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EXHIBIT 4(t)
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
By and Between
Universal Medical Systems, Inc
and
Dated as of December 31, 1996
_________________________________
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TABLE OF CONTENTS
Page
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ARTICLE I CERTAIN DEFINITIONS ...................................... 1
ARTICLE II PURCHASE OF DEBENTURES ................................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES ........................... 4
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES .......................... 10
ARTICLE V CONDITIONS PRECEDENT TO CLOSING........................... 15
ARTICLE VI TERMINATION............................................... 17
ARTICLE VII MISCELLANEOUS ............................................ 19
Exhibit A Form of Convertible Debenture
Exhibit B Form of Escrow Agreement
Exhibit C Form of Opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇, counsel for the Company
Exhibit D Conversion Procedures
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of December 31, 1996
(this "Agreement"), by and between Universal Medical Systems, Inc., a Nevada
corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire certain of the Company's 4% Convertible Debentures,
due January 1, 2001 (the "Convertible Debentures"), each in the form of Exhibit
A attached hereto.
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
I CERTAIN DEFINITIONS
Certain Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"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 actions to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.001 per
share.
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"Debentures" means the principal face amount of Convertible Debentures to
be purchased by the Purchaser pursuant to the terms and conditions of this
Agreement as specified at the foot of this Agreement.
"Disclosure Materials" means the disclosure package delivered to the
Purchaser in connection with the offering by the Company of the Debentures and
the Schedules to this Agreement furnished by or on behalf of the Company
pursuant to Section 3.1.
"Escrow Agent" means ▇▇▇▇▇ ▇▇▇▇ LLP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GEM" means GEM Advisors, Inc.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
"Required Approvals" shall have the meaning set forth in Section 3.1(f).
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Underlying Shares" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms thereof.
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II. PURCHASE OF DEBENTURES
2.1. Purchase of Debentures; Closing. Subject to the terms and
conditions herein set forth, the Company shall issue and sell to the Purchaser,
and the Purchaser shall purchase from the Company, on the Closing Date, the
Debentures at a price per (the "Purchase Price") equal to the aggregate face
value thereof (the "Purchase Price"). The Debentures shall be issued in such
denominations of $1,000 and any integral multiple of $1,000 as set forth at the
foot of the Agreement.
The closing of the purchase and sale of the Debentures (the "Closing")
shall take place at the offices of the Escrow Agent, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. The Closing shall be deemed to occur when (a) this
Agreement has been executed by both the Purchaser and the Company, (B) an escrow
agreement substantially in the form of Exhibit B attached hereto has been
executed by the Purchaser, the Company and the Escrow Agent (the "Escrow
Agreement"), (c) payment of the Purchase Price shall have been made by the
Purchaser, by wire transfer of good funds in United States Dollars, to the
Escrow Agent in accordance with and subject to the terms and conditions of the
Escrow Agreement, (d) the Company shall have delivered or caused to be delivered
to the Escrow Agent the opinion of counsel provided for in Section 6.1(a) hereof
(the "Opinion") and (e) the Company shall have delivered to the Escrow Agent the
warrant provided for in Section 3.1(i) hereof. In no event shall the Closing
occur later than December 31, 1996. The date of the Closing is hereinafter
referred to as the "Closing Date".
At the Closing, the Escrow Agent, in accordance with the terms and
conditions of the Escrow Agreement, shall deliver to the Company the Purchase
Price for the Debentures (less the placement fee payable to GEM as contemplated
in Section 3.1 hereof against delivery to the Escrow Agent, as agent for the
Purchaser, of the Debentures registered in the name of the Purchaser. As soon
thereafter as practicable, but in no event later than three (3) business days,
the Escrow Agent shall mail or deliver the Debentures and the Opinion as
provided in the Escrow Agreement and the Escrow Agent shall deliver the warrant
as provided in Section 3.1 hereof.
III. REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and
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assets and to carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth in the Disclosure Documents or in Schedule
3.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Escrow
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company. Each of this Agreement and the Escrow
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c), No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.l(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Debentures hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents.
(d) Issuance of Debentures. The Debentures have been duly and
validly authorized for issuance, offer and sale pursuant to this Agreement and,
when issued and delivered as provided hereunder against payment in accordance
with the terms hereof, shall be valid and binding obligations of the Company
enforceable in accordance with their terms. The
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Company has and at all times while the Debentures are outstanding will maintain
an adequate reserve of shares of Common Stock to enable it to perform its
obligations under this Agreement and the Debentures. When issued in accordance
with the terms hereof and the Debentures, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of its certificate of incorporation or bylaws or
(ii) subject to obtaining the consents referred to in Section 3.1(f), conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) to the knowledge of the
Company result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement, other than the making
of the applicable blue-sky filings under state securities laws, and other than,
in all cases, where the failure to obtain such consent, waiver, authorization or
order, or to give or make such notice or filing, would not materially impair or
delay the ability of the Company to effect the Closing and deliver to the
Purchaser the Debentures free and clear of all Liens (collectively, the
"Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials or in Schedule 3.1(g), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, State,
county, local or foreign) which (i) relates to or challenges the legality,
validity or enforceability of this Agreement or the Debentures (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under this Agreement.
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(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any governmental authority which could (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of this
Agreement, (y) have a Material Adverse Effect or (z) adversely impair the
Company's ability or obligation to perform fully on a timely basis its
obligations under this Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker to bank with respect to the
consummation of the transactions contemplated hereby except that the Company has
agreed to pay to GEM at the Closing, as compensation for its services in
connection with the sale of the Debentures, a placement fee (the "Placement
Fee") in cash, equal to 5% of the Purchase Price. In addition, the Company has
agreed to issue to GEM at the Closing a warrant (the "Warrant") to purchase such
number of shares of Common Stock as shall equal the Purchase Price of each
Debenture. The Warrant shall be exercisable in whole or in part at any time and
from time to time commencing on the issuance date and terminating five years
thereafter at an exercise price equal to the closing bid price of a share of
Common Stock on the day immediately preceding the Closing Date.
(j) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Debentures or
the Underlying Shares under the Securities Act) which might subject the
offering, issuance or sale of the Debentures or the Underlying Shares to the
registration requirements of Section 5 of the Securities Act.
(1) Not a Reporting Company; Eligibility to use Exemption under
504b. The Company is not subject to the reporting requirements of Section 13 or
Section
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l5d of the Exchange Act. The Company has not issued more than $500,000.00 of
securities pursuant to Rule 504 in the last twelve months. The Company is
eligible to issue securities exempt from registration pursuant to Rule 504 of
Regulation D of the Securities Act of 1933.
3.2. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and otherwise to carry out its obligations hereunder and thereunder. The
purchase of the Debentures by the Purchaser hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this Agreement and
the Escrow Agreement has been duly executed and delivered by the Purchaser or on
its behalf and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the
Debentures and the Underlying Shares for its own account (and/or on behalf of
managed accounts who are purchasing solely for their own accounts for
investment) for investment purposes only and not with a view to or for
distributing or reselling such Debentures or Underlying Shares or any part
thereof or interest therein, without prejudice, however, to the Purchaser's
right, subject to the provisions of this Agreement, at all times to sell or
otherwise dispose of all or any part of such Debentures or Underlying Shares in
compliance with applicable State securities laws and under an exemption from
registration under Rule 504(b) of the Securities Act of 1933.
(c) Purchaser Status. At the time the Purchaser (and any
account for which it is purchasing) was offered the Debentures, it (and any
account for which it is purchasing) was, and at the date hereof, it (and any
account for which it is purchasing) is, and at the Closing Date, it (and any
account for which it is purchasing) will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Debentures, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Debentures
and, at the present time, is able to afford a complete loss of such investment.
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(f) Prohibited Transactions. The Debentures to be purchased by
the Purchaser are not being acquired, directly or indirectly, with the assets of
any "employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Debentures and the merits and risks of
investing in the Debentures; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment in
the Common Stock; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the Debentures and to verify the accuracy and completeness of the
information contained in the Disclosure Materials.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Debentures are being offered and sold, and the Underlying Shares are
being offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption, depends in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
3.3. The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.2 hereof.
IV. OTHER AGREEMENTS OF THE PARTIES
4.1. Manner of Offering. The Debentures are being issued pursuant to
Rule 504(b) of Regulation D of the Securities Act of 1933. The Debentures and
the Underlying Shares will be exempt from restrictions on transfer, and will
carry no restrictive legend. The Company will use its best efforts to insure
that no actions are taken that would jeopardize the availability of the
exemption from registration under Rule 504(b) for the Debentures and the
Underlying Shares. Notwithstanding the foregoing, if the Company shall take any
action or any event shall occur, the effect of which would be to cause the
Underlying Shares to be issued upon conversion of any then outstanding
Debentures to be restricted securities (as such term is defined in Rule 144
promulgated under the 1933 Act), the Company agrees to immediately file with the
Commission and cause to become effective as soon as practicable a registration
statement which would permit the public resale of such Underlying Shares in such
states of the United States as
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the holders thereof shall reasonably request. All costs and expenses of such
registration shall be borne by the Company.
4.2. Furnishing of Information. As long as the Purchaser owns Debentures
or Underlying Shares, the Company will promptly furnish to it all annual and
quarterly reports comparable to those required by Section 13(a) or 15(d) of the
Exchange Act.
4.3. Notice of Certain Events. The Company shall (i) advise the Purchaser
promptly after obtaining knowledge thereof, and, if requested by the Purchaser,
confirm such advice in writing, of (A) the issuance by any state securities
commission of any stop order suspending the qualification or exemption from
qualification of the Debentures or the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority, or (B) any event that makes
any statement of a material fact made in the Disclosure Materials untrue or that
requires the making of any additions to or changes in the Disclosure Materials
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, (ii) use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption
from qualification of the Debentures or the Common Stock under any state
securities or Blue Sky laws, and (iii) if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Debentures or the Common
Stock under any such laws, use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
4.4. Copies and Use of Disclosure Materials. The Company shall furnish
the Purchaser, without charge, as many copies of the Disclosure Materials, and
any amendments or supplements thereto, as the Purchaser may reasonably request.
The Company consents to the use of the Disclosure Materials, and any amendments
and supplements thereto, by the Purchaser in connection with resales of the
Debentures or the Underlying Shares other than pursuant to an effective
registration statement.
4.5. Modification to Disclosure Materials. If any event shall occur as a
result of which, in the reasonable judgment of the Company or the Purchaser, it
becomes necessary or advisable to amend or supplement the Disclosure Materials
in order to make the statements therein, in the light of the circumstances at
the time the Disclosure Materials were delivered to the Purchaser, not
misleading, or if it is necessary to amend or supplement the Disclosure
Materials to comply with applicable law, the Company shall promptly prepare an
appropriate amendment or supplement to the Disclosure Materials (in form and
substance reasonably satisfactory to the Purchaser) so that (i) as so amended or
supplemented the Disclosure Materials will not include an untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it is
delivered to Purchaser, not misleading and (ii) the Disclosure Materials will
comply with applicable law.
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4.6. Blue Sky Laws. The Company shall cooperate with the Purchaser in
connection with the qualification of the Debentures and the Underlying Shares
under the securities or Blue Sky laws of such jurisdictions as the Purchaser may
request and to continue such qualification at all times through the third
anniversary of the Closing Date; provided, however, that neither the Company nor
its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified.
4.7. Integration. The Company shall not and shall use its best efforts
to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Debentures or the Underlying Shares in a manner that would require the
registration under the Securities Act of the sale of the Debentures or
Underlying Shares to the Purchaser.
4.8. Furnishing of Rule 144A Materials. The Company shall, for so long
as any of the Debentures or Underlying Shares remain outstanding and during any
period in which it is not subject to Section 13 or 15(d) of the Exchange Act,
make available to any registered holder of Debentures or Underlying Shares in
connection with any sale thereof and any prospective purchaser of such
Debentures or Underlying Shares from such Person, the following information in
accordance with Rule 144A(d)(4) under the Securities Act: a brief statement of
the nature of the business of the Company and the products and services it
offers and the Company's most recent audited balance sheet and profit and loss
and retained earnings statements, and similar audited financial statements for
such part of the two preceding fiscal years as the Company has been in
operation.
4.9. Solicitation Materials. The Company shall not (i) distribute any
offering materials in connection with the offering and sale of the Debentures or
Underlying Shares other than the Disclosure Materials and any amendments and
supplements thereto prepared in compliance herewith or (ii) solicit any offer to
buy or sell the Debentures or Underlying Shares by means of any form of general
solicitation or advertising.
4.10. Right of First Refusal. The Company shall not directly or
indirectly, without the prior consent of the Purchaser, offer, sell, grant any
option to purchase, or otherwise dispose (or announce any offer, sale, grant or
any option to purchase or other disposition) of any of its or its Affiliates
equity or equity-equivalent securities (a "Subsequent Sale") for a period of 90
days after Closing Date, except (i) the granting of options to employees,
officers and directors under, and the issuance of shares upon exercise of
options granted under, any stock option plan heretofore or hereinafter adopted
by the Company; (ii) shares issued upon exercise of any currently outstanding
warrants and upon conversion of any currently outstanding convertible preferred
stock disclosed in Schedule 3.1 and (iii) shares of Common Stock issued upon
conversion of Debentures in accordance herewith, unless (A) the Company provides
the Purchaser a written notice (the "Subsequent Financing Notice") of its
intention to effect such Subsequent Financing, which Subsequent Financing Notice
shall describe in reasonable detail
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the proposed terms of such Subsequent Financing and the amount of proceeds
intended to be raised thereunder and (B) the Purchaser shall not have notified
the Company within forty-eight (48) hours of its receipt of the Subsequent
Financing Notice of its willingness to enter into good faith negotiations to
provide (or to cause its sole designee to provide) financing to the Company on
substantially the terms set forth in the Subsequent Financing Notice. If the
Purchaser shall fail to notify the Company of its intention to enter into such
negotiations within such forty-eight (48) hour period, the Company may effect
the Subsequent Financing substantially upon the terms set forth in the
Subsequent Financing Notice; provided, that the Company shall provide the
Purchaser with a second Subsequent Financing Notice, and the Purchaser shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Financing subject to the initial Subsequent Financing Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Financing Notice within 30 days after the date of the initial
Subsequent Financing Notice.
From the date hereof through the Closing Date, the Company shall not and
shall cause the Subsidiaries not to, without the consent of the Purchaser, (i)
amend its Certificate of Incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Purchaser; (ii) split, combine or
reclassify its outstanding capital stock; (iii) declare, authorize, set aside or
pay any dividend or other distribution with respect to the Common Stock; (iv)
redeem, repurchase or offer to repurchase or otherwise acquire shares of its
Common Stock; or (v) enter into any agreement with respect to any of the
foregoing.
4.11. Listing of Underlying Shares. The Company shall take all steps
necessary to cause the Underlying Shares to be approved for listing on the NASD
Electronic Bulletin Board (or other national securities exchange or market on
which the Common Stock is listed) no later than the first day after which
Debentures may be converted hereunder by the Purchaser, and shall provide to the
Purchaser evidence of such listing.
4.12. Conversion Procedures. Exhibit D attached hereto sets forth the
procedures with respect to the conversion of the Debentures, including the forms
of conversion notice to be provided upon conversion, instructions as to the
procedures for conversion, the form of legal opinion, if necessary, that shall
be rendered by the Company's counsel to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable the
Purchaser to exercise its right of conversion smoothly and expeditiously.
V. CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to Obligations of the Purchaser. The
obligation of the Purchaser to purchase the Debentures is subject to the
satisfaction or waiver by the Purchaser, at or prior to the Closing, of each of
the following conditions:
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(a) Legal Opinion. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.,
counsel for the Company, substantially in the form of EXHIBIT C;
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except that representations and warranties
that are made as of a specific date need be true in all material respects only
as of such date);
(c) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing;
(d) No Material Adverse Effect. Since the date of the financial
statements included in the Company's last filed Quarterly Report on Form 10-Q,
no event which had a Material Adverse Effect shall have occurred which is not
disclosed in the Disclosure Materials;
(e) No Prohibitions. The purchase of and payment for the
Debentures (and upon conversion thereof, the Underlying Shares) hereunder (i)
shall not be prohibited or enjoined (temporarily or permanently) by any
applicable law or governmental regulation and (ii) shall not subject the
Purchaser to any penalty, or in its reasonable judgment, other onerous condition
under or pursuant to any applicable law or governmental regulation that would
materially reduce the benefits to the Purchaser of the purchase of the
Debentures or the Underlying Shares (provided, however, that such regulation,
law or onerous condition was not in effect in such form at the date of this
Agreement);
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an Assistant
Secretary of the Company and certifying (i) that attached thereto is a true,
correct and complete copy of (A) the Company's Certificate of Incorporation, as
amended to the date thereof, (B) the Company's By-Laws, as amended to the date
thereof, and (C) resolutions duly adopted by the Board of Directors of the
Company authorizing the execution and delivery of this Agreement and the
issuance and sale of the Debentures and the Underlying Shares and (ii) the
incumbency of officers executing this Agreement;
(g) No Suspensions of Trading in Common Stock. Trading in the
Common Stock shall not have been suspended by the Commission or the NASD or
other exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit dissemination
of material information regarding the Company);
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(h) Required Approvals. All Required Approvals shall have been
obtained; and
6.2. Conditions Precedent to Obligations of the Company. The obligation
of the Company to issue and sell the Debentures hereunder is subject to the
satisfaction or waiver by the Company, at or to the Closing, of each of the
following conditions:
(a) Accuracy of the Purchaser's Representations and Warranties.
The representations and warranties of the Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except that representations and warranties that are
made as of a specific date need be true in all material respects only as of such
date);
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by it at or prior to the Closing; and
(c) No Prohibitions. The sale of the Debentures (and upon
conversion thereof, the Underlying Shares) hereunder (i) shall not be prohibited
or enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Debentures or the Underlying Shares to
the Purchaser (provided, however, that such regulation, law or onerous condition
was not in effect in such form at the date of this Agreement).
VII. TERMINATION
7.1. Termination by Mutual Consent. This Agreement may be terminated at
any time prior to Closing by the mutual consent of the Company and the
Purchaser.
7.2. Termination by the Company or the Purchaser. This Agreement may be
terminated prior to Closing by either the Company or the Purchaser, by giving
written notice of such termination to the other party, if:
(a) the Closing shall not have occurred by December 31, 1996;
provided that the terminating party is not then in material breach of its
obligations under this Agreement in any manner that shall have caused the
failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law or regulation
that prohibits the consummation of the Closing or if the consummation of the
Closing would violate
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any non-appealable final judgment, order, decree, ruling or injunction of any
court of or governmental authority having competent jurisdiction; or
(c) there shall have been an amendment to Regulation D or an
interpretive release promulgated or issued thereunder, which, in the reasonable
judgment of the terminating party, would materially adversely affect the
transactions contemplated hereby.
7.3. Termination by the Company. This Agreement may be terminated prior
to Closing by the Company, by giving notice of such termination to the
Purchaser, if the Purchaser has materially breached any representation,
warranty, covenant or agreement contained in this Agreement and such breach is
not cured within five business days following receipt by the Purchaser of notice
of such breach.
7.4. Termination by the Purchaser. This Agreement may be terminated prior
to Closing by the Purchaser, by giving notice of such termination to the
Company, if:
(a) the Company has breached any representation, warranty,
covenant or agreement contained in this Agreement and such breach is not cured
within five business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the latest
financial statements included in the Disclosure Materials which could reasonably
be expected to have a Material Adverse Effect and which is not disclosed in the
Disclosure Materials; or
(c) trading in the Common Stock has been suspended by the
Commission or the NASD or other exchange or market on which the Common Stock is
listed or quoted (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the Company).
VIII. MISCELLANEOUS
8.1. Fees and Expenses Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Debentures (and upon conversion thereof, the Underlying Shares) pursuant hereto.
The Purchaser shall be responsible for its own tax liability that may arise as a
result of the investment hereunder or the transactions contemplated by this
Agreement. Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company shall pay (i) all
costs, expenses, fees and all taxes incident to and in connection with: (A) the
preparation, printing and distribution of the Disclosure Materials and all
amendments and supplements thereto (including, without limitation,
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17
financial statements and exhibits), and all preliminary and final Blue Sky
memoranda and all other agreements, memoranda, correspondence and other
documents prepared and delivered in connection herewith (B) the issuance and
delivery of the Debentures and, upon conversion thereof, the Underlying Shares,
(C) the qualification of the Debentures and, upon conversion thereof, the
Underlying Shares for offer and sale under the securities or Blue Sky laws of
the several states (including, without limitation, the fees and disbursements of
the Purchasers' counsel relating to such registration or qualification), (D)
furnishing such copies of the Disclosure Materials and all amendments and
supplements thereto, as may reasonably be requested for use in connection, with
resales of the Debentures and, upon conversion thereof, the Underlying Shares,
and (E) the preparation of the Debentures and, upon conversion thereof,
certificates for the Underlying Shares (including, without limitation, printing
and engraving thereof), (ii) all fees and expenses of the counsel and
accountants of the Company and (iii) all expenses and listing fees in connection
with the application for quotation of the Underlying Shares in the OTC Bulletin
Board.
8.2. Entire Agreement; Amendments. This Agreement, together with the
Exhibits, Annexes and Schedules hereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
8.3. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Universal Medical Systems, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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If to the Purchaser:
Vikraim ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇ ▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
With copies to:
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
8.4. Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchaser, or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
8.5. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
8.6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Neither the Company nor the Purchaser may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other. The
assignment by a party of this Agreement or any rights hereunder shall not affect
the obligations of such party under this Agreement.
8.7. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.8. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
8.9. Survival. The representations and warranties of the Company and the
Purchaser contained in Article III and the agreements and covenants of the
parties contained in Article IV and this Article VII shall survive the Closing
(or any earlier termination of this Agreement) and any conversion of Debentures
hereunder.
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8.10. Counterpart Signatures. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
8.11. Publicity. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed.
8.12. Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
8.13. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
this Agreement and the Company will be entitled to specific performance of the
obligations of the Purchaser hereunder with respect to the subsequent transfer
of Debentures and the Underlying Shares. Each of the Company and the Purchaser
agrees that monetary damages would not be adequate compensation for any loss
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incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
Universal Medical Systems, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President & CEO
Purchaser:
Vikram Chatnal
By: /s/ Vikram Chatnal
-------------------------
Name:
Title:
By:
--------------------------
Aggregate Principal Face Amount of
Debentures To be Purchased: 50,000
To Be Issued in Denominations of
$1,000 or Integral Multiples Thereof
As Follows: 1 X 50,000
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SCHEDULE 3.1(A) - SUBSIDIARIES
The following is a list of the Subsidiaries of Universal Medical Systems,
Inc. and the state or jurisdiction of incorporation or organization of each
(each subsidiary is wholly owned by Universal Medical Systems, Inc.):
1. Medhealth Imaging, Inc., a Nevada corporation
2. Medical High Technology International, Inc., a Florida corporation
3. Life Sciences, Inc., a Connecticut corporation
4. Biometrix, Inc., a Connecticut corporation
5. Biometrix, Inc., a New Hampshire corporation
6. American Med Pharm, Inc., a Delaware corporation
7. King of Nostalgia, Inc., a New York corporation
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SCHEDULE 3.1 C - CAPITALIZATION
A. Authorized Shares:
1. Common Stock - 25 million shares authorized par value of $.001
2. Preferred Stock - 10 million shares authorized par value of $.0001
B. Issued and Outstanding Shares, Warrants and Options
1. Common Stock: 9,208,872
2. Debentures: 0
3. Preferred "A" Class: 0
4. Preferred "B" Class: 1,100,000
5. Preferred "C" Class: 500,000
6. Preferred "D" Class: 407,500
7. Preferred "E" Class: 650,000
8. Warrants - A: 200,000
9. Warrants - B: 50,000
10. Warrants - C: 599,450
11. Warrants - D: 407,500
12. Warrants - E: 1,299,599
13. Options: 1,450,000
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SCHEDULE 3.1(F) - REQUIRED CONSENTS AND APPROVALS
None required
24
SCHEDULE 3.1(G) - LITIGATION
1. Whitestar Management, Inc. v. Medhealth Imaging, Inc.
Thirteenth Judicial Circuit, Hillsborough County, Florida
Case No.: 95-07248 - amount of claim: $25,000
2. Southwest Florida Equipment, Inc. v. Medical High Technology
International, Inc.
Twentieth Judicial Circuit, ▇▇▇ County, Florida
Case No.: 96-6179 - amount of claim: $100,000
Both of the above cases are in the process of being settled.
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EXHIBIT A
No. _____
US$ _____
4% CONVERTIBLE DEBENTURE DUE JANUARY 1, 2001
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Universal Medical Systems, Inc., a Nevada corporation having a principal place
of business at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Company"), designated as its 4% Convertible Debentures, Due January 1, 2001
(the "Debentures"), in an aggregate principal amount of up to US$500,000.
FOR VALUE RECEIVED, the Company promises to pay to [ ], or registered
assigns (the "Holder"), the principal sum of ____________ Thousand Dollars
(US$______), on January 1, 2001 (the "Maturity Date") and to pay interest to the
Holder on the principal sum, at the rate of 4% per annum, payable quarterly, in
arrears on April 1, July 1, October 1 and January 1 of each year, (each, an
"Interest Payment Date"), commencing April 1, 1997. 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, has
been made or duly provided for. Interest shall be calculated on the basis of a
360-day year. Interest due and payable hereunder will be paid on each Interest
Payment Date to the person in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register") on the first business day prior to each the Interest
Payment Date; provided, however, that the Company's obligation to a transferee
of this Debenture arises only if such transfer, sale or other disposition is
made in accordance with the terms and conditions hereof and of the Convertible
Debenture Purchase Agreement, dated as of December ______, 1996, as amended from
time to time (the "Purchase Agreement"), executed by the original Holder. Any
overdue principal and interest as provided herein shall bear interest at the
rate of 14% per annum. 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. A transfer of
the right to receive principal and interest under this Debenture shall be
transferable only through an appropriate entry in the Debenture Register as
provided herein.
1. This Debenture is subject to the following additional provisions:
(a) The Debentures are issuable in denominations of One
Thousand Dollars (US$1000.00) and integral multiples of one thousand dollars
(US$1000.00) in excess thereof. The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the
26
same but shall not be issuable in denominations of less than integral multiples
of One Thousand Dollars (US$1000.00). No services charge will be made for such
registration of transfer or exchange.
(b) If any interest or principal due hereunder is subject to
any withholding tax under the income tax or other applicable laws of the United
States, the Company will pay to the Holder, in addition to the payments
otherwise due hereunder, such additional amount as is necessary to provide that
the net amount actually received by the Holder (free and clear of any such
withholding tax, whether assessed against the Company or the Holder) will equal
the full amount the Holder would have received had such withholding tax not been
assessed.
2. Events of Default. "Event of Default", wherever used herein, means any
one of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(a) any default in the payment of the principal of or interest
on this Debenture as and when the same shall become due and payable either at
the Maturity Date, by acceleration or otherwise;
(b) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any breach of,
this Debenture, and such failure or breach shall not have been remedied within
30 days after the date on which notice of such failure or breach shall have been
given;
(c) the occurrence of any event or breach or default by the
Company under the Purchase Agreement;
(d) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or hereafter in
effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Company under the Bankruptcy Code and the petition is
not controverted within 30 days, or is not dismissed within 60 days, after
commencement of the case; or a "custodian" (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or any substantial part of the
property of the Company or the Company commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or there is commenced against the
Company any such proceeding which remains undismissed for a period of 60 days;
or the Company is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Company
suffers any appointment of any custodian or the like for it or any substantial
part of its property which continues undischarged or unstayed for a period of 60
days; or the Company makes a general assignment for the benefit of creditors; or
the Company shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; or the Company
2
27
shall call a meeting of its creditors with a view to arranging a composition or
adjustment of its debts; or the Company shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company for the purpose of
effecting any of the foregoing;
(e) the Company shall default in any of its obligations under
any mortgage, indenture or instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness of the Company in an
amount exceeding Fifty Thousand Dollars ($50,000), whether such indebtedness now
exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(f) the Company shall have its Common Stock (as defined in
Section 6) delisted from the OTCBB or other national securities exchange or
market on which such Common Stock is listed for trading or suspended from
trading thereon, and shall not have its Common Stock relisted or have such
suspension lifted, as the case may be, within five days; or
(g) the Company shall be a party to any merger or consolidation
(irrespective of whether it is the survivor) or shall dispose of all or
substantially all of its assets in one or more transactions, or shall redeem
more than a de minimis amount of its outstanding shares of Common Stock.
If any Event of Default occurs and is continuing, and in every such case, then
so long as such Event of Default shall then be continuing the Holder may, by
notice to the Company, declare the full principal amount of this Debenture,
together with all accrued but unpaid interest to the date of acceleration, to
be, whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything herein contained to the
contrary, 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 Holder 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.
3. Conversion.
(a) This Debenture shall be convertible into shares of Common Stock at
the Conversion Ratio, at the option of the Holder in whole or in part at any
time after the Original Issue Date. Any conversion under this Section 3(a) shall
be of a minimum principal amount of $1000.00 of Debentures. The Holder shall
effect conversions by surrendering the Debentures (or such portions thereof) to
be converted to the Company, together with the form of conversion notice
attached hereto as Exhibit A (the "Holder Conversion Notice") in the manner set
forth in Section 3(i). Each Holder Conversion Notice shall specify the
principal amount of Debentures to be converted and the date on which such
conversion is to be effected (the "Holder
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28
Conversion Date"). Subject to Section 3(c), each Holder 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
Holder Conversion Notice, the Company shall promptly deliver to the Holder a new
Debenture for such principal amount as has not been converted.
(b) This Debenture shall be convertible into shares of Common Stock at
the Conversion Ratio, at the option of the Company in whole or in part at the
Maturity Date; provided, however, that the Company is not permitted to deliver a
Company Conversion Notice (as defined below) within 10 days of issuing any press
release or other public statement relating to such conversion. The Company shall
effect such conversion by delivering to the Holder a written notice in the form
attached hereto as Exhibit B (the "Company Conversion Notice"), which Company
Conversion Notice, once given, shall be irrevocable. Each Company Conversion
Notice shall specify the principal amount of Debentures to be converted. Any
such conversion by the Company shall be subject to Section 4.13 of the Purchase
Agreement. The Company shall give such Company Conversion Notice in accordance
with Section 3(i) below at least two Trading Days before the Maturity Date (such
date is hereinafter referred to as the "Company Conversion Date). Any such
conversion shall be effected on a pro rata basis among all holders of
Debentures. Upon the conversion of the principal balance of the Debentures
pursuant to a Company Conversion Notice, the Holder shall surrender its
Debentures at the office of the Company or of any transfer agent for the
Debentures or Common Stock. If the Company is converting less than the aggregate
principal amount of all Debentures, the Company shall, upon conversion of such
Debentures subject to such Company Conversion Notice and receipt of the
Debentures surrendered for conversion, deliver to the Holder, and each other
such holder of Debentures full payment in immediately available funds of the
principal balance of and accrued interest on the portion of the Debentures that
have not been converted. Each of a Holder Conversion Notice and a Company
Conversion Notice is sometimes referred to herein as a "Conversion Notice," and
each of a "Holder Conversion Date" and a "Company Conversion Date" is sometimes
referred to herein as a "Conversion Date."
(c) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those then
required by law), representing the number of shares of Common Stock being
acquired upon the conversion of Debentures and (ii) Debentures in principal
amount equal to the principal amount of Debentures not converted; provided,
however that the Company shall not be obligated to issue certificates evidencing
the shares of Common Stock issuable upon conversion of any Debentures, until
Debentures are either delivered for conversion to the Company or any transfer
agent for the Debentures or Common Stock, or the Holder notifies the Company
that such Debentures have been lost, stolen or destroyed and provides a bond (or
other adequate security reasonably acceptable to the Company) satisfactory to
the Company to indemnify the Company from any loss incurred by it in connection
therewith. The Company shall, upon request of the Holder, use its best efforts
to deliver any certificate or certificates required to be delivered by the
Company under this Section 3(c) electronically through the Depository Trust
Corporation or another established
4
29
clearing corporation performing similar functions. In the case of a conversion
pursuant to a Holder Conversion Notice, if such certificate or certificates are
not delivered by the date required under this Section 3(c), 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.
(d)(i) The Conversion Price for each Debenture in effect on any
Conversion Date shall be the LESSER of X OR Y: where X is the GREATER of (a)[$
F] or (b)[ C ] / [ ( { C / F }+3.00 ) / 2 ] (where C = the average Per Share
Market Value for the five (5) Trading Days immediately preceding the Conversion
Date and F = the Per Share Market Value on the Trading Day immediately preceding
the Original issue Date); and Y = 70% of the average Per Share Market Value for
the five (5) Trading Days immediately preceding the Conversion Date.
(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 Junior Securities payable in shares of its capital stock
(whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Company, the Conversion Price designated in Section
3(d)(i) shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock of the Company outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
3(d)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are outstanding,
shall issue rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Per Share Market Value of Common Stock at the record date mentioned below,
the Conversion Price designated in Section 3(d)(i) shall be multiplied by a
fraction, of which the denominator shall be the number of shares of 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 Common Stock offered
for subscription or purchase, and of which the numerator shall be the number of
shares of 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 Common Stock the issuance of which resulted in an adjustment in the
Initial Conversion Price designated in Section 3(d)(i) pursuant to this Section
3(d)(iii), if any such right or warrant shall expire and shall not have
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30
been exercised, the Conversion Price designated in Section 3(d)(i) 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 5 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 Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are outstanding, shall
distribute to all holders of 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 (excluding those referred to in Section 3(d)(iii)
above) then in each such case the Conversion Price at which each Debenture shall
thereafter be convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of 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 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 of the principal amount of the
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 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 Holder and all
other holders of Debentures of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
(v) All calculations under this Section 3 shall be made to the nearest
cent or the nearest 1/l00th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to Section
3(d)(ii),(iii) or (iv), the Company shall promptly mail to the Holder and to
each other holder of Debentures, a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
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(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property as the
shares of the Common Stock into which such Debentures could have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 5(d)(vii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(viii) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
(C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
(D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company (other than a subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the Company,
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property; or
(E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up of the affairs of the
Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed to the
Holder and each other holder of Debentures at their last addresses as it shall
appear upon the Debenture Register, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
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distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of 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, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; 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.
If at any time conditions shall arise by reason of action taken by the
Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the Holder and all other holders of Debentures (different
than or distinguished from the effect generally on rights of holders of any
class of the Company's capital stock) or if at any time any such conditions are
expected to arise by reason of any action contemplated by the Company, the
Company shall, at least 30 calendar days prior to the effective date of such
action, mail a written notice to each holder of Debentures briefly describing
the action contemplated and the material adverse effects of such action on the
rights of such holders and an Appraiser selected by the holders of majority in
principal amount of the outstanding Debentures shall give its opinion as to the
adjustment, if any (not inconsistent with the standards established in this
Section 5), of the Conversion Price (including, if necessary, any adjustment as
to the securities into which Debentures may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of Debentures; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case the adjustment shall be equal to the
average of the adjustments recommended by each such Appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the receipt of
such opinion or opinions or the taking of any such action contemplated, as the
case may be; provided, however, that no such adjustment of the Conversion Price
shall be made which in the opinion of the Appraiser(s) giving the aforesaid
opinion or opinions would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, such number of shares of Common Stock as
shall be issuable (taking into account the adjustments and restrictions of
Section 3(b) and Section 3(d) hereof) upon the conversion of the aggregate
principal amount of all outstanding Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
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33
(f) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of 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 to, or is unable to, make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole share
of Common Stock.
(g) The issuance of certificates for shares of Common Stock on conversion
of Debentures shall be made without charge to the Holder 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 and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(h) Debentures converted into Common Stock shall be canceled.
(i) Each Holder Conversion Notice shall be given by facsimile and by
mail, postage prepaid, addressed to the Chief Financial Officer of the Company
at the facsimile telephone number and address of the principal place of business
of the Company. Each Company Conversion Notice shall be given by facsimile and
by mail, postage prepaid, addressed to each holder of Debentures at the
facsimile telephone number and address of such holder appearing on the books of
the Company or provided to the Company by such holder for the purpose of such
Company Conversion Notice, or if no such facsimile telephone number or address
appears or is so provided, at the principal place of business of the holder. Any
such notice shall be deemed given and effective upon the earliest to occur of
(i) receipt of such facsimile at the facsimile telephone number specified in
this Section 5(j), (ii) five days after deposit in the United States mails or
(iii) upon actual receipt by the party to whom such notice is required to be
given.
4. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day of the year on which commercial banks are
not required or authorized to be closed in New York City.
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, $0.001 par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
9
34
"Conversion Ratio" means, at any time, a fraction, of which the numerator
is the principal amount represented by any Debenture plus accrued but unpaid
interest, and of which the denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock, all other equity securities
of the Company and all other debt that is subordinated to the Debtors by its
terms.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number transfers hereof.
"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 Over-The-Counter
Bulletin Board ("OTCBB") or other stock exchange on which the Common Stock has
been listed or if there is no such price on such date, then the last bid price
on such exchange on the date nearest preceding such date, or (b) if the Common
Stock is not listed on OTCBB or any stock exchange, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the NASD at
the close of business on such date, or (c) if the Common Stock is not quoted by
the NASD, 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), or (d) if the Common Stock is no longer publicly traded the
fair market value of a share of Common Stock as determined by an Appraiser (as
defined in Section 5(d)(iv) above) selected in good faith by the holders of a
majority of principal amount of outstanding Debentures; provided, however, that
the Company, after receipt of the determination by such Appraiser, shall have
the right to select an additional Appraiser, in which case, the fair market
value shall be equal to the average of the determinations by each such
Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Trading Day" means (a) a day on which the Common Stock is traded on the
OTCBB or principal stock exchange on which the Common Stock has been listed, or
(b) if the Common Stock is not listed on the OTCBB or any stock exchange, a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the NASD, or (c) if the Common Stock is not quoted on the NASD, 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).
5. 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, and interest 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.
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6. The Company may not prepay any portion of the outstanding principal
amount on the Debentures.
7. 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.
8. 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.
9. 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.
10. All notices or other communications hereunder shall be given, and
shall be deemed duly given and received, if given, in the manner set forth in
Section 3(i).
11. Any waiver by the Company or the Holder 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.
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.
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
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(or, if such next succeeding Business Day falls in the next calendar month, the
preceding Business Day in the appropriate calendar month).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer "thereunto duly authorized as of the date first above
indicated.
Universal Medical Systems, Inc.
Attest:____________________ ________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President, General Counsel,
Secretary
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EXHIBIT A
NOTICE OF CONVERSION AT
THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.____
into shares of Common Stock, par value U.S.$0.001 per share (the "Common
Stock"), of Universal Medical Systems, 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
___________________________________________
Applicable Conversion Price
___________________________________________
Signature
___________________________________________
Name:
___________________________________________
Address:
38
EXHIBIT B
NOTICE OF CONVERSION
AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Universal Medical Systems, Inc.,
(the "Company") hereby notifies the addressee hereof that the Company hereby
elects to exercise its right to convert the above Debenture No.____ into shares
of Common Stock, $0.001 par value per share (the "Common Stock"), of the Company
according to the conditions hereof, as of the date written below. No fee will be
charged to the Holder for any conversion hereunder, except for such transfer
taxes, if any, which may be incurred by the Company if shares are to be issued
in the name of a person other than the person to whom this notice is addressed.
Conversion calculations: ___________________________________________
Date to Effect Conversion
___________________________________________
Principal Amount of Debentures to be
Converted
___________________________________________
Applicable Conversion Price
___________________________________________
Signature
___________________________________________
Name:
___________________________________________
Address:
39
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of_____, 1996, by and among
Universal Medical Systems, Inc., a Nevada corporation (the "Company"), ▇▇▇▇▇
▇▇▇▇ LLP (the "Escrow Agent") and the party who has executed this Agreement as
the Purchaser (the "Purchaser").
RECITALS
The Purchaser has entered into a Convertible Debenture Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), pursuant to
which the Purchaser has agreed to purchase certain debentures of the Company's
4% Convertible Debentures due January 1, 2001 (the "Debentures").
A. The Escrow Agent is willing to act as escrow agent pursuant to the
terms of this Agreement with respect to the Purchase Price (as defined in the
Purchase Agreement) to be paid for the Debentures and the delivery of the
Debentures registered in the name of the Purchaser as set forth in the Purchase
Agreement (the "Debentures Certificates" and, together with the Ancillary
Closing Documents (as defined below), the Purchase Price and the Warrant, the "
Consideration").
B. Upon the closing of the transaction contemplated by the Purchase
Agreement (the "Closing") and the occurrence of an event described in Section 2
below, the Escrow Agent shall cause the distribution of the Consideration in
accordance with the terms of this Agreement.
C. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. DEPOSIT OF CONSIDERATION. (a) The Purchaser shall deposit with the
Escrow Agent a copy of the Purchase Agreement and this Escrow Agreement or a
counterpart thereof, each executed by the Purchaser, and the Purchase Price. The
Company shall deliver to the Escrow Agent (i) the Purchase Agreement or a
counterpart thereof signed by the Company, (ii) this Escrow Agreement or a
counterpart thereof signed by the Company, (iii) the Debentures, registered in
the name of the Purchaser, and (iv) wiring instructions for transfer of the
Purchase Price by the Escrow Agent into an account specified by the Company for
such purpose. In addition, the Company shall deposit or cause to be deposited
with the Escrow Agent an opinion of the Company's counsel addressed to the
Purchaser in the form of Exhibit C attached to the
40
Purchase Agreement and the Company Certificates (such opinion and the Company
Certificates being hereinafter referred to as the "Ancillary Closing
Documents"), as well as the Warrant.
(i) The Purchase Price shall be delivered by the
Purchaser to the Escrow Agent by wire transfer to the following account:
Bankers Trust Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Account # ▇▇▇-▇▇-▇▇▇
Account Name: ▇▇▇▇▇ ▇▇▇▇ LLP
ABA No.: ▇▇▇-▇▇▇-▇▇▇
Reference:_________________
Purchaser
(ii) The Debentures shall be delivered by the
Company to the Escrow Agent at its address for notice indicated in Section 5(a).
(b) Until termination of this Agreement as set forth in Section 2,
all additional Consideration paid by or which becomes payable between the
Company and the Purchaser shall be deposited with the Escrow Agent.
(c) The Escrow Agent agrees to hold the Consideration received by
it in accordance with the terms and conditions set forth herein until it has
received all of the consideration;
(d) The Purchaser and the Company understand that all
Consideration delivered to the Escrow Agent pursuant to Section 1(a) shall be
held in escrow in a non-interest bearing ▇▇▇▇ account until the Closing. The
Purchase Price will be returned promptly to the Purchaser if all of the
Consideration is not received on or before December 31, 1996. After all of the
Consideration has been received by the Escrow Agent, the parties hereto hereby
authorize and instruct the Escrow Agent to promptly effect the Closing.
(e) At the Closing, Escrow Agent is authorized to pay to GEM in
accordance with its instructions, an amount equal to the Placement Fee (the "GEM
Payment").
2. TERMS OF ESCROW.
(a) The Escrow Agent shall hold the Consideration in escrow until
the earlier to occur of (i) the receipt by the Escrow Agent of all of the
Consideration or (ii) the receipt by the Escrow Agent of a notice, executed by
each of the Company and the Purchaser, stating that the Purchase Agreement has
been terminated or otherwise directing the disposition of the Consideration.
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41
(b) If the Escrow Agent receives the items referenced in clause
(i) of Section 2(a) prior to its receipt of the notice referenced in clause (ii)
of Section 2(a), then, the Escrow Agent shall deliver as soon as practicable,
but in no event later than three (3) business days, the Debentures and the
Ancillary Closing Documents executed by the Company to the Purchaser and shall
deliver immediately to the Company the Purchase Price (less the GEM Payment) and
the GEM Payment and the Warrant to GEM in accordance with its instructions.
(c) If the Escrow Agent receives the notice referenced in clause
(ii) of Section 2(a) prior to its receipt of the items referenced in clause (i)
of Section 2(a), then the Escrow Agent shall promptly deliver the Purchase
Price, Debentures, Ancillary Closing Documents and Warrant as specified in such
notice. The parties agree that if such notice is silent as to the delivery of
such items, the Escrow Agent shall promptly upon receipt of such notice return
(i) the Purchase Price to the Purchaser, (ii) the Debentures and the Warrant to
the Company and (iii) the Ancillary Closing Documents to the party that
delivered the same.
(d) If the Escrow Agent, prior to delivering or causing to be
delivered the Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Consideration
until such time as the Escrow Agent shall receive (i) written instructions
jointly executed by the Purchaser and the Company, directing distribution of
such Consideration, or (ii) a certified copy of a judgment, order or decree of a
court of competent jurisdiction, final beyond the right of appeal, directing the
Escrow Agent to distribute said Consideration to any party hereto or as such
judgment, order or decree shall otherwise specify (including any such order
directing the Escrow Agent to deposit the Consideration into the court rendering
such order, pending determination of any dispute between any of the parties). In
addition, the Escrow Agent shall have the right to deposit any of the
Consideration with a court of competent jurisdiction without liability to any
party if said dispute is not resolved within 30 days of receipt of any such
notice of objection, dispute or otherwise.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
(a) The parties hereto agree that the duties and obligations of
the Escrow Agent are only such as are herein specifically provided and no other.
The Escrow Agent's duties are as a depositary only, and the Escrow Agent shall
incur no liability whatsoever, except as a direct result of its willful
misconduct or gross negligence.
(b) The Escrow Agent may consult with counsel of its choice, and
shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
(c) The Escrow Agent shall not be bound in any way by the terms of
any other agreement to which the Purchaser and the Company are parties, whether
or not it has knowledge thereof, and the Escrow Agent shall not in any way be
required to determine whether
3
42
or not any other agreement has been complied with by the Subscriber and the
Company, or any other party thereto. The Escrow Agent shall not be bound by any
modification, amendment, termination, cancellation, rescission or supersession
of this Agreement unless the same shall be in writing and signed jointly by each
of the Subscriber and the Company, and agreed to in writing by the Escrow Agent.
(d) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action, other than to keep safely all
property held in escrow, until it shall jointly be directed otherwise in writing
by the Purchaser and the Company or by a final judgment of a court of competent
jurisdiction.
(e) The Escrow Agent shall be fully protected in relying upon any
written notice, demand, certificate or document which it, in good faith,
believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement.
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration.
(g) If the Escrow Agent at any time, in its sole discretion, deems
it necessary or advisable to relinquish custody of the Consideration, it may do
so by delivering the same to any other escrow agent mutually agreeable to the
Purchaser and the Company and, if no such escrow agent shall be selected within
three days of the Escrow Agent's notification to the Purchaser and the Company
of its desire to so relinquish custody of the Consideration, then the Escrow
Agent may do so by delivering the Consideration (a) to any bank or trust company
in the County, City and State of new York, which is willing to act as escrow
agent thereunder in place and instead of the Escrow Agent, or (b) to the clerk
or other proper officer of a court of competent jurisdiction as may be permitted
by law. The fee of any such bank or trust company or court officer shall be
borne by the Company. Upon such delivery, the Escrow Agent shall be discharged
from any and all responsibility or liability with respect to the Consideration
and the Company and the Purchaser shall promptly pay to the Escrow Agent all
monies which may be owed it for its services hereunder, including, but not
limited to, reimbursement of its out-of-pocket expenses pursuant to paragraph
(i) below.
(h) This Agreement shall not create any fiduciary duty on the
Escrow Agent's part to the Purchaser or the Company, nor disqualify the Escrow
Agent from
4
43
representing either party hereto in any dispute with the other, including any
dispute with respect to the Consideration. The parties understand that the
Escrow Agent has acted and will continue to act as counsel to GEM.
(i) The reasonable out-of-pocket expenses paid or incurred by the
Escrow Agent in the administration of its duties hereunder, including, but not
limited to, postage, all outside counsel to the Escrow Agent and advisors' and
agents' fees and all taxes or other governmental charges, if any, shall be paid
by the Company.
4. INDEMNIFICATION.
(a) The Purchaser and the Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, including, but not limited to, all legal costs and expenses of
the Escrow Agent incurred defending itself against any claim or liability in
connection with its performance hereunder, provided that the Escrow Agent shall
not be entitled to any indemnity for any losses, damages, taxes, liabilities or
expenses that directly result from its willful misconduct or gross negligence.
5. MISCELLANEOUS.
(a) All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by telecopier, upon receipt of proof of sending thereof,
(iii) if sent by Express Mail, Federal Express or other express delivery service
(receipt requested), the next business day or (iv) if mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, upon
receipt, in each case if delivered to the following addresses
(i) If to the Company:
Universal Medical Systems, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇.,▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(ii) If to the Purchaser:
At the address set forth in the Purchase Agreement
(iii) If to the Escrow Agent:
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44
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
(b) This Agreement shall be construed and enforced in accordance
with the law of the State of New York applicable to contracts entered into and
performed entirely within California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
PURCHASER:
___________________________
By:________________________
Name:
Title:
Universal Medical Systems, Inc.
By:________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President, General Counsel,
Secretary
▇▇▇▇▇ ▇▇▇▇ LLP
___________________________
Escrow Agent
6
45
EXHIBIT C
December ____, 1996
[Name and Address of Purchaser]
RE: UNIVERSAL MEDICAL SYSTEMS, INC. CONVERTIBLE
DEBENTURES
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 5.1 of the
Convertible Debenture Purchase Agreement, dated as of December _____, 1996 (the
"Purchase Agreement"), by and between Universal Medical Systems, Inc., a Nevada
corporation (the "Company"), pursuant to which the Company is issuing
Convertible Debentures (the "Debentures") in the aggregate principal amount of
up to $500,000 which are convertible into shares of Common Stock of the Company
at the conversion ratio set forth in the Debentures. Capitalized terms used and
not otherwise defined herein shall have the meanings given them in the Purchase
Agreement.
I am the Vice President, Secretary and General Counsel of the Company. I
have acted as counsel to the Company in connection with the issuance and sale of
the Debentures. I am familiar with the business and corporate proceedings of the
Company.
In connection with this opinion, I have examined:
1. The Purchase Agreement;
2. The Debentures;
3. The Certificate of Incorporation and By-laws of the Company, as
amended to the date hereof;
4. Records of proceedings and actions of the Board of Directors of
the Company relating to the transactions contemplated by the
Purchase Agreement.
I have also investigated such questions of law, including, without limitation,
Rule 504 of Regulation D ("Rule 504") promulgated under the Securities Act of
1933, as amended (the "Securities Act"), and examined, such additional corporate
records of the Company and such other documents, agreements and
46
[Name of Purchaser]
December ____, 1996
Page 2
instruments as I have deemed necessary or appropriate for the purposes of
rendering this opinion.
Based upon and subject to the foregoing, it is my opinion that:
1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of Nevada, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted.
2. The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by the Purchase
Agreement and otherwise to carry out its obligations thereunder.
3. The execution and delivery of the Purchase Agreement by the
Company and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the Company. The
Purchase Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
4. The authorized, issued and outstanding capital stock of the
Company and each subsidiary thereof are as set forth in the Purchase Agreement.
No shares of the common stock of the Company, par value $.001 per share (the
"Common Stock"), are entitled to preemptive or similar rights. Except as
disclosed in the Purchase Agreement, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or, except as a result of the purchase and sale of the Debentures
under the Purchase Agreement, securities, rights or obligations convertible into
or exchangeable for, or giving any person any right to subscribe for or acquire
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any subsidiary thereof is or may become
bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock.
47
[Name of Purchaser]
December ____, 1996
Page 3
5. The Debentures have been duly authorized, and when paid for in
accordance with the terms of the Purchase Agreement, shall be validly issued and
shall constitute valid and binding obligations of the Company enforceable in
accordance with their terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
6. When issued in accordance with the terms of the Purchase
Agreement, the shares of Common Stock into which the Debentures are convertible
in accordance with the terms of the Purchase Agreement will be duly authorized,
validly issued, fully paid and nonassessable.
7. The Company is an "eligible issuer" as such term is defined
pursuant to Rule 504(a) in that the Company is not (1) a reporting company, (2)
an investment company (whether or not registered under the Investment Company
Act of 1940, or (3) a development stage company with no specific business plan
or purpose.
8. The total sale of the Debentures will not exceed $500,000 and the
Company has not issued any securities within the last twelve (12) calendar
months pursuant to Regulation D.
9. When the Debentures are converted into shares of common stock by
the holders of the Debentures, pursuant to Rule 504 such shares will be free
trading in nature and may be freely or otherwise transferred without any
restrictions by nonaffiliates of the Company.
10. The execution, delivery and performance of the Purchase Agreement
by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of its certificate of incorporation or bylaws or (ii) conflict with,
require the consent of any party to, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is a party, or to
our knowledge result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject
48
[Name of Purchaser]
December ____, 1996
Page 4
(including Federal and state securities laws and regulations), or by which any
property or asset of the Company is bound or affected. To our knowledge, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority.
I am a member of the Bar of the State of _____ and am not licensed or
admitted to practice law in any other jurisdiction. I express no opinion with
respect to the laws of any jurisdiction other than the Federal laws of the
United States of America, including the Federal securities laws thereof. In so
far as any of the opinions expressed above are governed by Nevada law, I have
relied upon the most current compilation of Nevada law in general and upon
Nevada Revised Statutes Chapters 78 and 90 specifically.
The opinions expressed herein are solely for your benefit and may not be
relied upon by any other person without our prior written consent.
Very truly yours,
▇▇▇▇▇▇ ▇. ▇▇▇▇
49
EXHIBIT D
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.
____________, into shares of Common Stock, par value U.S.$0.001 per share (the
"Common Stock"), of Universal Medical Systems, 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
________________________________________
Applicable Conversion Price
________________________________________
Signature
________________________________________
Name:
________________________________________
Address: