Exhibit 4.1
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. A-1 $1,000,000
INTELLIGENT MEDICAL IMAGING, INC.
6% CONVERTIBLE DEBENTURE DUE JUNE 30, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures of
Intelligent Medical Imaging, Inc., a Delaware corporation, having a principal
place of business at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxx Xxxxx Xxxxxxx, XX
00000 (the "COMPANY"), designated as its 6% Convertible Debentures, due June 30,
2001 (the "DEBENTURES"), in an aggregate principal amount of $3,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC Opportunity Fund
Ltd., or registered assigns (the "HOLDER"), the principal sum of One Million
Dollars ($1,000,000), on or prior to June 30, 2001 or such earlier date as the
Debentures are required to be repaid as provided hereunder (the "MATURITY DATE")
and to pay interest to the Holder on the principal sum at the rate of 6% per
annum, payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year during the term hereof, commencing on September 30,
1998, but in no event later than the earlier to occur of a Conversion Date (as
defined in Section 4(a)(i)) for such principal amount or the Maturity Date.
Interest shall accrue daily commencing on the Original Issue Date (as defined in
Section 6) 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. Interest shall be calculated on the basis of a 360-day year and for the
actual number of days elapsed. Interest hereunder will be paid to the Person (as
defined in Section 6) in whose name this Debenture is registered on the records
of the Company regarding registration and transfers of the Debentures (the
"DEBENTURE REGISTER"). All overdue, accrued and unpaid interest and other
amounts due hereunder shall bear interest at the rate of 18% per annum (to
accrue daily) from the date such interest is due hereunder through and including
the date of payment. The principal of, and interest on, this Debenture are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts, at the
address of the Holder last appearing on the Debenture Register, except that
interest due on the principal amount (but not overdue interest) may, at the
Company's option, be paid in shares of Common Stock (as defined in Section 6)
calculated based upon the Conversion Price (as defined below) on the date such
interest was due. All amounts due hereunder other than such interest shall be
paid in cash. Notwithstanding anything to the contrary contained herein, the
Company may not issue shares of Common Stock in payment of interest on the
principal amount if: (i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay interest hereunder in shares of Common Stock; (ii) such
shares of Common Stock are not either registered for resale pursuant to an
Underlying Securities Registration Statement (as defined in Section 6) or freely
transferable without volume restrictions pursuant to Rule 144(k) promulgated
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), as
determined by counsel to the Company pursuant to a written opinion letter
addressed and in form and substance acceptable to the Holder and the transfer
agent for such shares; (iii) such shares of Common Stock are not then listed or
quoted on the Nasdaq National Market ("NASDAQ") or on the New York Stock
Exchange, American Stock Exchange or the Nasdaq SmallCap Market (each, a
"SUBSEQUENT MARKET"); (iv) the Company has failed to timely satisfy its
conversion obligations hereunder; or (v) the issuance of such shares would
result in the recipient thereof beneficially owning more than 4.999% of the
issued and outstanding shares of Common Stock as determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Payment of
interest on the principal amount in shares of Common Stock is further subject to
the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same but shall not be issuable in denominations of less
than integral multiplies of Fifty Thousand Dollars ($50,000) unless such amount
represents the full principal balance of Debentures outstanding to such Holder.
No service charge will be made for such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 6) and may be transferred or exchanged only in compliance
with the Purchase Agreement. 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.
SECTION 3. 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 the principal of, interest on
or liquidated damages in respect of this Debenture (free of any claim
of subordination), as and when the same shall become due and payable
(whether on the applicable quarterly interest payment date, a
Conversion Date or the Maturity Date or by acceleration or otherwise,
including if by reason of enforcement of any subordination
provisions);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, the Purchase Agreement or the Registration
Rights Agreement, and such failure or breach shall not have been
remedied within 10 days after the date on which notice of such failure
or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a
case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or 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 the
Company or any subsidiary thereof makes a general assignment for the
benefit of creditors; or the Company shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any
subsidiary thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement
or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness of the Company in an
amount exceeding one hundred thousand dollars ($100,000), whether such
indebtedness now exists or shall hereafter be created and such default
shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable;
(v) the Common Stock shall fail to be listed for trading on the
NASDAQ or on a Subsequent Market or the Common Stock shall be
suspended from trading on the NASDAQ or on a Subsequent Market, in
either case, for more than three (3) days (which need not be
consecutive days);
(vi) the Company shall be a party to any Change of Control
Transaction (as defined in Section 6), shall agree to sell or dispose
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 more than a de minimis number of shares
of Common Stock or other equity securities of the Company (other than
redemptions of Underlying Shares);
(vii) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange Commission
(the "COMMISSION") on or prior to the 180th day after the Original
Issue Date;
(viii) an Event (as hereinafter defined) shall not have been
cured to the satisfaction of the Holder prior to the expiration of
thirty (30) days from the Event Date (as hereinafter defined) relating
thereto (other than an Event resulting from a failure of an Underlying
Securities Registration Statement to be declared effective by the
Commission on or prior to the Effective Date (as defined in the
Registration Rights Agreement);
(ix) the Company shall fail for any reason to deliver
certificates to a Holder prior to the twelfth (12th) day after the
Conversion Date pursuant to Section 4(b) 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
(x) the Company shall fail for any reason to deliver the payment
in cash pursuant to a Buy-In (as defined below) within ten (10) days
after notice is deemed delivered hereunder.
(b) If any Event of Default occurs and is continuing, the full principal
amount of this Debenture (and, at the Holder's option, all other Debentures then
held by such Holder), together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become, immediately due and payable
in cash. The aggregate amount payable upon an Event of Default shall be equal to
the sum of (i) the Mandatory Prepayment Amount (as defined below) plus (ii) the
product of (A) the number of Underlying Shares issued in respect of conversions
hereunder or as payment of interest hereunder, in either case, within thirty
(30) days of the date of a declaration of an Event of Default and then held by
the Holder and (B) the Per Share Market Value on the date prepayment is due or
the date the full prepayment price is paid, whichever is greater. Interest shall
accrue on the prepayment amount hereunder from the seventh day after such amount
is due (being the date of an Event of Default) through the date of payment in
full thereof at the rate of 18% per annum. All Debentures and Underlying Shares
for which the full repayment price hereunder shall have been paid in accordance
herewith shall be promptly surrendered 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. No such rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
SECTION 4. CONVERSION.
(a) (i) This Debenture shall be convertible into shares of Common Stock
(subject to the limitations set forth in Section 4(a)(iii) hereof) at the option
of the Holder, in whole or in part at any time and from time to time, after the
90th day following the Original Issue Date (the "INITIAL CONVERSION DATE"),
PROVIDED, HOWEVER, (1) on and after the Initial Conversion Date, the Holder
shall be entitled to convert up to 25% of the aggregate principal amount of
Debentures originally issued on the Original Issue Date; (2) on and after the
first month anniversary of the Initial Conversion Date, the Holder shall be
entitled to convert up to 50% of the aggregate principal amount of Debentures
originally issued on the Original Issue Date; (3) on and after the second month
anniversary of the Initial Conversion Date, the Holder shall be entitled to
convert up to 75% of the aggregate principal amount of Debentures originally
issued on the Original Issue Date; (4) on and after the third month anniversary
of the Initial Conversion Date, the Holder shall be entitled to convert all of
the aggregate principal amount of Debentures originally issued on the Original
Issue Date. Notwithstanding the foregoing, the conversion limitations set forth
in this Section shall cease to apply, and all Debentures may be converted in
whole or in part at the option of the Holder, if the average of the closing
sales prices of the Common Stock on the NASDAQ or such Subsequent Market on
which the Common Stock is then listed or quoted for any twenty (20) consecutive
Trading Days shall be equal to or greater than 175% of the average of the Per
Share Market Values for the five (5) Trading Days immediately preceding the
Original Issue Date. The number of shares of Common Stock issuable upon a
conversion hereunder shall be determined by dividing the outstanding principal
amount of this Debenture to be converted, plus all accrued but unpaid interest
thereon (only to the extent that the Company has elected and is permitted to pay
such interest in shares of Common Stock), by the Conversion Price, each as
subject to adjustment as provided hereunder. The Holder shall effect conversions
by surrendering the Debentures (or such portions thereof) to be converted,
together with the form of conversion notice attached hereto as EXHIBIT A (a
"CONVERSION NOTICE") to the Company. Each Conversion Notice shall specify the
principal amount of Debentures to be converted and the date on which such
conversion is to be effected, which date may not be prior to the date such
Conversion Notice is deemed to have been delivered hereunder (a "CONVERSION
DATE"). If no Conversion Date is specified in a Conversion Notice, the
Conversion Date shall be the date that such Conversion Notice is deemed
delivered hereunder. Subject to Section 5(b) hereof, each Conversion Notice,
once given, shall be irrevocable. If the Holder is converting less than all of
the principal amount represented by the Debenture(s) tendered by the Holder with
the Conversion Notice, or if a conversion hereunder cannot be effected in full
for any reason, the Company shall honor such conversion to the extent
permissible hereunder and shall promptly deliver to such Holder (in the manner
and within the time set forth in Section 5(b)) a new Debenture for such
principal amount as has not been converted.
(ii) AUTOMATIC CONVERSION. Subject to the provisions in this
paragraph, the principal amount of Debentures for which conversion notices have
not previously been received or for which prepayment has not been made or
required hereunder shall be automatically converted on the third anniversary of
the Original Issue Date at the Conversion Price on such date. The conversion
contemplated by this paragraph shall not occur if (a) (1) an Underlying
Securities Registration Statement is not then effective that names the Holder as
a selling stockholder thereunder or (2) the Holder is not permitted to resell
Underlying Shares pursuant to Rule 144(k) promulgated under the Securities Act,
without volume restrictions, as evidenced by an opinion letter of counsel
acceptable to the Holder and the transfer agent for the Common Stock; (b) there
are not sufficient shares of Common Stock authorized and reserved for issuance
upon such conversion; and (c) the Company shall not have defaulted on its
covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement. Notwithstanding anything herein to the contrary,
the three-year period for conversion under this Section shall be extended (on a
day-for-day basis) for any Trading Days that the Holder is unable to resell
Underlying Shares under an Underlying Securities Registration Statement due to
(a) the Common Stock not being listed for trading on the NASDAQ or any
Subsequent Market, (b) the failure of an Underlying Securities Registration
Statement to be declared effective by the Commission by the Effectiveness Date
(as defined in the Registration Rights Agreement), or (c) if an Underlying
Securities Registration Statement shall have been declared effective by the
Commission, (x) the failure of such Underlying Securities Registration Statement
to remain effective at all times thereafter as to all Underlying Shares, or (y)
the suspension of the Holder's ability to resell Underlying Shares thereunder.
Notwithstanding anything to the contrary contained herein, a conversion pursuant
to this Section shall not be subject to the provisions of Section 4(a)(iii)(A).
(iii) CERTAIN CONVERSION RESTRICTIONS.
(A) The Holder agrees not to convert Debentures to the extent such
conversion would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 4.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of the Debentures held by such Holder
after application of this Section. To the extent that the limitation contained
in this Section applies, the determination of whether Debentures are convertible
(in relation to other securities owned by a Holder) and of which portion of the
principal amount of such Debentures are convertible shall be in the sole
discretion of the Holder, and the submission of Debentures for conversion shall
be deemed to be the Holder's determination of whether such Debentures are
convertible (in relation to other securities owned by the Holder) and of which
portion of such Debentures are convertible, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. Nothing contained herein
shall be deemed to restrict the right of the Holder to convert Debentures at
such time as such conversion will not violate the provisions of this Section.
The provisions of this Section will not apply to any conversion pursuant to
Section 4(a)(ii) of this Debenture, and may be waived by a Holder (but only as
to itself and not to any other Holder) upon not less than 75 days prior notice
to the Company (in which case, the Holder shall make such filings with the
Commission, including under Rule 13D or 13G, as are required by applicable law),
and the provisions of this Section shall continue to apply until such 75th day
(or later, if stated in the notice of waiver). Other Holders shall be unaffected
by any such waiver.
(B) If on any Conversion Date (A) the Common Stock is listed for
trading on the NASDAQ or the Nasdaq National Market, (B) the Conversion Price
then in effect is such that the aggregate number of shares of Common Stock that
would then be issuable upon conversion in full of all then outstanding
Debentures and as payment of interest thereon in shares of Common Stock,
together with any shares of the Common Stock previously issued upon conversion
of Debentures and as payment of interest thereon, would equal or exceed 20% of
the number of shares of the Common Stock outstanding on the Original Issue Date
(such number of shares as would not equal or exceed such 20% limit, the
"ISSUABLE MAXIMUM"), and (C) the Company shall not have previously obtained the
vote of shareholders (the "SHAREHOLDER APPROVAL"), if any, as may be required by
the applicable rules and regulations of The Nasdaq Stock Market (or any success
entity) applicable to approve the issuance of shares of Common Stock in excess
of the Issuable Maximum in a private placement whereby shares of Common Stock
are deemed to have been issued at a price that is less than the greater of book
or fair market value of the Common Stock, then the Company shall issue to the
Holder so requesting a conversion a number of shares of Common Stock equal to
the Issuable Maximum and, with respect to the remainder of the aggregate
principal amount of Debentures then held by such Holder for which a conversion
in accordance with the Conversion Price would result in an issuance of Common
Stock in excess of the Issuable Maximum (the "EXCESS PRINCIPAL"), the converting
Holder shall have the option to require the Company to either (1) use its best
efforts to obtain the Shareholder Approval applicable to such issuance as soon
as is possible, but in any event not later than the 60th day after such request,
or (2)(i) issue and deliver to such Holder a number of shares of Common Stock as
equals (x) the Excess Principal, plus accrued interest on all Debentures being
converted, divided by (y) the Initial Conversion Price , and (ii) cash in an
amount equal to the product of (x) the Per Share Market Value on the Conversion
Date and (y) the number of shares of Common Stock in excess of such Holder's pro
rata portion of the Issuable Maximum that would have otherwise been issuable to
the Holder in respect of such conversion but for the provisions of this Section
(such amount of cash being hereinafter referred to as the "DISCOUNT
EQUIVALENT"), or (3) pay cash to the converting Holder in an amount equal to the
Mandatory Prepayment Amount for the Excess Principal. If the Company fails to
pay the Discount Equivalent or the Mandatory Prepayment Amount, as the case may
be, in full pursuant to this Section within seven (7) days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum to the
converting Holder, accruing daily from the Conversion Date until such amount,
plus all such interest thereon, is paid in full.
(b) (i) Not later than three Trading Days after the Conversion Date, the
Company will deliver or cause to be delivered to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those required by Section 3.1(b) of the Purchase Agreement)
representing the number of shares of the Common Stock being acquired upon the
conversion of Debentures (subject to the limitations set forth in Section
4(a)(iii) hereof), (ii) Debentures in a principal amount equal to the principal
amount of Debentures not converted; (iii) a bank check in the amount of all
accrued and unpaid interest (if the Company has elected to pay accrued interest
in cash), together with all other amounts then due and payable in accordance
with the terms hereof, in respect of Debentures tendered for conversion, and
(iv) if the Company has elected and is permitted hereunder to pay accrued
interest in shares of the Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1(b) of the Purchase Agreement), representing such number of shares of
the Common Stock as equals such interest divided by the Conversion Price
calculated on the Conversion Date; PROVIDED, HOWEVER, that the Company shall not
be obligated to issue certificates evidencing the shares of the Common Stock
issuable upon conversion of the principal amount of Debentures until Debentures
are delivered for conversion to the Company or the Holder notifies the Company
that such Xxxxxxxxx has been mutilated, lost, stolen or destroyed and complies
with Section 9 hereof. If in the case of any Conversion Notice such certificate
or certificates, including for purposes hereof, any shares of the Common Stock
to be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, are not delivered to or as directed by the Holder by the third (3rd)
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 Debentures tendered for conversion. If the
Company fails to deliver to the Holder such certificate or certificates pursuant
to this Section, including for purposes hereof, any shares of the Common Stock
to be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the third (3rd) Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, $2,500 for each day thereafter until the Company delivers such
certificates (such amount shall be also be due for each Trading Day after the
date that the Holder may rescind such conversion until such date as the Holder
shall have received the return of the principal amount of Debentures relating to
such rescission).
(ii) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates pursuant
to Section 4(b)(i), including for purposes hereof, any shares of Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the third (3rd) Trading Day after the Conversion Date, and
if after such the third (3rd) Trading Day the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the Holder
anticipated receiving upon such conversion (a "BUY-IN"), then the Company shall
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 shares of Common Stock so
purchased exceeds (y) the aggregate principal amount of Debentures for which
such conversion was not timely honored. For example, if the Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 aggregate principal
amount of Debentures, 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.
(c) (i) The conversion price (the "CONVERSION PRICE") in effect on any
Conversion Date shall be the lesser of (a) 120% of the average of the Per Share
Market Values for the five (5) Trading Days immediately preceding the Original
Issue Date (the "INITIAL CONVERSION PRICE") and (b) 86% (the "DISCOUNT RATE")
multiplied by the average of the five (5) lowest Per Share Market Values during
the twenty five (25) Trading Day period immediately preceding the applicable
Conversion Date PROVIDED, HOWEVER, that such twenty five (25) Trading Day period
shall be extended for the number of Trading Days during such period in which (A)
trading in the Common Stock was suspended on the NASDAQ or on such Subsequent
Market on which the Common Stock is then listed, or (B) after the date declared
effective by the Commission, the Underlying Securities Registration Statement is
not effective, or (C) after the date declared effective by the Commission, the
Prospectus included in the Underlying Securities Registration Statement may not
be used by the Holder for the resale of Underlying Shares. If: (a) an Underlying
Securities Registration Statement is not filed on or prior to the Filing Date
(as defined in the Registration Rights Agreement) (if the Company files such
Underlying Securities Registration Statement without affording the Holder the
opportunity to review and comment on the same as required by Section 3(a) of the
Registration Rights Agreement, the Company shall not be deemed to have satisfied
this clause (a)), or (b) the Company fails to file with the Commission a request
for acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, within five (5) days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that an Underlying Securities Registration Statement will not be
"reviewed," or not subject to further review, or (c) the Underlying Securities
Registration Statement is not declared effective by the Commission on or prior
to the Effectiveness Date, or (d) such Underlying Securities Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities (as defined in the
Registration Rights Agreement) at any time prior to the expiration of the
"Effectiveness Period" (as defined in the Registration Rights Agreement),
without being succeeded within ten (10) days by an amendment to such Underlying
Securities Registration Statement or a subsequent Underlying Securities
Registration Statement filed with and declared effective by the Commission, or
(e) trading in the Common Stock shall be suspended from the NASDAQ or a
Subsequent Market for more than three (3) Business Days (which need not be
consecutive days), (f) the conversion rights of the Holders are suspended for
any reason or (g) an amendment to the Underlying Securities Registration
Statement is not filed by the Company with the Commission within ten (10) days
of the Commission's notifying the Company that such amendment is required in
order for the Underlying Securities Registration Statement to be declared
effective (any such failure or breach being referred to as an "EVENT," and for
purposes of clauses (a), (c), (f) the date on which such Event occurs, or for
purposes of clause (b) the date on which such five (5) day period is exceeded,
or for purposes of clauses (d) and (g) the date which such 10 day-period is
exceeded, or for purposes of clause (e) the date on which such three (3)
Business Day-period is exceeded, being referred to as "EVENT DATE"), then each
of the Initial Conversion Price and the Discount Rate shall be decreased by 2.0%
on the Event Date and each monthly anniversary thereof until the earlier to
occur of the second month anniversary after the Event Date and such time as the
applicable Event is cured (i.e., the Discount Rate would be lowered to 84% as of
the Event Date and 82% as of the one month anniversary of such Event Date).
Commencing on the second month anniversary after the Event Date, the Holder
shall have the option to either (x) require further cumulative 2.0% discounts to
continue or (y) require the Company to pay to the Holder 2.0% of the aggregate
principal amount of Debentures then held by such Holder, in cash, as liquidated
damages and not as a penalty, on the first day of each monthly anniversary of
the Event Date, until such time as the applicable Event is cured. Any decrease
in the Initial Conversion Price and the Discount Rate pursuant to this Section
shall remain in effect notwithstanding the fact that the Event causing such
decrease has been subsequently cured and further monthly decreases have ceased.
The provisions of this Section are not exclusive and shall in no way limit the
Company's obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are outstanding,
(a) shall pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of the Common Stock, (b) subdivide outstanding
shares of the Common Stock into a larger number of shares, (c) combine
outstanding shares of the Common Stock into a smaller number of shares, or (d)
issue by reclassification of shares of the Common Stock any shares of capital
stock of the Company, the Initial Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of the Common Stock
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common Stock
(and not to Holders of Debentures) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share Market
Value of the Common Stock at the record date mentioned below, the Initial
Conversion Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of the Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of the Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase shares of the
Common Stock the issuance of which resulted in an adjustment in the Initial
Conversion Price pursuant to this Section, if any such right or warrant shall
expire and shall not have been exercised, the Initial Conversion Price shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made pursuant
to the provisions of this Section 4 after the issuance of such rights or
warrants) had the adjustment of the Initial Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while
Debentures are outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that is convertible into or
exchangeable for shares of Common Stock ("COMMON STOCK EQUIVALENTS") entitling
any Person to acquire shares of Common Stock at a price per share less than the
Conversion Price, then the Conversion Price shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of shares of Common Stock or such Common Stock
Equivalents plus the number of shares of Common Stock which the offering price
for such shares of Common Stock or Common Stock Equivalents would purchase at
the Conversion Price, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock so issued or issuable, provided, that
for purposes hereof, all shares of Common Stock that are issuable upon exercise
or exchange of Common Stock Equivalents shall be deemed outstanding immediately
after the issuance of such Common Stock Equivalents. Such adjustment shall be
made whenever such shares of Common Stock or Common Stock Equivalents are
issued.
(v) If the Company, at any time while Debentures are outstanding,
shall distribute to all holders of the Common Stock (and not to Holders of
Debentures) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market Value
of the Common Stock on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; PROVIDED, HOWEVER, that in
the event of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "APPRAISER") selected in
good faith by the holders of a majority in interest of Debentures then
outstanding; and PROVIDED, FURTHER, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the holders of
Debentures of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder of this Debenture shall have the
right thereafter to, at its option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Initial Conversion Price is adjusted pursuant to
any of Section 4(c)(ii) - (v), the Company shall promptly mail to each Holder of
Debentures a notice setting forth the Initial Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(ix) If (A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its 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 of
the Company, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common Stock is converted into
other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then, and in each case, the Company shall cause to be filed at
each office or agency maintained for the purpose of conversion of the
Debentures, and shall cause to be mailed to the Holders of Debentures at their
last addresses as they 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, HOWEVER, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. Holders are entitled
to convert Debentures during the 20-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of the Common Stock solely
for the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(c)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of the Common Stock that shall
be so issuable shall, upon issue, be duly and validly authorized, issued and
fully paid, nonassessable and, if the Underlying Securities Registration
Statement has been declared effective under the Securities Act, registered for
public sale in accordance with such Underlying Securities Registration
Statement.
(e) Upon a conversion hereunder the Company shall not be required to issue
stock certificates representing fractions of shares of the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any final fraction of
a share based on the Per Share Market Value at such time. If the Company elects
not, or is unable, to make such a cash payment, the holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debentures 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.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxx Xxxxx Xxxxxxx, XX 00000 (facsimile
number (000) 000-0000, attention President, or such other address or facsimile
number as the Company may specify for such purposes by notice to the Holders
delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail, postage
prepaid, addressed to each Holder of the Debentures at the facsimile telephone
number or address of such Holder 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 8:00 p.m. (New
York City time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 8:00 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) four days
after deposit in the United States mail, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to be
given.
SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right to prepay, exercisable at any time
upon twenty (20) days prior written notice to the Holders of the Debentures to
be prepaid (the "OPTIONAL PREPAYMENT NOTICE"), from funds legally available
therefor at the time of such prepayment, all or any portion of the outstanding
principal amount of the Debentures which have not previously been repaid or for
which Conversion Notices have not previously been delivered hereunder, at a
price equal to the Optional Prepayment Price (as defined below). Any such
prepayment by the Company shall be in cash and shall be free of any claim of
subordination. The Holders shall have the right to tender, and the Company shall
honor, Conversion Notices delivered prior to the expiration of the twentieth
(20th) Trading Day after receipt by the Holders of an Optional Prepayment Notice
for such Debentures (such date, the "OPTIONAL PREPAYMENT DATE").
(b) If any portion of the Optional Prepayment Price shall not be paid by
the Company by the Optional Prepayment Date, the Optional Prepayment Price shall
be increased by 18% per annum (to accrue daily) until paid (which amount shall
be paid as liquidated damages and not as a penalty). In addition, if any portion
of the optional Prepayment Price remains unpaid through the expiration of the
Optional Prepayment Date, the Holder subject to such prepayment may elect by
written notice to the Company to either (i) demand conversion in accordance with
the formula and the time period therefor set forth in Section 4 of any portion
of the principal amount of Debentures for which the Optional Prepayment Price,
plus accrued liquidated damages thereof, has not been paid in full (the "UNPAID
PREPAYMENT PRINCIPAL AMOUNT"), in which event the applicable Per Share Market
Value shall be the lower of the Per Share Market Value calculated on the
Optional Prepayment Date and the Per Share Market Value as of the Holder's
written demand for conversion, or (ii) invalidate AB INITIO such optional
redemption, notwithstanding anything herein contained to the contrary. If the
Holder elects option (i) above, the Company shall within three (3) Trading Days
such election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Principal Amount subject
to such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company shall
promptly, and in any event not later than three Trading Days from receipt of
notice of such election, return to the Holder new Debentures for the full Unpaid
Prepayment Principal Amount. If, upon an election under option (i) above, the
Company fails to deliver the shares of Common Stock issuable upon conversion of
the Unpaid Prepayment Principal Amount within the time period set forth in this
Section, the Company shall pay to the Holder in cash, as liquidated damages and
not as a penalty, $2,500 per day until the Company delivers such Common Stock to
the Holder.
(c) The "OPTIONAL PREPAYMENT PRICE" for any Debentures shall equal the sum
of (i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided by the Conversion Price on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is less, multiplied by the Per Share Market Value on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is greater, and (ii) all other amounts, expenses, costs and liquidated
damages due in respect of such principal amount.
SECTION 6. DEFINITIONS. For the purposes hereof, the following terms shall
have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action to close.
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 40% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the Company's
securities continue to hold at least 40% of such securities following such
transaction or (iv) 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), (ii) or (iii).
"COMMON STOCK" means the common stock, $.01 par value, of the Company and
stock of any other class into which such shares may hereafter have been
reclassified or changed.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the sum of (i)
the principal amount of Debentures to be prepaid, plus all accrued and unpaid
interest thereon, divided by the Conversion Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the Average
Price on (x) the date the Mandatory Prepayment Amount is demanded or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.
"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.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the NASDAQ or on such
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on which the Common Stock is then listed or quoted on
the date nearest preceding such date, or (b) if the Common Stock is not then
listed or quoted on the NASDAQ or on a Subsequent Market, the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the Holder,
or (d) if the Common Stock is not then publicly traded the fair market value of
a share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority interest of the principal amount of Debentures.
"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 Convertible Debenture Purchase Agreement,
dated as of the Original Issue Date, between the Company and the original Holder
of Debentures, as amended, modified or supplemented from time to time in
accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Original Issue Date, between the Company and the original Holder
of Debentures, as amended, modified or supplemented from time to time in
accordance with its terms.
"TRADING DAY" means (a) a day on which the Common Stock is traded on the
NASDAQ or on such Subsequent Market on which the Common Stock is then listed or
quoted, as the case may be, or (b) if the Common Stock is not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
SECTION 7. 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 obligation of the
Company. This Debenture ranks PARI PASSU with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
SECTION 8. 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. As long as there are Debentures outstanding, the Company
shall not and shall cause it subsidiaries not to, without the consent of the
Holders, (i) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holders; (ii) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock or other equity securities other than as to the Underlying Shares
to the extent permitted or required under the Transaction Documents; or (iii)
enter into any agreement with respect to any of the foregoing
SECTION 9. 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.
SECTION 10. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to conflicts of
laws thereof. The Company and the Holders hereby irrevocably submit to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, 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 that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument 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.
SECTION 11. 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.
SECTION 12. 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.
SECTION 13. Whenever any payment or other obligation hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next calendar month, the preceding Business Day in the appropriate calendar
month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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.
INTELLIGENT MEDICAL IMAGING, INC.
By: /s/ XXXX XXXXXXX
----------------------------------
Name: Xxxx Xxxxxxx
Title: CFO
Attest:
By: /s/ XXXX XXXXXXXXXX
----------------------------
Name: Xxxx Xxxxxxxxxx
Title: CEO
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-[ ] into shares of
common stock, $.01 par value (the "Common Stock"), of Intelligent Medical
Imaging, Inc. (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
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.
Conversion calculations:
_____________________________________________
Date to Effect Conversion
_____________________________________________
Principal Amount of Debentures to be Converted
_____________________________________________
Number of shares of Common Stock to be Issued
_____________________________________________
Applicable Conversion Price
_____________________________________________
Signature
_____________________________________________
Name
_____________________________________________
Address
