EXHIBIT 10.1
DEBENTURE AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FACE AMOUNT $600,000
PRICE $600,000
DEBENTURE NUMBER August - ▇▇▇▇-▇▇▇
▇▇▇▇▇▇▇▇ DATE August 17, 2005
MATURITY DATE August 17, 2010
FOR VALUE RECEIVED, Union Dental Holdings, Inc., a Florida corporation (the
"Company"), hereby promises to pay DUTCHESS PRIVATE EQUITIES FUND, II, LP
("Holder") by August 17, 2010 (the "Maturity Date"), the principal amount of Six
Hundred Thousand Dollars ($600,000) U.S., and to pay interest and redemption on
the principal amount hereof, and any accrued penalties accrued, in such amounts,
at such times and on such terms and conditions as are specified herein.
The Debenture is subject to automatic conversion at the end of five (5)
years from the date of issuance at which time the Debenture outstanding will be
automatically converted based upon the formula set forth in Section 3.2 (c).
Article 1. Interest
The Company shall pay ten percent (10%) annual coupon on the unpaid Face
Amount of this Debenture (the "Debenture") at such times and in such amounts as
outlined in this section. The Company will make mandatory prepaid payments, in
advance, on the interest ("Interest Payment"), with the minimum Interest
Payments outlined in Exhibit B for the first three months, and herein
incorporate by reference in the amount of four thousand nine hundred and
fifty-one dollars and fifteen cents ($4,951.15) per month for the first three
months following Issuance Date. The first Interest Payment is due within three
days of funds being disbursed to the Company (a "Closing:").
Any monies paid to the Holder in excess of the interest due when paid shall
be credited toward the Face Amount of the Debenture.
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Article 2. Method of Payment
Section 2.1 Prior to the U.S. Securities and Exchange Commission ("SEC")
declaring the registration statement for the shares underlying the Debenture
("Registration Statement") effective ("Effective Date").
Amortizing payments will be made by the Company in satisfaction of this
Debenture (each a "Payment," and collectively, the "Payments") shall be made
monthly on the first day of each business day of each month while there is an
outstanding balance on the Debenture, to the Holder, in the amounts ("Payment
Amount" and collectively, the "Payment Amounts") outlined below on the following
schedule:
Payment for Month 1
(due within three (3) days of the Issuance Date) $4,951.15
Payment for Month 2 $4,951.15
Payment for Month 3 $4,951.15
Payment for Month 4 and each month thereafter $62,715.56
Notwithstanding any provision to the contrary in this Debenture, the
Company may pay in full to the Holder the Face Amount, or any balance remaining
thereof, in readily available funds at any time and from time to time without
penalty.
The minimum Payments are outlined on Exhibit B, attached hereto and
incorporate by reference.
Section 2.2 Subsequent to the Effective Date.
The Holder, at its sole option, shall be entitled to either a) request a
Payment from the Company in the amounts set forth in the table in Section 2.1
above; or, b) the Holder may elect to convert a portion of the Debenture
pursuant to Article 3 below in an amount equal to the Payment Amount. In the
event the Holder is unable to convert that portion of the debenture equal to the
Payment Amount during a calendar month, the Company shall make a payment in an
amount equal to the difference between the amount converted by the Holder and
the Payment Amount due for that month.
Nothing contained in this Article 2 shall limit the amount the Holder
can elect to convert during a calendar month except as defined in Section 3.2
(i)
All Payments made in this Article 2, shall be applied toward the
Redemption Article as outlined in Article 14, herein.
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Article 3. Conversion
Section 3.1 Conversion Privilege
(a) The Holder of this Debenture shall have the right to convert it into
shares of Common Stock at any time following the Closing Date and which is
before the close of business on the Maturity Date, except as set forth in
Section 3.1(c) below. The number of shares of Common Stock issuable upon the
conversion of this Debenture is determined pursuant to Section 3.2 and rounding
the result to the nearest whole share.
(b) This Debenture may not be converted, whether in whole or in part,
except in accordance with this Article 3.
(c) In the event all or any portion of this Debenture remains outstanding
on the Maturity Date, the unconverted portion of such Debenture will
automatically be converted into shares of Common Stock on such date in the
manner set forth in Section 3.2.
Section 3.2 Conversion Procedure.
(a) Conversion Procedures. The Face Amount of this Debenture may be
converted, in whole or in part, any time following the Closing Date. Such
conversion shall be effectuated by sending to the Company a facsimile or via
electronic mail the signed Notice of Conversion which evidences Holder's
intention to convert the Debenture indicated. The date on which the Notice of
Conversion is effective ("Conversion Date") shall be deemed to be the date on
which the Holder has delivered to the Company a facsimile of the signed Notice
of Conversion. . Notwithstanding the above, any Notice of Conversion received by
5:00 P.M. EST, shall be deemed to have been received the previous business day,
with receipt being via a confirmation of time of facsimile of the Holder.
(b) Common Stock to be Issued. Upon the conversion of any Debenture and
upon receipt by the Company of a facsimile of Holder's signed Notice of
Conversion the Company shall instruct its transfer agent to issue stock
certificates without restrictive legend or stop transfer instructions, if at
that time the Registration Statement has been declared effective (or with proper
restrictive legend if the Registration Statement has not as yet been declared
effective), in such denominations to be specified at conversion representing the
number of shares of Common Stock issuable upon such conversion, as applicable.
The Company shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture. The Company
warrants that no instructions, other than these instructions, have been given or
will be given to the transfer agent and that the Common Stock shall otherwise be
freely resold, except as may be set forth herein.
(c) Conversion Rate. Holder is entitled to convert the Face Amount of this
Debenture, plus accrued interest, anytime following the Closing Date, at the
lesser of (i) the lowest closing bid price during the fifteen (15) days of full
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trading, defined as standard market hours from 9:30 AM to 4:00 PM EST, partial
trading days will not be counted for calculation purposes only ("Trading Days")
prior to the Filing Date; or (ii) nine and two-tenths cents ($..092). ("Fixed
Conversion Price"), each being referred to as the "Conversion Price". No
fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded up, as the case
may be, to the nearest whole share. The Holder shall retain all rights of
conversions during any partial trading days.
(d) Nothing contained in this Debenture shall be deemed to establish or
require the payment of interest to the Holder at a rate in excess of the maximum
rate permitted by governing law. In the event that the rate of interest required
to be paid exceeds the maximum rate permitted by governing law, the rate of
interest required to be paid thereunder shall be automatically reduced to the
maximum rate permitted under the governing law and such excess shall be returned
with reasonable promptness by the Holder to the Company.
(e) It shall be the Company's responsibility to take all necessary actions
and to bear all such costs to issue the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
(f) Within three (3) business days after receipt of the documentation
referred to above in Section 3.2(a), the Company shall deliver a certificate, in
accordance with Section 3.2(c) for the number of shares of Common Stock issuable
upon the conversion. In the event the Company does not make delivery of the
Common Stock, as instructed by Holder, within three (3) business days after the
Conversion Date, then in such event the Company shall pay to Holder three
percent (3%) in cash, of the dollar value of the Debentures being converted,
compounded daily, per each day after the third (3rd) business day following the
Conversion Date that the Common Stock is not delivered to the Purchaser, as
liquidated damages.
The Company acknowledges that its failure to deliver the Common Stock
within three (3) business days after the Conversion Date will cause the Holder
to suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Debenture a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Debenture.
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To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(f) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(f) shall not
apply but instead the provisions of Section 3.2(m) shall apply.
The Company shall make any payments incurred under this Section 3.2(f) in
immediately available funds within three (3) business days from the date the
Common Stock is fully delivered. Nothing herein shall limit a Holder's right to
pursue actual damages or cancel the conversion for the Company's failure to
issue and deliver Common Stock to the Holder within three (3) business days
after the Conversion Date.
The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Debentures by all Holders of
the entire amount of Debentures then outstanding. If, at any time Holder submits
a Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are available, and the Notice of
Conversion as to any Debentures requested to be converted but not converted (the
"Unconverted Debentures"), may be deemed null and void upon written notice sent
by the Holder to the Company. The Company shall provide notice of such
Conversion Default ("Notice of Conversion Default") to all existing Holders of
outstanding Debentures, by facsimile, within three (3) business days of such
default (with the original delivered by overnight or two day courier), and the
Holder shall give notice to the Company by facsimile within five business days
of receipt of the Notice of Conversion Default (with the original delivered by
overnight or two day courier) of its election to either nullify or confirm the
Notice of Conversion.
The Company agrees to pay to Holder of outstanding Debenture payments for a
Conversion Default ("Conversion Default Payments") in the amount of (N/365) x
(.24) x the initial issuance price of the outstanding and/or tendered but not
converted Debentures held by each Holder where N = the number of days from the
Conversion Default Date to the date (the "Authorization Date") that the Company
authorizes a sufficient number of shares of Common Stock to effect conversion of
all remaining Debentures. The Company shall send notice ("Authorization Notice")
to Holder of outstanding Debenture that additional shares of Common Stock have
been authorized; stating the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion Default shall be
paid in cash or shall be convertible into Common Stock at the Conversion Rate,
upon written notice sent by the Holder to the Company, which Conversion Default
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shall be payable as follows: (i) in the event Holder elects to take such payment
in cash, cash payments shall be made to such Holder of outstanding Debentures by
the fifth (5th) day of the following calendar month, or (ii) in the event Holder
elects to take such payment in stock, the Holder may convert such payment amount
into Common Stock at the conversion rate set forth in Section 3.2(c) at any time
after the fifth (5th) day of the calendar month following the month in which the
Authorization Notice was received, until the expiration of the mandatory three
(3) year conversion period.
The Company acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of the Debenture will cause the Holder to suffer damages in an amount that will
be difficult to ascertain. Accordingly, the parties agree that it is appropriate
to include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to quantify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to deliver the Common Stock
pursuant to the terms of this Debenture. Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock.
If, by the third (3rd) business day after the Conversion Date of any
portion of the Debenture to be converted (the "Delivery Date"), the transfer
agent fails for any reason to deliver the Common Stock upon conversion by the
Holder and after such Delivery Date, the Holder purchases, in an open market
transaction or otherwise, shares of Common Stock (the "Covering Shares") solely
in order to make delivery in satisfaction of a sale of Common Stock by the
Holder (the "Sold Shares"), which delivery such Holder anticipated to make using
the Common Stock issuable upon conversion (a "Buy-In"), the Company shall pay to
the Holder, in addition to any other amounts due to Holder pursuant to this
Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as defined
below). The "Buy In Adjustment Amount" is the amount equal to the excess, if
any, of (x) the Holder's total purchase price (including brokerage commissions,
if any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Holder from the sale of the Sold Shares.
The Company shall pay the Buy-In Adjustment Amount to the Holder in immediately
available funds within three (3) business days of written demand by the Holder.
By way of illustration and not in limitation of the foregoing, if the Holder
purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which the Company will be required to pay to the Holder will be $1,000.
(g) Prospectus and Other Documents. The Company shall furnish to Holder
such number of prospectuses and other documents incidental to the registration
of the shares of Common Stock underlying the Debentures, including any amendment
of or supplements thereto. Any filings submitted via ▇▇▇▇▇ will constitute
fulfillment.
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(h) Limitation on Issuance of Shares. If the Company's Common Stock becomes
listed on the Nasdaq SmallCap Market after the issuance of the Debenture, the
Company may be limited in the number of shares of Common Stock it may issue by
virtue of (X) the number of authorized shares or (Y) the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, including, but not necessarily limited to, NASDAQ Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable (collectively, the
"Cap Regulations"). Without limiting the other provisions thereof, (i) the
Company will take all steps reasonably necessary to be in a position to issue
shares of Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still cannot
issue such shares of Common Stock without violating the Cap Regulations, the
holder of a Debenture which cannot be converted as result of the Cap Regulations
(each such Debenture, an "Unconverted Debenture") shall have the right to elect
either of the following remedies:
(x) if permitted by the Cap Regulations, require the Company to issue
shares of Common Stock in accordance with such holder's Notice of
Conversion at a conversion purchase price equal to the average of the
closing bid price per share of Common Stock for any five (5) consecutive
Trading Days (subject to certain equitable adjustments for certain events
occurring during such period) during the sixty (60) Trading Days
immediately preceding the Conversion Date; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Redemption Amount"), payable in cash, equal to the sum of (i)
one hundred thirty-three percent (133%) of the principal of an Unconverted
Debenture, plus (ii) any accrued but unpaid interest thereon through and
including the date (the "Redemption Date") on which the Redemption Amount
is paid to the holder.
A holder of an Unconverted Debenture may elect one of the above remedies
with respect to a portion of such Unconverted Debenture and the other remedy
with respect to other portions of the Unconverted Debenture. The Debenture shall
contain provisions substantially consistent with the above terms, with such
additional provisions as may be consented to by the Holder. The provisions of
this section are not intended to limit the scope of the provisions otherwise
included in the Debenture.
(i) Limitation on Amount of Conversion and Ownership. Notwithstanding
anything to the contrary in this Debenture, in no event shall the Holder be
entitled to convert that amount of Debenture, and in no event shall the Company
permit that amount of conversion, into that number of shares, which when added
to the sum of the number of shares of Common Stock beneficially owned, (as such
term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange
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Act of 1934, as may be amended, (the "1934 Act")), by the Holder, would exceed
4.99% of the number of shares of Common Stock outstanding on the Conversion
Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. In the
event that the number of shares of Common Stock outstanding as determined in
accordance with Section 13(d) of the 1934 Act is different on any Conversion
Date than it was on the Closing Date, then the number of shares of Common Stock
outstanding on such Conversion Date shall govern for purposes of determining
whether the Holder would be acquiring beneficial ownership of more than 4.99% of
the number of shares of Common Stock outstanding on such Conversion Date.
(j) Legend. The Holder acknowledges that each certificate representing the
Debentures, and the Common Stock unless registered pursuant to the Registration
Rights Agreement, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED
OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) IF
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
(m) Prior to conversion of the Debenture, if at any time the conversion of
all the Debentures and exercise of all the Warrants outstanding would result in
an insufficient number of authorized shares of Common Stock being available to
cover all the conversions, then in such event, the Company will move to call and
hold a shareholder's meeting or have shareholder action with written consent of
the proper number of shareholders within thirty (30) days of such event, or such
greater period of time if statutorily required or reasonably necessary as
regards standard brokerage house and/or SEC requirements and/or procedures, for
the purpose of authorizing additional shares of Common Stock to facilitate the
conversions. In such an event management of the Company shall recommend to all
shareholders to vote their shares in favor of increasing the authorized number
of shares of Common Stock. Management of the Company shall vote all of its
shares of Common Stock in favor of increasing the number of shares of authorized
Common Stock. The Company represents and warrants that under no circumstances
will it deny or prevent Holder's right to convert the Debentures as permitted
under the terms of this Subscription Agreement or the Registration Rights
Agreement. Nothing in this Section shall limit the obligation of the Company to
make the payments set forth in Section 3.2(g). The investor, at his option, may
request the company to authorize and issue additional shares if the investor
feels it is necessary for conversions in the future In the event the Company's
shareholder's meeting does not result in the necessary authorization, the
Company shall redeem the outstanding Debentures for an amount equal to (x) the
sum of the principal of the outstanding Debentures plus accrued interest thereon
multiplied by (y) 133%.
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Section 3.3 Fractional Shares. The Company shall not issue fractional
shares of Common Stock, or scrip representing fractions of such shares, upon the
conversion of this Debenture. Instead, the Company shall round up or down, as
the case may be, to the nearest whole share.
Section 3.4 Taxes on Conversion. The Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon the conversion of this Debenture. However, the Holder shall pay any
such tax which is due because the shares are issued in a name other than its
name.
Section 3.5 Company to Reserve Stock. The Company shall reserve the number
of shares of Common Stock required pursuant to and upon the terms set forth in
the Subscription Agreement to permit the conversion of this Debenture. All
shares of Common Stock which may be issued upon the conversion hereof shall upon
issuance be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
Section 3.6 Restrictions on Sale. This Debenture has not been registered
under the Securities Act of 1933, as amended, (the "Act") and is being issued
under Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the
Act. This Debenture and the Common Stock issuable upon the conversion thereof
may only be sold pursuant to registration under or an exemption from the Act.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5. Security
This Debenture is secured by a Security Agreement (the "Security
Agreement") of even date herewith between the Company and the Holder.
Article 6. Defaults and Remedies
Section 6.1 Events of Default. An "Event of Default" occurs if (a) the
Company does not make the Payment of the principal of this Debenture by
conversion into Common Stock within five (5) business days of the Maturity Date,
upon redemption or otherwise, (b) the Company does not make a payment, other
than a payment of principal, for a period of three (3) business days thereafter,
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(c) any of the Company's representations or warranties contained in the
Subscription Agreement or this Debenture were false when made or the Company
fails to comply with any of its other agreements in the Transaction Documents
(as defined in Article 16 below) and such failure continues for a period of five
(5) business days, (d) the Company pursuant to or within the meaning of any
Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case; (ii)
consents to the entry of an order for relief against it in an involuntary case;
(iii) consents to the appointment of a Custodian (as hereinafter defined) of it
or for all or substantially all of its property or (iv) makes a general
assignment for the benefit of its creditors or (v) a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for
relief against the Company in an involuntary case; (B) appoints a Custodian of
the Company or for all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains unstayed and in
effect for sixty (60) calendar days, (e) the Company's Common Stock is suspended
or no longer listed on any recognized exchange including electronic
over-the-counter bulletin board for in excess of five (5) consecutive Trading
Days (e) the Company violates any terms and conditions of the Registration
Rights Agreement (f) the Registration Statement underlying the Debenture is not
declared effective by the SEC within twelve (12) months of the Issuance Date.
As used in this Section 6.1, the term "Bankruptcy Law" means Title 11 of
the United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. A default under clause (c) above
is not an Event of Default until the holders of at least one hundred percent
(100%) of the aggregate principal amount of the Debentures outstanding notify
the Company of such default and the Company does not cure it within five (5)
business days after the receipt of such notice, unless the Company commences to
cure such default within such period, which must specify the default, demand
that it be remedied and state that it is a "Notice of Default". Prior to the
expiration of the time for curing a default as set forth in the preceding
sentence, the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding (exclusive of Debentures then owned by the
Company or any subsidiary or affiliate) may, on behalf of the holders of all of
the Debentures, waive any past Event of Default hereunder (or any past event
which, with the lapse of time or notice and lapse of time designated in
subsection (a), would constitute an Event of Default hereunder) and its
consequences, except a default in the payment of the principal of or interest on
any of the Debentures. In the case of any such waiver, such default or Event of
Default shall be deemed to have been cured for every purpose of this Debenture
and the Company and the holders of the Debentures shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
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In the Event of Default, the Holder may elect to secure a portion of the
Company's assets not to exceed 200% of the Face Amount of the Note, in Pledged
Collateral (as defined in the Irrevocable Transfer Agent Agreement). The Holder
may also elect to garnishee Revenue from the Company in an amount that will
repay the Holder on the schedules outlined in this Agreement.
In the Event of Default, as outlined in this Agreement, the Holder can
exercise its right to increase the Face Amount of the Debenture by ten percent
(10%) as an initial penalty and for each Event of Default under this Agreement.
In addition, the Holder may elect to increase the Face Amount by two and
one-half percent (2.5%) per month (pro-rata for partial periods) paid as a
penalty for liquated damages ("Liquidated Damages"). The Liquated Damages will
be compounded daily. It is the intention and acknowledgement of both parties
that the Liquidated Damages not be deemed as interest.
In the event of Default, specifically to Section 6.1 (f), the Holder may
elect to switch the Conversion Price of the Debenture as outlined in Section 3.2
(c) above ("Default Conversion Price"). The Default Conversion Price shall be
equal to the lesser of a) the Fixed Conversion Price or b) seventy percent (70%)
of the lowest closing bid price of the Common Stock during the fifteen (15)
trading days prior to conversion. Upon written notice being sent to the Company
by the Holder of Default under Section 6.1 (f), and the Holder's election to
exercise the remedy to switch the conversion price to the Default Conversion
Price, the Company shall immediately withdraw the Registration Statement.
Further, the Company agrees that the date of consideration for the Debenture
shall remain the Issuance Date stated herein. The Company shall provide an
opinion letter from counsel within two (2) days of written request by the Holder
stating that the date of consideration for the Debenture is the Issuance Date.
In the event the Company does not deliver the opinion letter within two business
days, the Default Conversion Price shall immediately decrease by two percent
(2%) for each business day an opinion letter fails to be delivered. In the event
that counsel to the Company fails or refuses to render an opinion as required to
issue the Shares in accordance with this paragraph (either with or without
restrictive legends, as applicable), then the Company irrevocably and expressly
authorizes counsel to the Investor to render such opinion and shall authorize
the Transfer Agent shall accept and be entitled to rely on such opinion for the
purposes of issuing the Shares. Any costs incurred by Holder for such opinion
letter shall be added to the Face Amount of the Debenture.
Section 6.2 Acceleration. If an Event of Default occurs and is continuing,
the Holder hereof by notice to the Company may declare the remaining principal
amount of this Debenture, together with all accrued interest and any liquidated
damages, to be due and payable. Upon such declaration, the remaining principal
amount shall be due and payable immediately.
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Section 6.3 Seniority, No indebtedness of the Company other than to Bank of
America is senior to this Debenture in right of payment, whether with respect to
interest, damages or upon liquidation or dissolution or otherwise.
Article 7. Registered Debentures
Section 7.1 Record Ownership. The Company, or its attorney, shall maintain
a register of the holders of the Debentures (the "Register") showing their names
and addresses and the serial numbers and principal amounts of Debentures issued
to them. The Register may be maintained in electronic, magnetic or other
computerized form. The Company may treat the person named as the Holder of this
Debenture in the Register as the sole owner of this Debenture. The Holder of
this Debenture is the person exclusively entitled to receive payments of
interest on this Debenture, receive notifications with respect to this
Debenture, convert it into Common Stock and otherwise exercise all of the rights
and powers as the absolute owner hereof.
Section 7.2 Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the Debenture if the Holder so requests by written notice to the
Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8. Notice.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Debenture must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
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If to the Company: ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
If to the Investor: At the address listed in the Questionnaire.
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.
Article 10. No Assignment
This Debenture shall not be assignable.
Article 11. Rules of Construction.
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
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Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture shall be
governed and construed by the provisions hereof and in accordance with the laws
of the Commonwealth of Massachusetts applicable to agreements that are
negotiated, executed, delivered and performed solely in the Commonwealth of
Massachusetts.
Article 13. Litigation
Disputes subject to arbitration governed by massachusetts law
All disputes arising under this agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws. The parties to this agreement
will submit all disputes arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA"). The arbitrator shall be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an attorney admitted to practice law in the Commonwealth of Massachusetts. No
party to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
Article 14. Redemption
The Holder shall have the right to be redeemed from the Debenture, in whole
or in part, at a price equal to one hundred and twenty percent (120%) of the
outstanding principal amount of the Debenture, including accrued interest (and
penalties if applicable). Any Payments, as defined in Article 2 above, shall
apply to the Redemption Amount. The Investor also holds the right to use the
existing equity line to redeem the Debenture
Article 15. Investor Warrants
As an additional inducement to Holder, the Company shall issue a warrant to
purchase one million three hundred and four thousand, three hundred and
forty-eight (1,304,348) shares of its common stock exercisable at the strike
prices outlined in the Warrant Agreement, attached hereto and incorporated by
reference, to Holder.
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Article 16. Transaction Documents
The Company agrees that contemporaneously with the execution and delivery
of this Debenture, the parties hereto are executing and delivering a
Registration Rights Agreement, Subscription Agreement, Warrant Agreement,
Security Agreement and the Irrevocable Transfer Agent Agreement (collectively,
the "Transaction Documents") pursuant to which the Company has agreed to provide
certain rights and obligations as defined in the documents.
Article 17. Waiver
The Holder's delay or failure at any time or times hereafter to require
strict performance by Company of any undertakings, agreements or covenants shall
not waiver, affect, or diminish any right of the Holder under this Agreement to
demand strict compliance and performance herewith. Any waiver by the Holder of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of the
same or a different type. None of the undertakings, agreements and covenants of
the Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.
Article 18. Waiver of Jury Trial.
AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.
* * *
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IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above and duly authorized to sign on behalf of:
UNION DENTAL HOLDINGS, INC.
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: A Managing Member
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Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Owner in order to Convert Debenture)
The undersigned hereby irrevocably elects, as of ________________, to
convert $________________ of its convertible debenture (the "Debenture") into
Common Stock of Union Dental Holdings, Inc.(the "Company") according to the
conditions set forth in the Debenture issued by the Company.
Date of Conversion
------------------------------------------------
Applicable Conversion Price
----------------------------------------
Number of Debentures Issuable upon this Conversion
-----------------------
Name(Print) Dutchess Private Equities Fund, II, LP
--------------------------------------------------------
Address ▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇
-------------------------------------------------------------------
Phone ▇▇▇-▇▇▇-▇▇▇▇ Fax ▇▇▇-▇▇▇-▇▇▇▇
------------------------------ -------------------------------
By:_______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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EXHIBIT B PAYMENT SCHEDULE
Convertible
Amount Interest Rate Redemption
$600,000.00 10% 120%
Amount with
Accrued Interest Applied to Applied to Applied to
Amount Due for Period Payment Principal Interest Redemptions
8/1/2005 $600,000.00 $604,951.15 $ 4,951.15 $0.00 $4,951.15 $0.00
9/1/2005 $600,000.00 $604,951.15 $ 4,951.15 $0.00 $4,951.15 $0.00
10/1/2005 $600,000.00 $604,951.14 $ 4,951.15 $0.00 $4,951.15 $0.00
11/1/2005 $599,999.99 $604,951.14 $ 62,715.56 $48,137.01 $4,951.15 $9,627.40
12/1/2005 $551,862.98 $556,416.91 $ 62,715.56 $48,468.03 $4,553.93 $9,693.61
1/1/2006 $503,394.95 $507,548.92 $ 62,715.56 $48,801.33 $4,153.97 $9,760.27
2/1/2006 $454,593.63 $458,344.89 $ 62,715.56 $49,136.91 $3,751.27 $9,827.38
3/1/2006 $405,456.71 $408,802.51 $ 62,715.56 $49,474.81 $3,345.79 $9,894.96
4/1/2006 $355,981.91 $358,919.44 $ 62,715.56 $49,815.03 $2,937.53 $9,963.01
5/1/2006 $306,166.88 $308,693.34 $ 62,715.56 $50,157.58 $2,526.46 $10,031.52
6/1/2006 $256,009.30 $258,121.86 $ 62,715.56 $50,502.50 $2,112.57 $10,100.50
7/1/2006 $205,506.80 $207,202.63 $ 62,715.56 $50,849.78 $1,695.82 $10,169.96
8/1/2006 $154,657.02 $155,933.24 $ 62,715.56 $51,199.46 $1,276.22 $10,239.89
9/1/2006 $103,457.56 $104,311.29 $ 62,715.56 $51,551.53 $853.72 $10,310.31
10/1/2006 $51,906.03 $52,334.36 $ 62,715.56 $51,906.03 $428.32 $10,381.21
TOTALS $0.00 $0.00 $767,440.20 $600,000.00 $47,440.20 $120,000.00
18