which it
converts.
(h) No Advertisement.
Holder acknowledges that the offer and sale of the Note or the common stock into
which it converts was not accomplished by the publication of any
advertisement.
(i) No Review. Holder
understands that no arbitration board or panel, court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, has passed upon or made any recommendation
or endorsement of the common stock into which it converts.
(j) Holder
understands that the Common Stock into which the Note may convert shall bear a
restrictive legend in substantially the following form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.
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7. Survival of Representation
and Warranties. All representations and warranties made by Holder shall
survive the earlier of the Due Date and shall remain effective and enforceable
until the earlier to occur of the Due Date or the date on which claims based
thereon shall have been barred by the applicable statutes of
limitation.
8. Waiver. The Company
expressly waives presentment, protest, demand, notice of dishonor, notice of
nonpayment, notice of maturity, notice of protest, presentment for the purpose
of accelerating maturity, and diligence in collection.
9. Attorneys' Fees and
Costs. In the event of any legal proceedings in connection with this
Note, all expenses in connection with such legal proceedings of the prevailing
party, including reasonable legal fees and applicable costs and expenses, shall
be reimbursed by the non-prevailing party upon demand. This provision shall not
merge with any enforcement order or judgment on this Note and shall be
applicable to any proceeding to enforce or appeal any judgment relating to the
Note.
10. Severability. If any
one or more of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provisions
hereof shall not be in any way impaired, unless the provisions held invalid,
illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
11. Successors and
Assigns. This Note shall inure to the benefit of the Holder and its
successors and permitted assigns and shall be binding upon the undersigned and
its successors and permitted assigns. As used herein, the term "Holder" shall
mean and include the successors and permitted assigns of the
Holder.
12. Governing Law. The
parties acknowledge and agree that this Note and the rights and obligations of
all parties hereunder shall be governed by and construed under the laws of the
State of California, without regard to conflict of laws principles.
13. Modification. This
Note may not be modified or amended orally, but only by an agreement in writing
signed by the party against whom such agreement is sought to be
enforced.
14. Entire Agreement.
This Note constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes any and all prior written or
oral agreements and understandings with respect to the matters covered
hereby.
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a
Delaware corporation
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EXHIBIT
D
IR
S Form
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