NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
No. ___ U.S. $720,000 Original Issue Date: May 24, 2002
Holder: Breckenridge Fund LLC
Address: 00 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx
SERIES 2002A CONVERTIBLE NOTE DUE MARCH 1, 2003
THIS Note is one of a duly authorized issue of Notes of MED-EMERG
INTERNATIONAL, INC., an Ontario corporation, having a principal place of
business at 0000 Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
(the "COMPANY"), designated as its Series 2002A Convertible Notes, due June 1,
2003 (the "NOTES"), in an aggregate principal amount of up to Seven Hundred
Twenty Thousand and 00/100 Dollars ($720,000.00). This Note is acquired by the
Holder (as defined herein) pursuant to the terms of that certain Financing
Agreement dated as of the Original Issue Date (as defined herein), between the
Company and the Holder, as amended, modified or supplemented from time to time
in accordance with its terms ("FINANCING AGREEMENT").
FOR VALUE RECEIVED, the Company promises to pay to the Holder or
registered assigns, the principal sum of Seven Hundred Twenty Thousand and
00/100 Dollars ($720,000.00), on the dates and in the amounts set forth in
Schedule A hereto. Upon default, all amounts due hereunder shall bear interest
at the rate of 18% per annum from the day such interest is due hereunder through
and including the date of payment. The principal of, and interest on, this Note
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address of the Holder last appearing on the Note Register.
This Note is subject to the following additional provisions:
SECTION 1. The Notes are issuable in denominations of Fifty Thousand
Dollars ($50,000.00). The Notes are exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same but shall not be issuable in denominations of
less than integral multiples of Fifty Thousand Dollars ($50,000) unless such
amount represents the full principal balance of Notes outstanding to such
Holder. No service charge will be made for such registration of transfer or
exchange.
SECTION 2.
(a) This Note may not be sold, transferred, assigned,
hypothecated or divided into two or more Notes of smaller denominations, nor may
any Underlying Shares be transferred, sold, assigned or hypothecated except in
accordance with this Section. The Holder, by acceptance hereof, agrees to give
written notice to the Company before transferring this Note or transferring any
Underlying Shares; such notice will describe briefly the any proposed transfer
and will give the Company the name, address, and tax identification number of
the proposed transferee, and will further provide the Company with an opinion of
the Holder's counsel that such transfer can be accomplished in accordance with
federal and applicable state securities laws (unless such transaction is
permitted by the plan of distribution in an effective Registration Statement).
Promptly upon receiving such written notice, the Company shall present copies
thereof to the Company's counsel.
(i) If in the opinion of such counsel the proposed transfer may be
effected without registration or qualification (under any federal or
state securities laws), the Company, as promptly as practicable, shall
notify the Holder of such opinion, whereupon the Holder shall be
entitled to transfer this Note or to dispose of Underlying Shares
received upon the previous conversion of this Note, all in accordance
with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Note or the
certificates for such Underlying Shares respecting restrictions upon
transfer thereof necessary or advisable in the opinion of counsel and
satisfactory to the Company to prevent further transfers which would be
in violation of Section 5 of the Securities Act and applicable state
securities laws; and provided further that the prospective transferee
or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely
to comply with the exemptions relied upon by the Company for the
transfer or disposition of the Note or Underlying Shares.
(ii) If in the opinion of the counsel referred to in this Section 2,
the proposed transfer or disposition of this Note or such Underlying
Shares described in the written notice given pursuant to this Section 2
may not be effected without registration or qualification of this Note
or such Underlying Shares the Company shall promptly give written
notice thereof to the Holder, and the Holder will limit its activities
in respect to such as, in the opinion of such counsel, are permitted by
law.
(b) Prior to transfer of this Note in compliance with this
Section 2, the Company and any agent of the Company may treat the person in
whose name this Note is duly registered on the Note Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note is overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.
SECTION 3. EVENTS OF DEFAULT.
"EVENT OF DEFAULT" wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of,
interest on or liquidated damages, or other obligations on conversion
in respect of, this Note, free of any claim of subordination, as and
when the same shall become due and payable, (whether on a Conversion
Date or the Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit
any breach of, this Note, or the Financing Agreement, and such failure
or breach shall not have been remedied within 10 days after the date on
which notice of such failure or breach shall have been given;
(iii) the Company shall commence a voluntary case
under the United States Bankruptcy Code or insolvency laws as now or
hereafter in effect or any successor thereto (the "BANKRUPTCY CODE");
or an involuntary case is commenced against the Company under the
Bankruptcy Code and the petition is not controverted within 30 days, or
is not dismissed within 60 days, after commencement of such involuntary
case; or a "custodian" (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or any substantial part of the property of
the Company or the Company commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company
or there is commenced against the Company any such proceeding which
remains undismissed for a period of 60 days; or the Company is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company
suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or
unstayed for a period of 60 days; or the Company makes a general
assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay its debts generally as
they become due;r the Company shall call a meeting of all of its
creditors with a view to arranging a composition or adjustment of its
debts; or the Company shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing; or any
corporate or other action is taken by the Company for the purpose of
effecting any of the foregoing;
(iv) the Company shall default in any of its
obligations under any mortgage, credit agreement or other facility,
indenture, agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced any indebtedness
of the Company in an amount exceeding fifty thousand dollars ($50,000),
whether such indebtedness now exists or shall hereafter be created and
such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise
become due and payable;
(v) the Company shall be a party to any Change of
Control Transaction (as defined in Section 6), shall agree to sell or
dispose of all or in excess of 49% of its assets (based on book value
calculation as reflected in the Company's most recent financial
statements) in one or more transactions (whether or not such sale would
constitute a Change of Control Transaction), or shall redeem more than
a DE MINIMIS number of shares of Common Stock or other equity
securities of the Company (other than redemptions of Underlying
Shares);
(vi) the Common Stock shall fail to be listed on the
NASD-OTC Electronic Bulletin Board, or any other national securities
exchange or trading market on which such Common Stock is then listed
for trading or suspended from trading thereon without being relisted or
having such suspension lifted, as the case may be, within 3 Trading
Days;
(vii) the Company shall fail for any reason to
deliver unlegended certificates free of trading restrictions or stop
transfer orders to a Holder on or prior to the fifth (5th) business day
after a Conversion Date, or the Company shall provide notice to the
Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of any Notes in
accordance with the terms hereof; or
(viii) the Company shall fail for any reason to
deliver the payment in cash pursuant to a Buy-In (as defined below)
within ten (10) days after notice is deemed delivered hereunder.
SECTION 4. CONVERSION.
(a) (i) This Note shall be convertible into shares of Common
Stock (subject to the limitation
set forth in Section 4(a)(ii)) at the option of the Holder in whole or
in part at any time and from time to time after the Original Issue Date
and prior to the close of business on the Maturity Date. The number of
shares of Common Stock issuable upon a conversion hereunder shall be
determined by dividing the outstanding principal amount of this Note to
be converted, plus all accrued but unpaid interest thereon, by the
Conversion Price, each as subject to adjustment as provided hereunder.
The Holder shall effect conversions by surrendering the Notes (or such
portions thereof) to be converted, together with the form of conversion
notice attached hereto as EXHIBIT A (the "CONVERSION NOTICE") to the
Company. Each Conversion Notice shall specify the principal amount of
Notes to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date of such Conversion
Notice is deemed to have been delivered pursuant to Section 4(h) (the
"CONVERSION DATE"). If no Conversion Date is specified in a Conversion
Notice, the Conversion Date shall be the date that the Conversion
Notice is deemed delivered pursuant to Section 4(h). Subject to Section
4(b) hereof, each Conversion Notice, once given, shall be irrevocable.
If the Holder is converting less than all of the principal amount
represented by the Note(s) tendered by the Holder with the Conversion
Notice, or if a conversion hereunder cannot be effected in full for any
reason, the Company shall honor such conversion to the extent
permissible hereunder and shall promptly deliver to such Holder (in the
manner and within the time set forth in Section 4(b)) a new Note for
such principal amount as has not been converted.
(ii) CERTAIN CONVERSION RESTRICTIONS. The Holder
agrees not to convert Notes to the extent such conversion would result
in the Holder beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules thereunder) in excess
of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of the Notes held by such
Holder after application of this Section. The Holder shall have the
sole authority and obligation to determine whether the restriction
contained in this Section applies and to the extent the Holder
determines that the restriction contained in this Section applies, the
determination of which portion of the principal amount of such Notes is
convertible shall be in the sole discretion of the Holder. The
provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 65 days prior
notice to the Company. Other Holders shall be unaffected by any such
waiver.
(b) (i) Not later than five (5) Trading Days after the
Conversion Date, the Company will deliver to the Holder (i) a
certificate or certificates free of restrictive legends, trading
restrictions or stop transfer orders representing the number of shares
of the Common Stock being acquired upon the conversion of Notes, (ii)
Notes in a principal amount equal to the principal amount of Notes not
converted; (iii) a bank check in the amount of all accrued and unpaid
interest (if the Company has elected to pay accrued interest in cash),
together with all other amounts then due and payable in accordance with
the terms hereof, in respect of Notes tendered for conversion and (iv)
if the Company has elected and is permitted to pay accrued interest in
shares of the Common Stock, certificates free of restrictive legends,
trading restrictions or stop transfer orders, representing such number
of shares of the Common Stock as equals such interest divided by the
Conversion Price on the applicable Conversion Date; PROVIDED, HOWEVER,
that the Company shall not be obligated to issue certificates
evidencing the shares of the Common Stock issuable upon conversion of
the principal amount of Notes until Notes are either delivered for
conversion to the Company or any transfer agent for the Notes or the
Common Stock, or the Holder notifies the Company that such Note has
been lost, stolen or destroyed and complies with Section 9 hereof (in
which case the Company shall issue a replacement Note in like principal
amount). The Company shall, upon request of the Holder, use its best
efforts to deliver any certificate or certificates required to be
delivered by the Company under this Section electronically through the
Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any
Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of the Common Stock to be
issued on a Conversion Date on account of accrued but unpaid interest
hereunder, are not delivered to or as directed by the applicable Holder
by the third Trading Day after a Conversion Date, the Holder shall be
entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return the
Notes tendered for conversion. The Holder acknowledges that the Company
may only issue unlegended shares if the Registration Statement relating
to such shares has been declared effective by the U.S. Securities and
Exchange Commission. In the event that such Registration Statement is
not effective, the penalties discussed herein shall not be applicable.
(ii) If the Company fails to deliver to the Holder
such certificate or certificates pursuant to this Section, including
for purposes hereof, any shares of the Common Stock to be issued on a
Conversion Date on account of accrued but unpaid interest hereunder,
prior to the 5th Trading Day after a Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a
penalty, an amount equal to 0.5% of the principal amount of Note to be
converted.
(iii) In addition to any other rights available to
the Holder, if the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i), including for
purposes hereof, any shares of Common Stock to be issued on the
Conversion Date on account of accrued but unpaid interest hereunder, by
the fifth (5th ) Trading Day after the Conversion Date, and if after
such third (3rd) Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder was
entitled to receive upon such conversion (a "BUY-IN"), then the Company
shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any)
for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such Holder was
entitled to receive from the conversion at issue multiplied by (2) the
market price of the Common Stock at the time of the sale giving rise to
such purchase obligation and (B) at the option of the Holder, either
return the aggregate principal amount of Notes for which such
conversion was not honored or deliver to such Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its conversion and delivery obligations under
Section 4(b)(i). 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 conversion of $10,000 aggregate principal amount of
Notes, under clause (A) 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. Notwithstanding anything contained
herein to the contrary, if a Holder requires the Company to make
payment in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full such
payment, the Company shall not be required to pay such Holder
liquidated damages under Section 4(b)(ii) in respect of the
certificates resulting in such Buy-In. The remedies in Sections 4(i),
(ii) and (iii) shall be cumulative.
(iv) In the event a Holder shall elect to convert a
Note or part thereof, the Company may not refuse conversion based on
any claim that such Holder or any one associated or affiliated with
such Holder has been engaged in any violation of law, or for any other
reason, unless, an injunction from a court, or notice, restraining and
or enjoining conversion of all or part of said Note shall have been
sought and obtained and the Company posts a surety bond for the benefit
of such Holder in the amount of 130% of the amount of the Note, which
is subject to the injunction, which bond shall remain in effect until
the completion of litigation of the dispute and the proceeds of which
shall be payable to such Holder to the extent Holder obtains judgment.
(c) (i) The conversion price (the "CONVERSION PRICE") in
effect shall be $1.00, or as
adjusted as hereinafter provided.
(ii) If the Company, at any time while any Notes are
outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of the
Common Stock, (b) subdivide outstanding shares of the Common Stock into
a larger number of shares, (c) combine outstanding shares of the Common
Stock into a smaller number of shares, or (d) issue by reclassification
of shares of the Common Stock any shares of capital stock of the
Company, the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding before such event and
of which the denominator shall be the number of shares of the Common
Stock outstanding after such event. Any adjustment made pursuant to
this Section 4(c)(ii) shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any Notes are
outstanding, shall issue rights or warrants to all holders of the
Common Stock (and not to Holders of Notes) entitling them to subscribe
for or purchase shares of the Common Stock at a price per share less
than the Per Share Market Value of the Common Stock at the record date
mentioned below, the Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the
Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of
additional shares of the Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of
the Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so
offered would purchase at such Per Share Market Value. Such adjustment
shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or
warrants. However, upon the expiration of any right or warrant to
purchase shares of the Common Stock the issuance of which resulted in
an adjustment in the Conversion Price pursuant to this Section
4(c)(iii), if any such right or warrant shall expire and shall not have
been exercised, the Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration
be increased to the price which it would have been (but reflecting any
other adjustments in the Conversion Price made pursuant to the
provisions of this Section 4 after the issuance of such rights or
warrants) had the adjustment of the Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of the Common
Stock actually purchased upon the exercise of such rights or warrants
actually exercised.
(iv) If the Company, as applicable with respect to
Common Stock Equivalents (as defined below), at any time while Notes
are outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that is convertible into
or exchangeable for shares of Common Stock ("COMMON STOCK EQUIVALENTS")
entitling any Person to acquire shares of Common Stock at a price per
share less than the Conversion Price, then the Conversion Price shall
be multiplied by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to the issuance
of shares of Common Stock or such Common Stock Equivalents plus the
number of shares of Common Stock which the offering price for such
shares of Common Stock or Common Stock Equivalents would purchase at
the Conversion Price, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to
such issuance plus the number of shares of Common Stock so issued or
issuable, provided, that for purposes hereof, all shares of Common
Stock that are issuable upon
exercise or exchange of Common Stock Equivalents shall be deemed
outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such shares of
Common Stock or Common Stock Equivalents are issued.
(v) If the Company, at any time while Notes are
outstanding, shall distribute to all holders of the Common Stock (and
not to Holders of Notes) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security, then in
each such case the Conversion Price at which Notes shall thereafter be
convertible shall be determined by multiplying the Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the Per Share Market Value of the Common
Stock determined as of the record date mentioned above, and of which
the numerator shall be such Per Share Market Value of the Common Stock
on such record date less the then fair market value at such record date
of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; PROVIDED, HOWEVER,
that in the event of a distribution exceeding ten percent (10%) of the
net assets of the Company, such fair market value shall be determined
by a nationally recognized or major regional investment banking firm or
firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements
of the Company) (an "APPRAISER") selected in good faith by the holders
of a majority in interest of Notes then outstanding; and PROVIDED,
FURTHER, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser, in
good faith, in which case the fair market value shall be equal to the
average of the determinations by each such Appraiser. In either case
the adjustments shall be described in a statement provided to the
holders of Notes of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one share of
the Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
(vi) In case of any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is converted into other securities, cash or property, the Holder
of this Note shall have the right thereafter to, at its option, convert
the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect
of this Note only into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of the
Common Stock following such reclassification or share exchange, and the
Holders of the Notes shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common
Stock of the Company into which the then outstanding principal amount,
together with all accrued but unpaid interest and any other amounts
then owing hereunder in respect of this Note could have been converted
immediately prior to such reclassification or share exchange would have
been entitled. The terms of any such reclassification or share exchange
shall include such terms so as to continue to give to the Holder the
right to receive the securities, cash or property set forth in this
Section 4(c)(viii) upon any conversion following such event. This
provision shall similarly apply to successive reclassifications or
share exchanges.
(vii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; or
D. the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common
Stock of the Company, any consolidation or merger to which the Company
is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share of exchange whereby the
Common Stock is converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of the Notes, and shall cause
to be mailed to the Holders of Notes at their last addresses as they
shall appear upon the stock books of the Company, at least 30 calendar
days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; PROVIDED, HOWEVER, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in
such notice. Holders are entitled to convert Notes during the 30-day
period commencing the date of such notice to the effective date of the
event triggering such notice.
(viii) All calculations under this Section 4 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case
may be.
(ix) Whenever the Conversion Price is adjusted
pursuant to Section 4(c), the Company shall promptly mail to each
Holder of Notes, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(x) Notwithstanding anything to the contrary herein,
in no event shall the Conversion Price be adjusted for (i) issuances of
shares upon exercise of any warrants, options or convertible securities
outstanding as of the date hereof, or (ii) issuances of options (or
shares upon the exercise thereof) pursuant to the Company's 1997 Stock
Option Plan.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are
not adequately covered by the other provisions hereof and which might
materially and adversely affect the rights of the Holders (different
than or distinguished from the effect generally on rights of holders of
any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated
by the Company, the Company shall mail a written notice briefly
describing the action contemplated and the material adverse effects of
such action on the rights of the Holders at least 30 calendar days
prior to the effective date of such action, and an Appraiser selected
by the Holders of majority in interest of the Notes shall give its
opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 4), of the Conversion Price
(including, if necessary, any adjustment as to
the securities into which Notes may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting
the rights of the Holders; PROVIDED, HOWEVER, that the Company, after
receipt of the determination by such Appraiser, shall have the right to
select an additional Appraiser, in good faith, in which case the
adjustment shall be equal to the average of the adjustments recommended
by each such Appraiser. The Board of Directors shall make the
adjustment recommended forthwith upon the receipt of such opinion or
opinions or the taking of any such action contemplated, as the case may
be; PROVIDED, HOWEVER, that no such adjustment of the Conversion Price
shall be made which in the opinion of the Appraiser(s) giving the
aforesaid opinion or opinions would result in an increase of the
Conversion Price to more than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of the
Common Stock solely for the purpose of issuance upon conversion of the
Notes and payment of interest on the Notes, each as herein provided,
free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of
shares of the Common Stock as shall (subject to any additional
requirements of the Company as to reservation of such shares set forth
in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(c)) upon the conversion of
the outstanding principal amount of the Notes and payment of interest
hereunder. The Company covenants that all shares of the Common Stock
that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Registration Statement has been declared effective under the Securities
Act, freely tradeable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the Per
Share Market Value at such time. If the Company elects not, or is
unable, to make such a cash payment, the holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of
Common Stock.
(g) The issuance of certificates for shares of the Common
Stock on conversion of the Notes shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than
that of the Holder of such Notes so converted and the Company shall not
be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Notes hereunder, including,
without limitation, any Conversion Notice, shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to the Company, at 0000 Xxxxxxxx Xxxx, Xxxxx
000, Xxxxxxxxxxx, Xxxxxxx Xxxxxx X0X 0X0 (facsimile number
(_905-858-1399), attention President, or such other address or
facsimile number as the Company may specify for such purposes by notice
to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or
sent by certified or registered mail, postage prepaid, addressed to
each Holder of the Notes at the facsimile telephone number or address
of such Xxxxxx appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place
of business of the
holder. Any notice or other communication or deliveries hereunder shall
be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section
prior to 5:00 p.m. (New York City time), (ii) the date after the date
of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section
later than 5:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) four days after
deposit in the United States mails, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier
service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
SECTION 5. PREPAYMENT.
(a) The Company shall have the right to prepay this Note in
whole or in part thereon prior to the Maturity Date provided that, if
such Prepayment Date is prior to 180 days of this Note, the prepayment
premium shall be $ 690,000 plus all accrued interest. If such
Prepayment Date is thereafter, the amount shall be $720,000 plus all
accrued interest.
(b) (i) The Company shall give at least five (5) business
days, but not more than ten (10) business days, written notice of any
intention to prepay this Note prior to the Maturity Date to the Holder
which notice shall specify the "Prepayment Date".
SECTION 6. DEFINITIONS. For the purposes hereof, the
following terms shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law
or other government action to close.
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act) of in excess of 49% of the voting securities of the
Company coupled with a replacement of more than one-half of the members
of the Company's board of directors which is not approved by those
individuals who are members of the board of directors on the date
hereof in one or a series of related transactions, or (ii) the merger
of the Company with or into another entity, consolidation or sale of
all or substantially all of the assets of the Company in one or a
series of related transactions, unless following such transaction, the
holders of the Company's securities continue to hold at least 40% of
such securities following such transaction. The execution by the
Company of an agreement to which the Company is a party or by which it
is bound providing for any of the events set forth above in (i) or (ii)
does not constitute the occurrence of the event until after the event
in fact occurs.
"COMMON STOCK" means the Company's common stock, no par value
per share, and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"ORIGINAL ISSUE DATE" shall mean the date of the first
issuance of any Notes regardless of the number of transfers of any Note
and regardless of the number of instruments which may be issued to
evidence such Note.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual,
a government or political subdivision thereof or a governmental agency.
SECTION 7. Except as expressly provided herein, no provision
of this Note shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, interest and
liquidated damages (if any) on, this Note at the time, place, and rate,
and in the coin or currency, herein prescribed. This Note is a direct
obligation of the Company. This Note ranks PARI PASSU with all other
Notes now or hereafter issued under the terms set forth herein.
SECTION 8. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu
of or in substitution for a lost, stolen or destroyed Note, a new Note
for the principal amount of this Note so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Note, and of the ownership hereof, and indemnity,
if requested, all reasonably satisfactory to the Company.
SECTION 9. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Each of the parties
consents to the exclusive jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection,
including any objection based on FORUM NON COVENIENS, to the bringing
of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Holder for any
reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under any of this
Note.
SECTION 10. Any waiver by the Company or the Holder of a
breach of any provision of this Note shall not operate as or be
construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Note. The failure of the
Company or the Holder to insist upon strict adherence to any term of
this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Note. Any waiver must
be in writing.
SECTION 11. If any provision of this Note is invalid, illegal
or unenforceable, the balance of this Note shall remain in effect, and
if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and
circumstances.
SECTION 12. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next calendar month, the preceding Business
Day in the appropriate calendar month).
SECTION 13. SECURITY. The obligation of the Company for
payment of principal, interest and all other sums hereunder, in the
event of a default and failure of the Company to perform hereunder, is
secured solely by the pledge of certain securities (the "COLLATERAL
SHARES") under the terms and conditions of a Stock Pledge Agreement, by
reference made a part of the terms of this Note.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer duly authorized for such purpose, as of the date first
above indicated.
MED-EMERG INTERNATIONAL, INC.
By:________________________________
, President
Attest:
By:___________________________
SCHEDULE A
DATE OF PAYMENT AMOUNT
--------------- ------
July 1, 2002 $ 20,000
August 1, 2002 $ 20,000
September 1, 2002 $ 20,000
October 1, 2002 $ 30,000
November 1, 2002 $ 30,000
December 1, 2002 $ 30,000
January 1,2003 $ 35,000
February 1, 2003 $ 35,000
March 1, 2003 $ 35,000
April 1, 2003 $ 35,000
May 1, 2003 $ 35,000
June 1, 2003 $ 395,000
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[5/24A/02]
