EXHIBIT 10.2
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: May 19, 2006
12% SENIOR SECURED CONVERTIBLE DEBENTURE
DUE May 19, 2007
THIS 12% SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly
authorized and issued 12% Senior Secured Convertible Debentures of
PracticeXpert, Inc., a Nevada corporation, having a principal place of business
at 00000 Xxxx Xxxxxxxx Xxxxx, Xx.000 Xxxxxxxx, Xxxxxxxxxx 00000 (the "Company"),
designated as its 12% Senior Secured Convertible Debenture, due May 19, 2007
(this debenture, the "Debenture" and collectively with the other such series of
debentures, the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to ________________ or its
registered assigns (the "Holder"), or shall have paid pursuant to the terms
hereunder, the principal sum of $___________ by May 19, 2007, or such earlier
date as this Debenture is required or permitted to be repaid as provided
hereunder (the "Maturity Date"), and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof. This Debenture is subject to the
following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:
"ALTERNATE CONSIDERATION" shall have the meaning set forth in Section
5(d).
"BASE CONVERSION PRICE" shall have the meaning set forth in Section 5(b).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States 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.
"BUY-IN" shall have the meaning set forth in Section 4(d)(v).
"CHANGE OF CONTROL TRANSACTION" means the occurrence after the date hereof
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 effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of a 50% of the voting securities of the Company, or (ii) the Company
merges into or consolidates with any other Person, or any Person merges into or
consolidates with the Company and, after giving effect to such transaction, the
stockholders of the Company immediately prior to such transaction own less than
66% of the aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers its assets, as an entirety
or substantially as an entirety, to another Person and the stockholders of the
Company immediately prior to such transaction own less than 66% of the aggregate
voting power of the acquiring entity immediately after the transaction, (iv) a
replacement at one time or within a three year period of more than one-half of
the members of the Company's board of directors which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), or (v) 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) through (iv).
"COMMON STOCK" means the common stock, par value $0.001 per share, of the
Company and stock of any other class of securities into which such securities
may hereafter have been reclassified or changed into.
"CONVERSION DATE" shall have the meaning set forth in Section 4(a).
"CONVERSION PRICE" shall have the meaning set forth in Section 4(b).
"CONVERSION SHARES" means the shares of Common Stock issuable upon
conversion of this Debenture or payment of interest in accordance with the terms
hereof.
"DEBENTURE REGISTER" shall have the meaning set forth in Section 2(c).
"DILUTIVE ISSUANCE" shall have the meaning set forth in Section 5(b).
"DILUTIVE ISSUANCE NOTICE" shall have the meaning set forth in Section
5(b).
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"EQUITY CONDITIONS" shall mean, during the period in question, (i) the
Company shall have duly honored all conversions and redemptions scheduled to
occur or occurring by virtue of one or more Notice of Conversions of the Holder,
if any, (ii) all liquidated damages and other amounts owing to the Holder in
respect of this Debenture shall have been paid, (iii) there is an effective
registration statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the shares issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (iv) the
Common Stock is trading on the Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed for trading on a Trading Market
(and the Company believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable future), (v)
there is a sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the shares issuable pursuant
to the Transaction Documents, (vi) there is then existing no Event of Default or
event which, with the passage of time or the giving of notice, would constitute
an Event of Default, (vii) the issuance of the shares in question to the Holder
would not violate the limitations set forth in Section 4(c) and (viii) no public
announcement of a pending or proposed Fundamental Transaction, Change of Control
Transaction or acquisition transaction has occurred that has not been
consummated.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 6.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXEMPT ISSUANCE" shall have the meaning set forth in the Purchase
Agreement.
"FUNDAMENTAL TRANSACTION" shall have the meaning set forth in Section
5(d).
"INTEREST CONVERSION RATE" means $0.025, subject to adjustment herein.
"INTEREST CONVERSION SHARES" shall have the meaning set forth in Section
2(a).
"INTEREST PAYMENT DATE" shall have the meaning set forth in Section 2(a).
"INTEREST SHARE AMOUNT" shall have the meaning set forth in Section 2(a).
"LATE FEES" shall have the meaning set forth in Section 2(d).
"MANDATORY DEFAULT AMOUNT" shall equal the sum of (i) the greater of: (A)
100% of the principal amount of this Debenture to be prepaid, plus all accrued
and unpaid interest thereon, or (B) the principal amount of this Debenture to be
prepaid, plus all other accrued and unpaid interest hereon, divided by the
Conversion Price on (x) the date the Mandatory Default Amount is demanded or
otherwise due or (y) the date the Mandatory Default Amount is paid in full,
whichever is less, multiplied by the VWAP on (x) the date the Mandatory Default
Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount
is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of this Debenture.
"NEW YORK COURTS" shall have the meaning set forth in Section 9(d).
"NOTICE OF CONVERSION" shall have the meaning set forth in Section 4(a).
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"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless
of the number of instruments which may be issued to evidence such Debenture.
"PERSON" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"PURCHASE AGREEMENT" means the Amended and Restated Securities Purchase
Agreement, dated as of May 19, 2006, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SUBSIDIARY" shall have the meaning given to such term in the Purchase
Agreement.
"TRADING DAY" means a day on which the Common Stock is traded on a Trading
Market.
"TRADING MARKET" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq
Small Cap Market, the American Stock Exchange, the New York Stock Exchange or
the Nasdaq National Market, and shall include the OTC Bulletin Board or Pink
Sheets.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the Purchase
Agreement.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the "Pink Sheets" published by the Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company.
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Section 2. Interest.
(a) Payment of Interest in Cash or Kind. The Company shall pay
interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of 12% per annum, payable
quarterly on January 1, April 1, July 1 and October 1, beginning on the first
such date after the Original Issue Date, on each Conversion Date (as to that
principal amount then being converted), and on the Maturity Date (except that,
if any such date is not a Business Day, then such payment shall be due on the
next succeeding Business Day) (each such date, an "Interest Payment Date"), in
cash or shares of Common Stock at the Interest Conversion Rate, or a combination
thereof (the amount to be paid in shares, the "Interest Share Amount");
provided, however, payment in shares of Common Stock may only occur, if (i)
during the 20 Trading Days immediately prior to the applicable Interest Payment
Date (the "Interest Notice Period") and through and including the date such
shares of Common Stock are issued to the Holder, all of the Equity Conditions,
unless waived by the Holder in writing, have been met and the Company shall have
given the Holder notice in accordance with the notice requirements set forth
below, and (ii) as to such Interest Payment Date, prior to the such Interest
Notice Period (but not more 5 Trading Days prior to the commencement of the
Interest Notice Period), the Company shall have delivered to the Holder's
account with The Depository Trust Company a number of shares of Common Stock to
be applied against such Interest Share Amount equal to the quotient of (x) the
applicable Interest Share Amount divided by (y) the then Conversion Price (the
"Interest Conversion Shares"). Notwithstanding the remainder of this Section
2(a), the Holder at its option may elect to receive interest payments in the
form of additional Debentures in an aggregate principal amount equal to the
applicable interest payment (the "Additional Debentures"). Such Additional
Debentures shall contain the same terms and conditions as this Debenture and
shall for all purposes be treated as though they were issued simultaneously with
this Debenture on the Original Issue Date. The Additional Debentures shall be
registered in the name of Holder. The Additional Debentures shall be delivered
to the Holder within 3 Trading Days following notice of election to receive
payment of interest in the form of Additional Debentures in accordance herewith.
For purposes of this Debenture, failure to deliver Additional Debentures shall
be treated as a failure to deliver certificates in payment of interest in shares
of Common Stock, including, without limitations, with respect to the application
of fees, damages, events of defaults, and default interest.
(b) Company's Election to Pay Interest in Kind. Subject to the terms
and conditions herein, including, without limitation, the provisions of Section
4(c) of this Debenture, the decision whether to pay interest hereunder in shares
of Common Stock or cash shall be at the discretion of the Company. Prior to the
commencement of an Interest Notice Period, the Company shall provide the Holder
with written notice of its election to pay interest hereunder on the applicable
Interest Payment Date either in cash, shares of Common Stock or a combination
thereof (the Company may indicate in such notice that the election contained in
such notice shall continue for later periods until revised) and the Interest
Share Amount as to the applicable Interest Payment Date. During any Interest
Notice Period, the Company's election (whether specific to an Interest Payment
Date or continuous) shall be irrevocable as to such Interest Payment Date.
Subject to the aforementioned conditions, failure to timely provide such written
notice shall be deemed an election by the Company to pay the interest on such
Interest Payment Date in cash. At any time the Company delivers a notice to the
Holder of its election to pay the interest in shares of Common Stock, the
Company shall file a prospectus supplement pursuant to Rule 424 disclosing such
election. The aggregate number of shares of Common Stock otherwise issuable to
the Holder on an Interest Payment Date shall be reduced by the number of
Interest Conversion Shares previously issued to the Holder in connection with
such Interest Payment Date.
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(c) Interest Calculations. Interest shall be calculated on the basis
of a 360-day year and shall accrue daily commencing on the Original Issue Date
until payment in full of the principal sum, together with all accrued and unpaid
interest and other amounts which may become due hereunder, has been made.
Payment of interest in shares of Common Stock shall otherwise occur pursuant to
Section 4(d)(ii) and only for purposes of the payment of interest in shares of
Common Stock, the Interest Payment Date shall be deemed the Conversion Date.
Interest shall cease to accrue with respect to any principal amount converted,
provided that the Company in fact delivers the Conversion Shares within the time
period required by Section 4(d)(ii). Interest hereunder will be paid to the
Person in whose name this Debenture is registered on the records of the Company
regarding registration and transfers of this Debenture (the "Debenture
Register"). Except as otherwise provided herein, if at any time the Company pays
interest partially in cash and partially in shares of Common Stock to the
holders of the Debentures, then such payment shall be distributed ratably among
the holders of the Debentures based on their (or their predecessor's) initial
purchases of Debentures pursuant to the Purchase Agreement.
(d) Late Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail and accrue a late fee and compound at the rate of 5% per
month (or such lower maximum amount of interest permitted to be charged under
applicable law) ("Late Fees") which will accrue daily, from the date such
interest is due hereunder through and including the date of payment.
(e) Prepayment. Except as otherwise set forth in this Debenture, the
Company may not prepay any portion of the principal amount of this Debenture
without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
(a) Different Denominations. This Debenture is exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration of transfer or exchange.
(b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state securities laws and
regulations.
(c) Reliance on Debenture Register. Prior to due presentment to the
Company for transfer of this Debenture, the Company and any agent of the Company
may treat the Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
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Section 4. Conversion.
(a) Voluntary Conversion. At any time after the Original Issue Date
until this Debenture is no longer outstanding, this Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any time and from time to time (subject to the limitations on
conversion set forth in Section 4(c) hereof). The Holder shall effect
conversions by delivering to the Company the form of Notice of Conversion
attached hereto as Annex A (a "Notice of Conversion"), specifying therein the
principal amount of this Debenture to be converted and the date on which such
conversion is to be effected (a "Conversion Date"). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date that
such Notice of Conversion is provided hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender this
Debenture to the Company unless the entire principal amount of this Debenture
plus all accrued and unpaid interest thereon has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Debenture in an amount equal to the applicable conversion. The Holder and
the Company shall maintain records showing the principal amount converted and
the date of such conversions. The Company shall deliver any objection to any
Notice of Conversion within 3 Business Days of receipt of such notice. In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The Holder and
any assignee, by acceptance of this Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of a portion of
this Debenture, the unpaid and unconverted principal amount of this Debenture
may be less than the amount stated on the face hereof.
(b) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $0.02, subject to adjustment herein (the
"Conversion Price").
(c) Conversion Limitations. The Holder shall not have the right to
convert any portion of this Debenture, pursuant to Section 4(a) or otherwise, to
the extent that after giving effect to such conversion, the Holder (together
with the Holder's Affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of the Beneficial Ownership
Limitation. For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates shall include
the number of shares of Common Stock issuable upon conversion of this Debenture
with respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be issuable upon
(A) conversion of the remaining, nonconverted portion of this Debenture
beneficially owned by the Holder or any of its Affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Debentures or the
Warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 4(c), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this section applies,
the determination of whether this Debenture is convertible (in relation to other
securities owned by the Holder) and of which a portion of this Debenture is
convertible shall be in the sole discretion of such Holder. To ensure compliance
with this restriction, the Holder will be deemed to represent to the Company
each time it delivers a Notice of Conversion that such Notice of Conversion has
7
not violated the restrictions set forth in this paragraph and the Company shall
have no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 4(c), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company's most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company's Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of the Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this
Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The "Beneficial
Ownership Limitation" shall be 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture. The Beneficial Ownership
Limitation may not be waived by such Holder. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 4(c) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
this Debenture.
(d) Mechanics of Conversion.
(i) Conversion Shares Issuable Upon Conversion of Principal
Amount. The number of shares of Common Stock issuable upon a conversion
hereunder shall be determined by the quotient obtained by dividing (x) the
outstanding principal amount of this Debenture to be converted by (y) the
Conversion Price.
(ii) Delivery of Certificate Upon Conversion. Not later than
three Trading Days after any Conversion Date, the Company will deliver or cause
to be delivered to the Holder (A) a certificate or certificates representing the
Conversion Shares which shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the conversion of this
Debenture, including shares of Common Stock representing the payment of accrued
interest, and (B) cash via wire transfer in the amount of accrued and unpaid
interest (if the Company is required to pay accrued interest in cash). The
Company shall, if available and if allowed under applicable securities laws, 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.
(iii) Failure to Deliver Certificates. If in the case of any
Notice of Conversion such certificate or certificates 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
certificates representing the principal amount of this Debenture tendered for
conversion.
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(iv) Obligation Absolute; Partial Liquidated Damages. If the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of principal amount being
converted, $10 per Trading Day (increasing to $20 per Trading Day after 5
Trading Days after such damages begin to accrue) for each Trading Day after such
third Trading Day until such certificates are delivered. The Company's
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Conversion Shares; provided, however, such delivery shall not operate as a
waiver by the Company of any such action the Company may have against the
Holder. In the event the Holder of this Debenture shall elect to convert any or
all of the outstanding principal amount hereof, the Company may not refuse
conversion based on any claim that the Holder or any one associated or
affiliated with the Holder has been engaged in any violation of law, agreement
or for any other reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of this Debenture shall
have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the principal amount of this
Debenture outstanding, which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Holder to the extent it
obtains judgment. In the absence of an injunction precluding the same, the
Company shall issue Conversion Shares or, if applicable, cash, upon a properly
noticed conversion. Nothing herein shall limit a Xxxxxx's right to pursue actual
damages or declare an Event of Default pursuant to Section 8 herein for the
Company's failure to deliver Conversion Shares within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
(v) Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. In addition to any other rights available to the
Holder, if the Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(d)(ii) by the third Trading
Day after the Conversion Date, and if after such third Trading Day the Holder is
required by its brokerage firm to purchase (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of
the Conversion Shares which the Holder anticipated receiving 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 anticipated
receiving from the conversion at issue multiplied by (2) the actual sale price
of the Common Stock at the time of the sale (including brokerage commissions, if
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any) giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue (if surrendered) this Debenture in a principal amount
equal to the principal amount of the attempted conversion or deliver to the
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its delivery requirements under Section 4(d)(ii),
and thereafter the liquidated damages pursuant to clause (v) shall cease to
accrue. 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 this Debenture with respect to which the actual sale price of the
Conversion Shares at the time of the sale (including brokerage commissions, if
any) giving rise to such purchase obligation was a total of $10,000 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(d)(iv) in respect of the certificates resulting in such Buy-In.
(vi) Reservation of Shares Issuable Upon Conversion. The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Debenture and payment of interest on this
Debenture, each as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder (and the
other holders of the Debentures), not less than such number of shares of the
Common Stock as shall (subject to the terms and conditions set forth in the
Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5) upon the conversion of the outstanding principal
amount of this Debenture and payment of interest hereunder. The Company
covenants that all shares of 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 is then effective under the Securities Act,
registered for public sale in accordance with such Registration Statement.
(vii) Fractional Shares. 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 VWAP 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.
(viii) Transfer Taxes. The issuance of certificates for shares
of the Common Stock on conversion of this Debenture shall be made without charge
to the Holder hereof 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 this Debenture 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.
10
Section 5. Certain Adjustments.
(a) Stock Dividends and Stock Splits. If the Company, at any time
while this Debenture is outstanding: (A) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock (which,
for avoidance of doubt, shall not include any shares of Common Stock issued by
the Company pursuant to this Debenture, including as interest thereon), (B)
subdivides outstanding shares of Common Stock into a larger number of shares,
(C) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then
the Conversion Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to this Section 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.
(b) (A) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while this Debenture is outstanding, shall
offer, sell, grant any option to purchase or offer, sell or grant any right to
reprice its securities, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common Stock or
Common Stock Equivalents entitling any Person to acquire shares of Common Stock,
at an effective price per share less than the then Conversion Price (such lower
price, the "Base Conversion Price" and such issuances collectively, a "Dilutive
Issuance"), as adjusted hereunder (if the holder of the Common Stock or Common
Stock Equivalents so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective price per share which is less than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced to the Base Conversion Price. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b) in respect of an
Exempt Issuance. The Company shall notify the Holder in writing, no later than
the Business Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms (such notice the "Dilutive Issuance Notice"). For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance,
after the date of such Dilutive Issuance the Holder is entitled to receive a
number of Conversion Shares based upon the Base Conversion Price regardless of
whether the Holder accurately refers to the Base Conversion Price in the Notice
of Conversion.
11
(c) Pro Rata Distributions. If the Company, at any time while this
Debenture is outstanding, shall distribute to all holders of Common Stock (and
not to the holders of the Debenture) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for or
purchase any security, then in each such case the Conversion Price shall be
adjusted by multiplying such 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 VWAP determined
as of the record date mentioned above, and of which the numerator shall be such
VWAP 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. In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
(d) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Conversion Share
that would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of one share of Common Stock (the
"Alternate Consideration"). For purposes of any such conversion, the
determination of the Conversion 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 Conversion 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 the Holder shall be given the same choice as
to the Alternate Consideration it receives upon any conversion of this Debenture
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 the Holder a new debenture
consistent with the foregoing provisions and evidencing the Holder's right to
convert such debenture 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 paragraph (d) and insuring that this Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
12
(e) Calculations. All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.
(f) Notice to the Holder.
(i) Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any of this Section 5, the Company shall promptly
mail to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security the Company shall be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised.
(ii) Notice to Allow Conversion by Xxxxxx. If (A) the Company
shall declare a dividend (or any other distribution) on the Common Stock; (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (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; (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, 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 exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Debenture, and shall cause to be mailed to the Holder at its last addresses as
it shall appear upon the stock books of the Company, at least 20 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 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. The Holder is entitled to convert this Debenture during the
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.
13
Section 6. Events of Default.
(a) "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 (A) the principal amount of
any Debenture, or (B) interest (including Late Fees) on, or liquidated damages
in respect of, any Debenture, as and when the same shall become due and payable
(whether on a Conversion Date or the Maturity Date or by acceleration or
otherwise) which default, solely in the case of an interest payment or
liquidated damages or other default under clause (B) above, is not cured, within
5 Trading Days;
(ii) the Company shall fail to observe or perform any other
covenant or agreement contained in this Debenture (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the Holder upon
conversion which breach is addressed in clause (viii) below and a failure to
amend its certificate of incorporation to increase it authorized shares of
Common Stock to 500,000,000 within 75 days following the date hereof) which
breach is address in clause (ix) below) which failure is not cured, if possible
to cure, within the earlier to occur of (A) 5 Trading Days after notice of such
default sent by the Holder or by any other Holder and (B)10 Trading Days after
the Company shall become or should have become aware of such failure;
(iii) a default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document or instrument)
shall occur under any of the Transaction Documents within the earlier to occur
of (A) 5 Trading Days after notice of such default sent by the Holder or by any
other Holder and (B) 10 Trading Days after the Company shall become or should
have been aware of such failure;
(iv) any representation or warranty made herein, in any other
Transaction Documents, in any written statement pursuant hereto or thereto, or
in any other report, financial statement or certificate made or delivered to the
Holder or any other holder of Debentures shall be untrue or incorrect in any
material respect as of the date when made or deemed made;
(v) (i) the Company or any of its Subsidiaries shall commence
a case, as debtor, a case under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Company or any
Subsidiary 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 any Subsidiary thereof or (ii) there is commenced a case against
the Company or any Subsidiary thereof, under any applicable bankruptcy or
insolvency laws, as now or hereafter in effect or any successor thereto which
remains undismissed for a period of 60 days; or (iii) the Company or any
Subsidiary thereof is adjudicated by a court of competent jurisdiction insolvent
or bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary thereof 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
(v) the Company or any Subsidiary thereof makes a general assignment for the
benefit of creditors; or (vi) the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its indebtedness generally as it
become due; or (vii) the Company or any Subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any Subsidiary thereof
shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) any corporate or other
action is taken by the Company or any Subsidiary thereof for the purpose of
effecting any of the foregoing;
14
(vi) the Company or any Subsidiary shall default in any of its
obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
of the Company in an amount exceeding $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;
(vii) the Company shall be a party to any Change of Control
Transaction or Fundamental Transaction, shall agree to sell or dispose of all or
in excess of 33% of its assets in one or more transactions (whether or not such
sale would constitute a Change of Control Transaction) or shall redeem or
repurchase more than a de minimis number of its outstanding shares of Common
Stock or other equity securities of the Company;
(viii) the Company shall fail for any reason to deliver
certificates to a Holder prior to the third Trading Day after a Conversion Date
pursuant to and in accordance with Section 4(d) 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 Debentures in
accordance with the terms hereof; or
(ix) the Company shall fail for any reason to amend its
certificate of incorporation to increase the number of authorized shares of
Common Stock of the Company to 500,000,000 within 75 days following the date
hereof.
(b) Remedies Upon Event of Default. If any Event of Default occurs,
the full principal amount of this Debenture, together with interest and other
amounts owing in respect thereof, to the date of acceleration shall become, at
the Holder's election, immediately due and payable in cash. The aggregate amount
payable upon an Event of Default shall be equal to the Mandatory Default Amount.
Commencing 5 days after the occurrence of any Event of Default that results in
the eventual acceleration of this Debenture, the interest rate on this Debenture
shall accrue at the rate of 18% per annum, or such lower maximum amount of
interest permitted to be charged under applicable law. Upon the payment in full
of the Mandatory Default Amount on this entire Debenture the Holder shall
promptly surrender this Debenture to or as directed by the Company. The Holder
need not provide and the Company hereby waives any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Xxxxxx at any time prior to payment
hereunder and the Holder shall have all rights as a Debenture holder until such
time, if any, as the full payment under this Section shall have been received by
it. No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.
15
Section 7. Miscellaneous.
(a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at the address set forth above, facsimile
number (000) 000-0000, Attn: Xxxxxxx Xxxxxxx, Chief Executive Officer, or such
other address or facsimile number as the Company may specify for such purposes
by notice to the Holder 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 addressed to each Holder 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
5:30 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 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
(b) Absolute Obligation. Except as expressly provided herein, no
provision of this Debenture 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 Debenture at the time, place, and rate, and
in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other
Debentures now or hereafter issued under the terms set forth herein.
(c) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Debenture, or
in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost, stolen
or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
(d) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the "New York Courts"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such
16
New York Courts are improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding 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
Debenture 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 manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Debenture or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of this Debenture, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
(e) Waiver. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture 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 Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture 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
Debenture. Any waiver must be in writing.
(f) Severability. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture 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. If it
shall be found that any interest or other amount deemed interest due hereunder
violates applicable laws governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum permitted rate of
interest. The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of or interest on this Debenture as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
17
(g) Next Business Day. 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.
(h) Headings. The headings contained herein are for convenience
only, do not constitute a part of this Debenture and shall not be deemed to
limit or affect any of the provisions hereof.
(i) Assumption. Any successor to the Company or surviving entity in
a Fundamental Transaction shall (i) assume in writing all of the obligations of
the Company under this Debenture and the other Transaction Documents pursuant to
written agreements in form and substance satisfactory to the Holder (such
approval not to be unreasonably withheld or delayed) prior to such Fundamental
Transaction and (ii) to issue to the Holder a new debenture of such successor
entity evidenced by a written instrument substantially similar in form and
substance to this Debenture, including, without limitation, having a principal
amount and interest rate equal to the principal amounts and the interest rates
of the Debentures held by the Holder and having similar ranking to this
Debenture, and satisfactory to the Holder (any such approval not to be
unreasonably withheld or delayed). The provisions of this Section 7(i) shall
apply similarly and equally to successive Fundamental Transactions and shall be
applied without regard to any limitations of this Debenture.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
PRACTICEXPERT, INC.
By: ______________________________
Name: Xxxxxxx Xxxxxxx
Title: Chief Executive Officer
18
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 12% Senior
Secured Convertible Debenture of PracticeXpert, a Nevada corporation (the
"Company"), due on May 19, 2007 into shares of common stock, par value $0.001
per share (the "Common Stock"), of the Company according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts determined in accordance with Section 13(d) of the Exchange
Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery requirements
under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debenture to be Converted:
Payment of Interest in Common Stock
yes ____
no ____
If yes, $_____ of Interest Accrued on Account of Conversion at
Issue.
Number of shares of Common Stock to be issued:
Signature:_____________________________
Name:__________________________________
Address:_______________________________
19
SCHEDULE 1
CONVERSION SCHEDULE
The 12% Senior Secured Convertible Debentures due on May 19, 2007, in the
aggregate principal amount of $600,000 issued by PracticeXpert, Inc. This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.
Dated:
Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to Conversion
(or for first entry, Amount of (or Original Principal
Original Issue Date) Conversion Amount Company Attest
-------------------- ---------- ------------------------ --------------
20
