EX. 4.17
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
9 1/2 % CONVERTIBLE DEBENTURE
DUE JANUARY 4, 2003
$125,000
Trinity Medical Group USA, Inc., a Florida corporation, with principal
executive offices located at 00000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Company"), for value received, hereby promises
to pay to the Holder (as such term is hereinafter defined), or such other Person
(as such term is hereinafter defined) upon order of the Holder, on January 4,
2003 (the "Maturity Date"), the principal sum of one-hundred twenty-five
thousand Dollars ($125,000), as such sum may be adjusted pursuant to Article 3,
and to pay interest thereon from the date hereof, monthly in arrears, on the
last day of each month (each an "Interest Payment Due Date" and collectively,
the "Interest Payment Due Dates"), commencing on February 28, 2002, at the rate
of nine and one-half percent (9 1/2%) per annum (the "Debenture Interest
Rate"), until the Principal Amount (as such term is hereinafter defined) of this
Debenture has been paid in full. The interest payable on any Interest Payment
Due Date shall be paid to the Person in whose name this Debenture is registered
at the close of business on the fifteenth (15th) day next preceding the
applicable Interest Payment Due Date and all interest payable on the Principal
Amount of this Debenture shall be calculated on the basis of a 360-day year for
the actual number of days elapsed. Payment of interest on this Debenture shall
be in cash.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The terms defined in this Article whenever used in
this Debenture have the following respective meanings:
(i) "Affiliate" has the meaning ascribed to such term in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
(ii) "Bankruptcy Code" means the United States Bankruptcy Code of
1986, as amended (11 U.S.C.ss.ss.101 et. -- seq.).
(iii) "Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of California are authorized or
obligated to close.
1
(iv) "Capital Shares" means the Common Stock and any other shares of
any other class or series of capital stock, whether now or hereafter authorized
and however designated, which have the right to participate in the distribution
of earnings and assets (upon dissolution, liquidation or winding-up) of the
Company.
(v) "Closing Date" means January 4, 2002.
(vi) "Common Shares" or "Common Stock" means shares of the Company's
Common Stock.
(vii) "Common Stock Issued at Conversion", when used with reference to
the securities deliverable upon conversion of this Debenture, means all Common
Shares now or hereafter Outstanding and securities of any other class or series
into which this Debenture hereafter shall have been changed or substituted,
whether now or hereafter created and however designated.
(viii) "Company" means Trinity Medical Group USA, Inc., a Florida
corporation, and any successor or resulting corporation by way of merger,
consolidation, sale or exchange of all or substantially all of the Company's
assets or otherwise.
(ix) "Conversion" or "conversion" means the repayment by the Company
of the Principal Amount of this Debenture (and, to the extent the Holder elects
as permitted by Section 3.1, accrued and unpaid interest thereon) by the
delivery of Common Stock on the terms provided in Section 3.2, and "convert,"
"converted," "convertible" and like words shall have a corresponding meaning.
(x) "Conversion Date" means any day on which all or any portion of the
Principal Amount of this Debenture is converted in accordance with the
provisions hereof.
(xi) "Conversion Notice" means a written notice of conversion
substantially in the form annexed hereto as Exhibit A.
(xii) "Conversion Price" on any date of determination means the
applicable price for the conversion of this Debenture into Common Shares on such
day as set forth in Section 3.1(a).
(xiii) "Current Market Price" on any date of determination means the
closing price of a Common Share on such day as reported on the NASDAQ OTCBB
Exchange; provided that, if such security is not listed or admitted to trading
on the NASDAQ OTCBB, as reported on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of such security
on the over-the-counter market on the day in question as reported by Bloomberg
LP or a similar generally accepted reporting service, as the case may be.
(xiv) "Deadline" means the date which is the 90th day from the Closing
Date.
2
(xv) "Debenture" or "Debentures" means this 9 1/2% Convertible
Debenture due January 4, 2003 of the Company or such other convertible
debenture(s) exchanged therefor as provided in Section 2.1.
(xvi) "Default Interest Rate" shall be equal to the Debenture Interest
Rate plus an additional four percent (4%) per annum calculated on the basis of a
360-day year.
(xvii) "Discount Multiplier" has the meaning set forth in Section
3.1(a).
(xviii) "Event of Default" has the meaning set forth in Section 6.1.
(xix) "Holder" means La Jolla Cove Investors, Inc., any successor
thereto, or any Person to whom this Debenture is subsequently transferred in
accordance with the provisions hereof.
(xx) "Interest Payment Due Date" has the meaning set forth in the
opening paragraph of this Debenture.
(xxi) "Market Disruption Event" means any event that results in a
material suspension or limitation of trading of the Common Shares.
(xxii) "Market Price" per Common Share means the closing bid price of
the Common Shares on any Trading Day as reported on the NASDAQ OTCBB; provided
that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
as reported on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the lowest price of the Common Shares during any Trading Day
on the over-the-counter market as reported by Bloomberg LP or a similar
generally accepted reporting service, the case may be.
(xxiii) "Maximum Rate" has the meaning set forth in Section 6.3.
(xxiv) "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively, "Shares") means, on any date of determination, all
issued and outstanding Shares, and includes all such Shares issuable in respect
of outstanding scrip or any certificates representing fractional interests in
such Shares; provided, however, that any such Shares directly or indirectly
owned or held by or for the account of the Company or any Subsidiary of the
Company shall not be deemed "Outstanding" for purposes hereof.
(xxv) "Person" means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(xxvi) "Principal Amount" means, for any date of calculation, the
principal sum set forth in the first paragraph of this Debenture (but only such
principal amount as to which the Holder has (a) actually advanced pursuant to
the Securities Purchase Agreement (b) not theretofore furnished a Conversion
Notice in compliance with Section 3.2).
3
(xxvii) "Registration Rights Agreement" means that certain
Registration Rights Agreement dated as of January 4, 2002 by and between the
Company and Holder, as the same may be amended from time to time.
(xxviii) "SEC" means the United States Securities and Exchange
Commission.
(xxix) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as in effect at the
time.
(xxx) "Securities Purchase Agreement" means that certain Securities
Purchase Agreement dated as of January 4, 2002 by and among the Company and
Holder, as the same may be amended from time to time.
(xxxi) "Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Company.
(xxxii) "Trading Day" means any day on which (i) purchases and sales
of securities on the principal national security exchange or quotation system on
which the Common Shares are traded are reported thereon, or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, as reported by Bloomberg LP or a similar generally accepted reporting
service, as the case may be, (ii) at least one bid for the trading of Common
Shares is reported and (iii) no Market Disruption Event occurs.
All references to "cash" or "$" herein means currency of the United
States of America.
ARTICLE 2
EXCHANGES, TRANSFER AND OPTIONAL REDEMPTION
SECTION 2.1 Exchange and Registration of Transfer of Debentures. The Holder
may, at its option, surrender this Debenture at the principal executive offices
of the Company and receive in exchange therefor a Debenture or Debentures, each
in the denomination of $1,000 or an integral multiple of $1,000 in excess
thereof, dated as of the date of this Debenture (which shall accrue interest
from the most recent Interest Payment Due Date on which an interest payment was
made in full), and payable to such Person or order as may be designated by such
Holder. The aggregate Principal Amount of the Debenture or Debentures exchanged
in accordance with this Section 2.1 shall equal the aggregate unpaid Principal
Amount of this Debenture as of the date of such surrender; provided, however,
that upon any exchange pursuant to this Section 2.1 there shall be filed with
the Company the name and address for all purposes hereof of the Holder or
Holders of the Debenture or Debentures delivered in such exchange. This
Debenture, when presented for registration of transfer or for exchange or
conversion, shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Company duly executed, by the Holder duly authorized in writing.
SECTION 2.2 Loss, Theft, Destruction of Debenture. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Debenture and, in
4
the case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Debenture, the Company shall
make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated
Debenture, a new Debenture of like tenor and unpaid Principal Amount dated as of
the date hereof (which shall accrue interest from the most recent Interest
Payment Due Date on which an interest payment was made in full). This Debenture
shall be held and owned upon the express condition that the provisions of this
Section 2.2 are exclusive with respect to the replacement of a mutilated,
destroyed, lost or stolen Debenture and shall preclude any and all other rights
and remedies notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement of negotiable instruments or other
securities without the surrender thereof.
SECTION 2.3 Who Deemed Absolute Owner. The Company may deem the Person in
whose name this Debenture shall be registered upon the registry books of the
Company to be, and may treat it as, the absolute owner of this Debenture
(whether or not this Debenture shall be overdue) for the purpose of receiving
payment of or on account of the Principal Amount of this Debenture, for the
conversion of this Debenture and for all other purposes, and the Company shall
not be affected by any notice to the contrary. All such payments and such
conversions shall be valid and effectual to satisfy and discharge the liability
upon this Debenture to the extent of the sum or sums so paid or the conversion
or conversions so made. SECTION 2.4 Repayment at Maturity. At the Maturity Date,
the Company shall repay the outstanding Principal Amount of this Debenture in
whole in cash, together with all accrued and unpaid interest thereon, in cash,
to the Maturity Date.
ARTICLE 3
CONVERSION OF DEBENTURE
SECTION 3.1 Conversion; Conversion Price; Valuation Event. (a) At the
option of the Holder, this Debenture may be converted, either in whole or in
part, up to the full Principal Amount hereof (in increments of $1,000 in
Principal Amount) into Common Shares (calculated as to each such conversion to
the nearest 1/100th of a share), at any time and from time to time on any
Business Day, subject to compliance with Section 3.2. The number of Common
Shares into which this Debenture may be converted is equal to (i) the Principal
Amount of the Debenture being converted at the Conversion Date (plus, at the
option of the Holder, any accrued and unpaid interest on the Debenture being
converted through the Conversion Date) divided by (ii) the Conversion Price. In
addition, the Company shall pay to the Holder on the Conversion Date, in cash,
any accrued and unpaid interest on the Debenture being converted not included at
the option of the Holder in clause (i) of the immediately preceding sentence.
The "Conversion Price" shall be equal to the lesser of (i) $4.00, or (ii)
eighty-three percent (83%) of the average of the three (3) lowest Market Prices
during the twenty (20) Trading Days prior to Holder's election to convert (a
"Discount Multiplier"); provided, that in the event the Registration Statement
has not been declared effective by the SEC by the Deadline, then the applicable
Discount Multiplier shall decrease by three percent (3%) for each month or
partial month occurring after the Deadline that the Registration Statement has
not been declared effective by the SEC.
5
(b) Notwithstanding the provisions of Section 3.1(a), in the event the
Company's Registration Statement has not been declared effective by the Deadline
or, if the Registration Statement has theretofore been declared effective but is
not thereafter effective, the following will also apply in addition to any
damages incurred by the Holder as a result thereof:
(i) The Holder may demand repayment of one hundred and fifty
percent (150%) of the Principal Amount of the Debenture, together with all
accrued and unpaid interest thereon, in cash, at any time prior to the Company's
Registration Statement being declared effective by the SEC or during the period
that the Company's Registration Statement is not effective, such repayment to be
made within three (3) business days of such demand. In the event that the
Debenture is so accelerated, in addition to the repayment of one hundred and
fifty percent (150%) of the Principal Amount together with accrued interest as
aforesaid, the Company shall immediately pay to the Holder $5,000 for each
thirty (30) day period, or portion thereof, during which the Principal Amount,
including interest thereon, remains unpaid;
(ii) If the Holder does not elect to accelerate the Debenture, the
Company shall immediately pay to Holder $5,000 for each thirty (30) day period,
or portion thereof, that the Registration Statement is not effective.
SECTION 3.2 Exercise of Conversion Privilege. (a) Conversion of this
Debenture may be exercised on any Business Day by the Holder by telecopying an
executed and completed Conversion Notice to the Company. Each date on which a
Conversion Notice is telecopied to the Company in accordance with the provisions
of this Section 3.2 shall constitute a Conversion Date. The Company shall
convert this Debenture and issue the Common Stock Issued at Conversion in the
manner provided below in this Section 3.2, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the persons who are to become the
holders of the Common Stock Issued at Conversion in connection with such
conversion. The Holder shall deliver this Debenture by express courier within
thirty (30) days following the date on which the telecopied Conversion Notice
has been transmitted to the Company. Upon surrender for conversion, this
Debenture shall be accompanied by a proper assignment hereof to the Company or
be endorsed in blank. As promptly as practicable after the receipt of the
Conversion Notice as aforesaid, but in any event not more than three (3)
Business Days after the Company's receipt of such Conversion Notice, the Company
shall (i) issue the Common Stock Issued at Conversion in accordance with the
provisions of this Article 3 and (ii) cause to be mailed for delivery by
overnight courier to the Holder (x) a certificate or certificate(s) representing
the number of Common Shares to which the Holder is entitled by virtue of such
conversion, (y) cash, as provided in Section 3.3, in respect of any fraction of
a Common Share deliverable upon such conversion and (z) cash or shares of Common
Stock, as applicable, representing the amount of accrued and unpaid interest on
this Debenture as of the Conversion Date. Such conversion shall be deemed to
have been effected at the time at which the Conversion Notice indicates, and at
such time the rights of the Holder of this Debenture, as such (except if and to
the extent that any Principal Amount thereof remains unconverted), shall cease
and the Person and Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby, and all voting and
other rights associated with the
6
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons. The Conversion Notice shall constitute a contract between the
Holder and the Company, whereby the Holder shall be deemed to subscribe for the
number of Common Shares which it will be entitled to receive upon such
conversion and, in payment and satisfaction of such subscription (and for any
cash adjustment to which it is entitled pursuant to Section 3.4), to surrender
this Debenture and to release the Company from all liability thereon (except if
and to the extent that any Principal Amount thereof remains unconverted). No
cash payment aggregating less than $1.00 shall be required to be given unless
specifically requested by the Holder.
(b) If, at any time after the date of this Debenture, (i) the Company
challenges, disputes or denies the right of the Holder hereof to effect the
conversion of this Debenture into Common Shares or otherwise dishonors or
rejects any Conversion Notice delivered in accordance with this Section 3.2 or
(ii) any third party who is not and has never been an Affiliate of the Holder
commences any lawsuit or legal proceeding or otherwise asserts any claim before
any court or public or governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares, then the Holder shall have
the right, by written notice to the Company, to require the Company to promptly
redeem this Debenture for cash at one hundred and fifty (150%) of the Principal
Amount thereof, together with all accrued and unpaid interest thereon to the
date of redemption. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in defending
itself in any such action or pursuing its rights hereunder (in addition to any
other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under the Bankruptcy Code. In the
event the Company is a debtor under the Bankruptcy Code, the Company hereby
waives to the fullest extent permitted any rights to relief it may have under 11
U.S.C. ss. 362 in respect of the Holder's conversion privilege. The Company
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. ss. 362 in respect of the conversion of this Debenture. The
Company agrees, without cost or expense to the Holder, to take or consent to any
and all action necessary to effectuate relief under 11 U.S.C. ss. 362.
SECTION 3.3 Fractional Shares. No fractional Common Shares or scrip
representing fractional Common Shares shall be delivered upon conversion of this
Debenture. Instead of any fractional Common Shares which otherwise would be
delivered upon conversion of this Debenture, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
multiplied by the Current Market Price on the Conversion Date. No cash payment
of less than $1.00 shall be required to be given unless specifically requested
by the Holder.
SECTION 3.4 Adjustments. The Conversion Price and the number of shares
deliverable upon conversion of this Debenture are subject to adjustment from
time to time as follows:
7
(i) Reclassification, Etc. In case the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or into another
Person (where the Company is not the survivor or where there is a change in or
distribution with respect to the Common Stock of the Company), sell, convey,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another Person, or effectuate a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company is disposed of (each, a "Fundamental Corporate Change") and, pursuant to
the terms of such Fundamental Corporate Change, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property") are to be received by
or distributed to the holders of Common Stock of the Company, then the Holder of
this Debenture shall have the right thereafter, at its sole option, to (x)
require the Company to prepay this Debenture for cash at one hundred and fifty
percent (150%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of prepayment, (y) receive the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property as is receivable
upon or as a result of such Fundamental Corporate Change by a holder of the
number of shares of Common Stock into which such the outstanding portion of this
Debenture may be converted at the Conversion Price applicable immediately prior
to such Fundamental Corporate Change or (z) require the Company, or such
successor, resulting or purchasing corporation, as the case may be, to, without
benefit of any additional consideration therefor, execute and deliver to the
Holder a debenture with substantial identical rights, privileges, powers,
restrictions and other terms as this Debenture in an amount equal to the amount
outstanding under this Debenture immediately prior to such Fundamental Corporate
Change. For purposes hereof, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to prepayment and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions shall similarly apply to successive Fundamental Corporate
Changes.
SECTION 3.5 Certain Conversion Limits.
Notwithstanding anything herein to the contrary, if and to the extent that,
on any date (the "Section 16 Determination Date"), the holding by the Holder of
this Debenture would result in the Holder's becoming subject to the provisions
of Section 16(b) of the Securities Exchange Act of 1934, as amended, by virtue
of being deemed the "beneficial owner" of more than ten percent (10%) of the
then Outstanding shares of Common Stock, then the Holder shall not have the
right, and the Company shall not have the obligation, to convert any portion of
this Debenture (the "Section 16 Prepayment Portion") as shall cause such Holder
to be deemed the beneficial owner of more than ten percent (10%) of the then
Outstanding shares of Common Stock during the period ending sixty (60) days
after the Section 16 Determination Date. If any court of competent jurisdiction
shall determine, in a final non-appealable decision,that the foregoing
limitation is ineffective to prevent a Holder from being deemed the beneficial
owner of more than ten percent (10%) of the then Outstanding shares of Common
Stock for the purposes
8
of such Section 16(b), then the Company shall prepay the Section 16 Prepayment
Portion. Upon such determination by a court of competent jurisdiction, the
Holder shall have no interest in or rights under such Section 16 Prepayment
Portion. Any and all interest paid on or prior to the date of such determination
shall be deemed interest paid on the remaining portion of this Debenture held by
the Holder. Such prepayment shall be for cash at a prepayment price of one
hundred and fifty percent (150%) of the Principal Amount thereof, together with
all accrued and unpaid interest thereon to the date of prepayment.
SECTION 3.6 Surrender of Debentures. Upon any redemption of this Debenture
pursuant to Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to Section 2.4,
the Holder shall either deliver this Debenture by hand to the Company at its
principal executive offices or surrender the same to the Company at such address
by nationally recognized overnight courier. Payment of the redemption price or
the amount due on maturity specified in Section 2.4, shall be made by the
Company to the Holder against receipt of this Debenture (as provided in this
Section 3.5) by wire transfer of immediately available funds to such account(s)
as the Holder shall specify by written notice to the Company. If payment of such
redemption price is not made in full by the redemption date, or the amount due
on maturity is not paid in full by the Maturity Date, the Holder shall again
have the right to convert this Debenture as provided in Article 3 hereof or to
declare an Event of Default.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1 Status of Debenture. This Debenture is an unsecured obligation
of the Company, and constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms subject, as to enforceability,
to general principles of equity and to principles of bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or
affecting creditors' rights and remedies generally.
SECTION 4.2 Restrictions on Transfer. This Debenture, and any Common Shares
deliverable upon the conversion hereof, have not been registered under the
Securities Act. The Holder by accepting this Debenture agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Debenture or such shares may be sold pursuant to an exemption from
registration under the Securities Act or (ii) a registration statement relating
to this Debenture or such shares has been filed by the Company and declared
effective by the SEC.
Each certificate for shares of Common Stock deliverable hereunder
shall bear a legend as follows unless and until such securities have been sold
pursuant to an effective registration statement under the Securities Act:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended (the "Securities Act"). The securities may
not be offered for sale, sold or otherwise transferred
except (i) pursuant to an effective registration
statement under the Securities Act or (ii) pursuant to
9
an exemption from registration under the Securities Act
in respect of which the issuer of this certificate has
received an opinion of counsel satisfactory to the
issuer of this certificate to such effect. Copies of
the agreement covering both the purchase of the
securities and restrictions on their transfer may be
obtained at no cost by written request made by the
holder of record of this certificate to the Secretary
of the issuer of this certificate at the principal
executive offices of the issuer of this certificate."
ARTICLE 5
COVENANTS
SECTION 5.1 Conversion. The Company shall, not later than five (5) Business
Days after the Company's receipt of a Conversion Notice, issue and deliver to
the Holder the requisite shares of Common Stock Issued at Conversion.
SECTION 5.2 Notice of Default. If any one or more events occur which
constitute or which, with notice, lapse of time, or both, would constitute an
Event of Default, the Company shall forthwith give notice to the Holder,
specifying the nature and status of the Event of Default or such other event(s),
as the case may be.
SECTION 5.3 Payment of Obligations. So long as this Debenture shall be
outstanding, the Company shall pay, extend, or discharge at or before maturity,
all its respective material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
SECTION 5.4 Compliance with Laws. So long as this Debenture shall be
outstanding, the Company shall comply with all applicable laws, ordinances,
rules, regulations and requirements of governmental authorities, except for such
noncompliance which would not have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries.
SECTION 5.5 Inspection of Property, Books and Records. So long as this
Debenture shall be outstanding, the Company shall keep proper books of record
and account in which full, true and correct entries shall be made of all
material dealings and transactions in relation to its business and activities
and shall permit representatives of the Holder at the Holder's expense to visit
and inspect any of its respective properties, to examine and make abstracts from
any of its respective books and records, not reasonably deemed confidential by
the Company, and to discuss its respective affairs, finances and accounts with
its respective officers and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
ARTICLE 6
REMEDIES
SECTION 6.1 Events of Default. "Event of Default" wherever used herein
means any one of the following events:
10
(i) the Company shall default in the payment of principal of or
interest on this Debenture as and when the same shall be due and payable and, in
the case of an interest payment default, such default shall continue for five
(5) Business Days after the date such interest payment was due, or the Company
shall fail to perform or observe in any other covenant, agreement, term,
provision, undertaking or commitment under this Debenture, the Conversion
Warrants and Initial Warrants (as defined in the Securities Purchase Agreement),
the Securities Purchase Agreement or the Registration Rights Agreement and such
default shall continue for a period of ten (10) Business Days after the delivery
to the Company of written notice that the Company is in default hereunder or
thereunder;
(ii) any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Registration Rights Agreement
or in any certificate or financial or other written statements heretofore or
hereafter furnished by or on behalf of the Company in connection with the
execution and delivery of this Debenture, the Warrants, the Securities Purchase
Agreement or the Registration Rights Agreement shall be false or misleading in a
material respect on the Closing Date;
(iii) under the laws of any jurisdiction not otherwise covered by
clauses (iv) and (v) below, the Company or any Subsidiary (A) becomes insolvent
or generally not able to pay its debts as they become due, (B) admits in writing
its inability to pay its debts generally or makes a general assignment for the
benefit of creditors, (C) institutes or has instituted against it any proceeding
seeking (x) to adjudicate it a bankrupt or insolvent, (y) liquidation,
winding-up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors including any plan of compromise or
arrangement or other corporate proceeding involving or affecting its creditors
or (z) the entry of an order for relief or the appointment of a receiver,
trustee or other similar person for it or for any substantial part of its
properties and assets, and in the case of any such official proceeding
instituted against it (but not instituted by it), either the proceeding remains
undismissed or unstayed for a period of sixty (60) calendar days, or any of the
actions sought in such proceeding (including the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its properties and assets) occurs
or (D) takes any corporate action to authorize any of the above actions;
(iv) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under the Bankruptcy
Code or any other applicable Federal or state law, or appointing a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Company or of any substantial part of its property, or ordering the winding-up
or liquidation of its affairs, and any such decree or order continues and is
unstayed and in effect for a period of sixty (60) calendar days;
(v) the institution by the Company or any Subsidiary of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it to the institution
of bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
Bankruptcy Code or any other applicable federal or state law,
11
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as and when they
become due, or the taking of corporate action by the Company in furtherance of
any such action;
(vi) a final judgment or final judgments for the payment of money
shall have been entered by any court or courts of competent jurisdiction against
the Company and remains undischarged for a period (during which execution shall
be effectively stayed) of thirty (30) days, provided that the aggregate amount
of all such judgments at any time outstanding (to the extent not paid or to be
paid, as evidenced by a written communication to that effect from the applicable
insurer, by insurance) exceeds One Hundred Thousand Dollars ($100,000);
(vii) it becomes unlawful for the Company to perform or comply with
its obligations under this Debenture, the Conversion Warrant and the Initial
Warrant, the Securities Purchase Agreement or the Registration Rights Agreement
in any respect;
(viii) the Common Shares shall be delisted from the NASDAQ OTCBB (the
"Trading Market" or, to the extent the Company becomes eligible to list its
Common Stock on any other national security exchange or quotation system, upon
official notice of listing on any such exchange or system, as the case may be,
it shall be the "Trading Market") or suspended from trading on the Trading
Market, and shall not be reinstated, relisted or such suspension lifted, as the
case may be, within five (5) days or;
(ix) the Company shall default (giving effect to any applicable grace
period) in the payment of principal or interest as and when the same shall
become due and payable, under any indebtedness, individually or in the
aggregate, of more than One Hundred Thousand Dollars ($100,000);
SECTION 6.2 Acceleration of Maturity; Rescission and Annulment. If an Event
of Default occurs and is continuing, then and in every such case the Holder may,
by a notice in writing to the Company, rescind any outstanding Conversion Notice
and declare that all amounts owing or otherwise outstanding under this Debenture
are immediately due and payable and upon any such declaration this Debenture
shall become immediately due and payable in cash at a price of one hundred and
fifty percent (150%) of the Principal Amount thereof, together with all accrued
and unpaid interest thereon to the date of payment; provided, however, in the
case of any Event of Default described in clauses (iii), (iv), (v) or (vii) of
Section 6.1, such amount automatically shall become immediately due and payable
without the necessity of any notice or declaration as aforesaid.
SECTION 6.3 Default Interest Rate. (a) If any portion of the principal of
or interest on this Debenture shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise) such principal of and interest on the
Debenture which is due and owing but not paid shall, without limiting the
Holder's rights under this Debenture, bear interest at the Default Interest Rate
until paid in full.
12
(b) Notwithstanding anything herein to the contrary, if at any time
the applicable interest rate as provided for herein shall exceed the maximum
lawful rate which may be contracted for, charged, taken or received by the
Holder in accordance with any applicable law (the "Maximum Rate"), the rate of
interest applicable to this Debenture shall be limited to the Maximum Rate. To
the greatest extent permitted under applicable law, the Company hereby waives
and agrees not to allege or claim that any provisions of this Note could give
rise to or result in any actual or potential violation of any applicable usury
laws. SECTION 6.4 Remedies Not Waived. No course of dealing between the Company
and the Holder or any delay in exercising any rights hereunder shall operate as
a waiver by the Holder.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Notice of Certain Events. In the case of the occurrence of any
event described in Section 3.4 of this Debenture, the Company shall cause to be
mailed to the Holder of this Debenture at its last address as it appears in the
Company's security registry, at least twenty (20) days prior to the applicable
record, effective or expiration date hereinafter specified (or, if such twenty
(20) days' notice is not possible, at the earliest possible date prior to any
such record, effective or expiration date), a notice thereof, including, if
applicable, a statement of (y) the date on which a record is to be taken for the
purpose of such dividend, distribution, issuance or granting of rights, options
or warrants, or if a record is not to be taken, the date as of which the holders
of record of Common Stock to be entitled to such dividend, distribution,
issuance or granting of rights, options or warrants are to be determined or (z)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.
SECTION 7.2 Register. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this
Debenture. Upon any transfer of this Debenture in accordance with Articles 2 and
4 hereof, the Company shall register such transfer on the Debenture register.
SECTION 7.3 Withholding. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Debenture.
SECTION 7.4 Transmittal of Notices. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally, or sent by
telecopier machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier machine or
overnight courier service as follows:
13
(1) if to the Company, to:
Trinity Medical Group USA, Inc.
00000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(2) if to the Holder, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 7.4.
SECTION 7.5 Attorneys' Fees. Should any party hereto employ an attorney
for the purpose of enforcing or construing this Agreement, or any judgment based
on this Agreement, in any legal proceeding whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litigation, the prevailing
party shall be entitled to receive from the other party or parties thereto
reimbursement for all reasonable attorneys' fees and all reasonable costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not, and that such reimbursement shall be included in
any judgment or final order issued in that proceeding. The "prevailing party"
means the party determined by the court to most nearly prevail and not
necessarily the one in whose favor a judgment is rendered.
SECTION 7.5 Governing Law. THIS DEBENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES). WITH RESPECT TO ANY SUIT, ACTION
OR PROCEEDINGS RELATING TO THIS DEBENTURE, THE COMPANY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA SITTING IN
SAN DIEGO AND THE UNITED STATES DISTRICT COURT LOCATED IN THE CITY OF SAN DIEGO
AND HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. SUBJECT TO APPLICABLE LAW, THE COMPANY AGREES THAT FINAL JUDGMENT AGAINST
IT IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
DEBENTURE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION
WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED COPY OF
WHICH JUDGMENT SHALL BE CONCLUSIVE EVIDENCE
14
THEREOF AND THE AMOUNT OF ITS INDEBTEDNESS, OR BY SUCH OTHER MEANS PROVIDED BY
LAW.
SECTION 7.6 Headings. The headings of the Articles and Sections of this
Debenture are inserted for convenience only and do not constitute a part of this
Debenture.
SECTION 7.7 Payment Dates. Whenever any payment hereunder shall be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
SECTION 7.8 Binding Effect. Each Holder by accepting this Debenture agrees
to be bound by and comply with the terms and provisions of this Debenture.
SECTION 7.9 No Stockholder Rights. Except as otherwise provided herein, this
Debenture shall not entitle the Holder to any of the rights of a stockholder of
the Company, including, without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to attend,
meetings of stockholders or any other proceedings of the Company, unless and to
the extent converted into shares of Common Stock in accordance with the terms
hereof.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed by
its duly authorized officer on the date of this Debenture.
Trinity Medical Group USA, Inc.
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------
Title: Chief Financial Officer
--------------------------------------
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Title: Chief Executive Officer
--------------------------------------
15
EXHIBIT A
[FORM OF CONVERSION NOTICE]
TO:
The undersigned owner of this 9 1/2 % Convertible Debenture due January 4,
2003 (the "Debenture") issued by Trinity Medical Group USA, Inc. (the "Company")
hereby irrevocably exercises its option to convert $__________ Principal Amount
of the Debenture [and accrued and unpaid interest thereon to the date of this
Notice] into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert the portion
of the Debenture specified above into shares of Common Stock Issued at
Conversion in accordance with the provisions of Article 3 of the Debenture. The
undersigned directs that the Common Stock and certificates therefor deliverable
upon conversion, the Debenture reissued in the Principal Amount not being
surrendered for conversion hereby, [the check or shares of Common Stock in
payment of the accrued and unpaid interest thereon to the date of this Notice,]
together with any check in payment for fractional Common Stock, be registered in
the name of and/or delivered to the undersigned unless a different name has been
indicated below. All capitalized terms used and not defined herein have the
respective meanings assigned to them in the Debenture. The conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the
Principal Amount of the Debenture set forth above shall cease and the Person or
Persons in whose name or names the Common Stock Issued at Conversion shall be
registered shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest with
such Person or Persons.
Date and time: __________________
-------------------------------
By:
---------------------------
Title:
-------------------------
Fill in for registration of Debenture:
Please print name and address
(including ZIP code number):
-------------------------------
-------------------------------
-------------------------------
A-1
