EXHIBIT 10.10
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO METROPOLITAN
HEALTH NETWORKS, INC., THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, METROPOLITAN HEALTH NETWORKS, INC., a Florida
corporation (hereinafter called the "BORROWER"), hereby promises to pay to
LAURUS MASTER FUND, LTD., x/x Xxxxxxx Xxxxxxxxx Xxxxxxxx Xxx., X.X. Xxx 0000
G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax:
000-000-0000 (the "HOLDER") on order, without demand, the sum of One Million Two
Hundred Thousand Dollars ($1,200,000), with simple interest accruing at the
annual rate of 5%, on June 19, 2002 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a seven (7) day
grace period to pay any monetary amounts due under this Note, after which grace
period a default interest rate of five percent (5%) per annum above the then
applicable interest rate hereunder shall apply to the amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth in
Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full.
1.3 Interest Rate. (a) Interest payable on this Note shall accrue
at the annual rate of five percent (5%) and be payable in arrears commencing one
month from the date hereof and on the successive one month anniversary dates of
the date hereof thereafter, and on the Maturity Date, accelerated or otherwise,
when the principal and remaining accrued but unpaid interest shall be due and
payable, or sooner as described below.
(b) In addition to the interest rate set forth above in
Section 1.3(a), an additional fee on this Note shall accrue at the annual
rate of twenty percent (20%) and be payable in arrears commencing one month
from the date hereof and on the successive one month anniversary dates of the
date hereof thereafter, and on the Maturity Date, accelerated or otherwise,
when the principal and accrued but unpaid interest shall
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be due and payable, or sooner as described below. Notwithstanding the foregoing,
for every $120,000 in principal amount of the Note that the Holder actually
converts into Common Stock solely in connection with an Optional Conversion
Notification (as defined below), the annual rate of the additional fees payable
as set forth in this subsection shall be reduced by 1.25% and shall be deemed
the rate retroactive to the date hereof. In such event, any amounts already
received by the Holder with respect to such additional fees shall be rebated to
the Borrower. Upon the Holder's conversion of the remaining principal amount of
the Note, the annual rate of the additional fees payable as set forth in this
subsection shall be reduced by 7.5% and shall be deemed the rate retroactive to
the date hereof. In such event, any amounts already received by the Holder with
respect to such additional fees shall be rebated to the Borrower.
ARTICLE II
CONVERSION RIGHTS
At any time during the term of this Note, the Borrower may deliver a
written notification (the "OPTIONAL CONVERSION NOTIFICATION") to the Holder
setting forth the portion of the principal amount of the Note and/or interest
due and payable (the "INVESTMENT AMOUNT") that the Borrower authorizes the
Holder to exercise its conversion rights with respect thereto, subject to the
terms and provisions set forth below. Except upon the occurrence of an Event of
Default hereunder, in which event the Holder shall have the right to convert the
entire principal amount and interest due under this Note into shares of the
Borrower's Common Stock, as set forth below, unless the Borrower delivers an
Optional Conversion Notification to the Holder, the Holder will not be permitted
to exercise its rights to convert any portion of the Note to Common Stock.
2.1. Conversion into the Borrower's Common Stock.
(a) Subject to the Holder's receipt of an Optional Conversion
Notification, as described above or following the occurrence of an Event of
Default hereunder, the Holder shall have the right, but not the obligation, from
and after the receipt of an Optional Conversion Notification or the occurrence
of any Event of Default, as the case may be, and then at any time until this
Note is fully paid, to convert the principal portion of this Note and/or
interest due and payable set forth in each such Optional Conversion Notification
or the entire principal portion of this Note and/or interest due and payable
following the occurrence or an Event of Default, as the case may be, into fully
paid and nonassessable shares of common stock of the Borrower as such stock
exists on the date of issuance of this Note, or any shares of capital stock of
the Borrower into which such stock shall hereafter be changed or reclassified
(the "COMMON STOCK") at the conversion price as defined in Section 2.1(b) hereof
(the "CONVERSION PRICE"), determined as provided herein. Upon delivery to the
Borrower of a Notice of Conversion as described in Section 8 of the Securities
Purchase Agreement entered into between the Borrower and certain persons who are
signatories thereto, including the Holder, relating to this Note (the "PURCHASE
AGREEMENT") of the Holder's written request for conversion (the date of giving
such notice of conversion being a "CONVERSION DATE"), the Borrower shall issue
and deliver to the Holder within three business days from the Conversion Date
that number of shares of Common Stock for the portion of the Note converted in
accordance with the foregoing. At the election of the Holder, the Borrower will
deliver accrued but unpaid interest on the Note through the Conversion Date
directly to the Holder on or before the
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Delivery Date (as defined in the Purchase Agreement). The number of shares of
Common Stock to be issued upon each conversion of this Note shall be determined
by dividing that portion of the principal of the Note to be converted and
interest, if any, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof,
the Conversion Price per share shall be the lower of (i) one hundred and three
percent (103%) of the average of the three lowest closing prices for the Common
Stock on the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National
Market System, American Stock Exchange, or New York Stock Exchange (whichever of
the foregoing is at the time the principal trading exchange or market for the
Common Stock, the "PRINCIPAL Market"), or if not then trading on a Principal
Market, such other principal market or exchange where the Common Stock is listed
or traded, for the thirty (30) trading days prior to but not including the
Closing Date (as defined in the Purchase Agreement) in connection with which
this Note is issued ("MAXIMUM BASE PRICE"); or (ii) eighty percent (80%) of the
average of the three lowest closing prices for the Common Stock on the Principal
Market, or on any securities exchange or other securities market on which the
Common Stock is then being listed or traded, for the thirty (30) trading days
prior to but not including the Conversion Date. Notwithstanding the foregoing,
unless an Event of Default shall have occurred and be continuing hereunder (in
which case the Floor Price shall not be applicable), in no event shall the
Conversion Price be less than $1.00 per share ("FLOOR PRICE").
(c) The Maximum Base Price described in Section 2.1(b)(i) above,
Floor Price described in Section 2.1(b) above and number and kind of shares or
other securities to be issued upon conversion determined pursuant to Section
2.1(a) and 2.1(b), shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding, as
follows:
A. Merger, Sale of Assets, etc. If the Borrower at any
time shall consolidate with or merge into or sell or convey all or substantially
all its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, this Note, as to
the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately prior to such
reclassification or other change.
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C. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Conversion Price shall be proportionately reduced
in case of subdivision of shares or stock dividend or proportionately increased
in the case of combination of shares, in each such case by the ratio which the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event.
(d) During the period the conversion right exists, the Borrower
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the full conversion
of this Note. The Borrower represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable. The Borrower agrees that
its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by the Holder
in whole or in part as described in Section 2.1(a) hereof and the Purchase
Agreement. Upon partial conversion of this Note, a new Note containing the same
date and provisions of this Note shall, at the request of the Holder, be issued
by the Borrower to the Holder for the principal balance of this Note and
interest which shall not have been converted or paid.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default ("EVENT OF
DEFAULT") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, all without demand, presentment or
notice, or grace period, all of which hereby are expressly waived, except as set
forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails to
pay any installment of principal or interest hereon or on any other promissory
note issued pursuant to the Purchase Agreement, when due and such failure
continues for a period of five (5) days after the due date.
3.2 Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of this Note or the Purchase Agreement in
any material respect and such breach, if subject to cure, continues for a period
of seven (7) days after written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Purchase
Agreement, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection therewith shall be false or misleading.
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3.4 Receiver or Trustee. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final process
shall be entered or filed against the Borrower or any of its property or other
assets for more than $100,000, and shall remain unvacated, unbonded or unstayed
for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower.
3.7 Delisting. Delisting of the Common Stock from the Principal
Market or such other principal exchange on which the Common Stock is listed for
trading; the Borrower's failure to comply with the conditions for listing; or
notification that the Borrower is not in compliance with the conditions for such
continued listing.
3.8 Concession. A concession by the Borrower, after applicable
notice and cure periods, under any one or more obligations in an aggregate
monetary amount in excess of $100,000.
3.9 Stop Trade. An SEC stop trade order or Principal Market
trading suspension for a period greater than three consecutive trading days.
3.10 Failure to Deliver Common Stock or Replacement Note. The
Borrower's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Section 8 of the Purchase Agreement, or if
required a replacement Note.
3.11 Registration Default. The occurrence of a Non-Registration
Event as described in Section 9.4 of the Purchase Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
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4.2 Notices. Any notice herein required or permitted to be given
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party notified, (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Borrower at the address as set forth on the signature page to the Purchase
Agreement executed in connection herewith and to the Holder at the address set
forth on the signature page to the Purchase Agreement for such Holder, with a
copy to Xxxxxx X. Xxxxxx, Esq., 000 Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, facsimile number (000) 000-0000, or at such other address as the
Borrower or the Holder may designate by ten days advance written notice to the
other parties hereto. A Notice of Conversion shall be deemed given when made to
the Borrower pursuant to the Purchase Agreement.
4.3 Amendment Provision. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder.
4.5 Cost of Collection. If default is made in the payment of this
Note, the Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
4.6 Governing Law. This Note 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 against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. 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 Note 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 with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note.
4.7 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
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4.8 Security Interest. The holder of this Note has been granted a
security interest in common stock of the Borrower more fully described in a
Security Agreement.
4.9 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its name by its Chief Executive Officer on this 6th day of March, 2002.
METROPOLITAN HEALTH NETWORKS, INC.
By:
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WITNESS:
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