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EXHIBIT 4.4
CRYSTAL MEDICAL PRODUCTS, INC.
Class B 10% Subordinated Convertible Debenture
No. ____ ___________, 1998
$___________
CRYSTAL MEDICAL PRODUCTS, INC., an Illinois corporation (hereinafter
called "Company") for value received, promises to pay to the order
of_____________("Holder") the sum of _________________________________
($__________) in lawful money of the United States on the Maturity Date (as
defined herein).
This debenture ("Debenture") is one of an authorized issue of Class
B 10% Convertible Subordinated Debentures (collectively, the "Debentures" or
individually a "Debenture") limited in the aggregate to $300,000 offered
pursuant to a Private Placement Memorandum dated April 6, 1998, all of like
tenor and maturity except the variations necessary to express the principal
amount and registered owner of each Debenture.
THIS DEBENTURE IS NON-NEGOTIABLE, and can only be assigned or
transferred as provided for herein.
The following is a statement of the rights of the holder of this
Debenture and the terms and conditions to which this Debenture is subject, to
which the Holder assents:
1. Payment of Principal and Interest. Company will pay interest
semi-annually in arrears from the date of issue on the unpaid principal balance
at the rate of Ten Percent (10%) per annum on July 1 and January 1, commencing
July 1, 1998 through the Maturity Date to holders of record at the close of
business thirty (30) days prior to each interest payment date. Interest will be
calculated on the basis of a 360 day year. Company will pay the entire principal
amount of this Debenture, together with all accrued and unpaid interest thereon,
on the Maturity Date.
2. Place of Payment. The principal and interest of this Debenture
shall be payable without setoff or reduction at the principal office of the
Company, c/o Ginader, ▇▇▇▇▇ & Co., LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, or at such other place to which such office may have been moved (the
"Principal Office") unless another place of payment is specified in writing by
the Company.
3. Maturity Date. This Debenture shall mature and all unpaid
principal and interest shall be automatically due and payable, without notice or
demand, upon the earliest to occur (the "Maturity Date") of the following dates:
(i) May 1, 2003; or (ii) closing of any Equity Financing (as defined herein)
resulting in proceeds to Company of at least $2,500,000. As used
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herein, the term "Equity Financing" shall mean and include the sale by Company
in any public or private offering, of shares of any class of its New Common
Stock or any security convertible into such shares.
4. Optional Conversion. For purposes of this Section 4, the
"Conversion Termination Date" shall mean the earlier of the following dates: (i)
April 1, 2003; or (ii) sixty (60) days following the mailing postmark date of
written notice by the Company to the Holders that it intends to close under an
Equity Financing. This Debenture may be converted at any time after, but not
before, April 1, 1999 (or at any time following written notice by the Company to
the Holders that it intends to close under an Equity Offering) and prior to the
Conversion Termination Date in whole or in part, at the option of the Holder
(the "Conversion") into that number of whole shares of the Company's fully-paid
and non-assessable New Common Stock as shall be determined by dividing the then
outstanding principal balance of this Debenture plus all interest then accrued
but unpaid hereunder, by $.10 (the "Conversion Price"). No fractional shares of
the Company's New Common Stock shall be issued nor shall cash in lieu of
fractional shares be paid by the Company.
A Debenture may be converted in whole or in part by written notice
from the Holder to the Company bearing a mailing postmark date not later than
the Conversion Termination Date sent to the Principal Office of the Company
specifying the portion, if less than all, of the Debenture to be converted,
accompanied by surrender of the Debenture. In the event of a partial Conversion
of the Debenture by the Holder, another Debenture of like terms equal in
principal amount to the unpaid balance of the Debenture partially converted
shall be issued to the Holder.
The shares of New Common Stock issuable upon the Conversion may not
be publicly offered or sold unless the person offering or selling such security
complies with the registration provisions of the Securities Act of 1933, as
amended or any successor legislation thereto, any state securities law
applicable to the issuance and sale of such shares and all applicable rules and
regulations adopted by any of the foregoing, or unless, in the opinion of
counsel who is satisfactory to Company and its counsel, such offer and sale is
exempt from such registration provisions. Notwithstanding anything herein to the
contrary, unless the shares issuable on Conversion are covered by a current
registration statement under the Securities Act of 1933 as amended, or other
applicable law at the time of any proposed Conversion, it shall be a condition
of the delivery of certificates for shares of the Company's New Common Stock
issuable upon the Conversion, that the Holder deliver to Company, together with
this Debenture for cancellation, the Holder's written representation in form
satisfactory to the Company that the Holder is acquiring the shares without a
view to engage in a distribution thereof in violation of applicable laws, rules
and regulations relating to such registration. Any unregistered shares issued
upon Conversion shall be endorsed with a legend in substantially the following
form, and the Holder shall comply with the terms thereof:
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"These shares have not been registered under the Securities Act of
1933, as amended, or any successor legislation thereto or under any
state securities laws. They may not be transferred by the holder
unless, in the opinion of counsel who is satisfactory to the Company
and its counsel, such transfer does not violate the registration
provisions of such laws."
5. Redemption. Company may redeem this Debenture at any time in
whole or in part, without payment of any premium or penalty. The redemption
price shall be the principal amount of the portion of the Debenture redeemed,
plus accrued and unpaid interest to the date of redemption. A Debenture may be
redeemed by the Company by written notice of redemption specifying the date of
redemption (the "Redemption Date"), mailed to the Holder not less than fifteen
(15) days nor more than ninety (90) days prior to the Redemption Date. The
Holder shall surrender this Debenture to Company at the Principal Office by the
Redemption Date in exchange for the payment due and, in the event of a partial
redemption, in exchange for another Debenture of like terms equal in principal
amount to the unpaid balance of the principal sum of the Debenture partially
redeemed. Upon due tender of the redemption price by Company, no Debenture which
has been subject to a notice of redemption, and no part of a Debenture which has
been the subject of a notice of partial redemption, shall be deemed to be
outstanding for any purpose subsequent to 5:00 p.m. local time at the Principal
Office on the Redemption Date, notwithstanding the failure of the Holder to
surrender such Debenture. Interest shall cease to accrue on the Debenture or on
the portion of a Debenture partially redeemed, as of the Redemption Date.
6. Events of Default. The occurrence of any of the following events
shall constitute an event of default ("Event of Default") hereunder:
(a) Failure to pay any amount payable on account of principal
or interest on this Debenture or redemption of this Debenture in whole or in
part, within thirty (30) days after the date when due;
(b) Failure to observe or perform any of the other agreements
or covenants of Company herein contained; or
(c) The adoption by Company of any plan of merger in which it
is not the surviving entity and in which its shareholders prior to the merger do
not own the majority of the outstanding stock of the surviving entity, or any
plan of consolidation, liquidation or dissolution.
(d) The sale or other transfer by Company of all or
substantially all of its property or assets except in the usual and ordinary
course of the operation of its business.
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(e) The commencement of an involuntary case, or the filing of
a petition against Company seeking reorganization, arrangement, adjustment or
composition of or in respect of Company under the Federal bankruptcy laws, as
now or hereafter constituted, or under any other applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law, or seeking the
appointment of a receiver, liquidator, custodian, trustee (or similar official)
of Company for any substantial part of its property, or seeking the winding up
or liquidation of its affairs (and such involuntary case or petition is not
dismissed within ninety (90) days after the filing thereof), or the commencement
by Company of a voluntary case, or the consent by it to the institution, of
bankruptcy or insolvency proceedings against it under the Federal bankruptcy
laws as now or hereafter constituted, or any other applicable Federal or state
bankruptcy or insolvency or other similar law, or the consent by Company to the
appointment of or taking possession by a receiver, liquidator, trustee,
custodian (or other similar official) of Company for any substantial part of its
property, or the making by it of any assignment for the benefit of creditors or
the admission by it in writing of its inability to pay its debts generally as
they become due, or the failure of Company to generally pay its debts as such
debts become due or the taking of any corporate action by Company by its
stockholders or Board of Directors or any committee thereof in furtherance of
any of the foregoing.
If an Event of Default described in (c) or (d) occurs, the entire
principal balance of this Debenture shall accelerate and shall become
automatically due and payable without further notice or demand within thirty
(30) days following the Event of Default.
If an Event of Default described in (a), (b) or (e) occurs, and if
the Holders of Debentures holding forty percent (40%) or more of the then
remaining principal balance of indebtedness under the Debentures give written
notice to the Company of an Event of Default (whether or not the Holder of this
Debenture gives written notice of an Event of Default), then in such event the
entire principal balance of indebtedness under this Debenture shall accelerate
and shall become due and payable thirty (30) days after Company's receipt of
such notices from Holders of Debentures, unless all Events of Default described
in (a), (b) or (e) above have been cured prior to the expiration of such thirty
(30)-day period.
Any payment due on this Debenture which is not paid within thirty
(30) days after the date when due will bear interest at the rate of three
percent (3%) in excess of the rate specified above from the due date until the
date of payment.
7. Subordination. This Debenture shall be subordinated to Senior
Debt to the extent indicated herein. "Senior Debt" shall mean any indebtedness
or obligation of Company (plus interest, premium and penalties due from or
arising out of such indebtedness, or any refinancing thereof), whether now
outstanding or hereinafter incurred, to its secured creditors and/or its general
or unsecured creditors, including Kingco, L.L.C. and/or its members. The
Debentures will be on parity with any future subordinated indebtedness of the
Company. In case of any insolvency proceedings, receivership, conservatorship,
reorganization, readjustment of debt, marshaling of assets and liabilities or
similar proceedings or any liquidation or winding-up
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of the Company, whether voluntary or involuntary, all such obligations (except
obligations which rank on a parity with or junior to the Debentures) will be
entitled to be paid in full before any payment may be made on account of the
principal of or accrued interest on the Debentures.. No payment of principal or
interest shall be made on the Debenture if, but only as long as, there exists
any default, or the existence of any event which, with the giving of notice,
would constitute a default, in the payment of Senior Debt, as determined by the
terms of such Senior Debt. No default shall be deemed to exist on Senior Debt to
the extent that Company is, in good faith, diligently contesting its obligation
to pay or discharge such Senior Debt.
8. Covenants. Until the principal amount of this Debenture and all
accrued interest have been paid in full, Company will not without the prior
written consent of the Holder, pay any dividends or make any distributions
(other than dividends or distributions in the form of capital stock of Company)
to its shareholders.
9. Anti-Dilution Provisions. In the event that Company shall, at any
time prior to the Maturity Date and prior to any Conversion: (i) declare or pay
to the holders of its New Common Stock a dividend payable in any kind of shares
of stock of Company; or (ii) change or divide or otherwise reclassify its New
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially as an entirety
to, any other corporation or other entity; or (iv) make any distribution of its
assets to Holders of its New Common Stock in whole or partial liquidation or by
way of return of capital, then, upon Conversion, the Holder hereof shall receive
for the Conversion Price, in addition to or in substitution for the shares of
New Common Stock to which such Holder would otherwise be entitled upon such
exercise, such additional shares of stock of Company or such reclassified shares
of stock of Company, or such shares of the securities or property of Company if
the surviving entity) or of the corporation or other entity resulting from such
consolidation, merger or transfer, or such assets of Company, which the Holder
would have been entitled to receive had the Conversion occurred immediately
prior to the happening of any of the foregoing events. Any plan or agreement
devised or executed in connection with any of the foregoing events shall
explicitly provide for the aforesaid rights of the Holder of this Debenture.
Within a reasonable time prior to or subsequent to the occurrence of any of the
foregoing events, Company shall notify the registered Holder hereof with respect
to the Holder's rights in connection therewith, and shall include with such
notice a detailed written explanation of the relevant events, transactions and
resulting capital adjustments to the Holder hereof. If the Holder gives Company
no written objection to such adjustments within ten (10) days after the Holder's
receipt of such explanation, the Holder hereof may not thereafter object to such
adjustments.
Company shall, at all times prior to the Maturity Date, reserve or
hold available a sufficient number of shares of its New Common Stock to cover
the number of shares issuable upon Conversion.
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10. Severability. If any provision of this Debenture is held to be
invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Debenture shall remain in full force and effect and shall be
liberally construed in favor of Holder in order to effectuate the provisions of
this Debenture. In addition, in no event shall the rate of interest payable
under this Debenture exceed the maximum rate of interest permitted to be charged
by the applicable law (including the choice of law rules) and any interest paid
in excess of the permitted rate shall be refunded to Company. Such refund shall
be made by application of the excessive amount of interest paid against any sums
outstanding, and shall be applied to reduce principal. If the excessive amount
on interest paid exceeds the sums outstanding, the portion exceeding the said
sums outstanding shall be refunded in cash by ▇▇▇▇▇▇. Any such crediting or
refund shall not cure or waive any default by Company hereunder. Company agrees,
however, that in determining whether or not any interest payable under this
Debenture exceeds the highest rate permitted by law, any non-principal payment,
including, without limitation, fees and late charges, if any, shall be deemed,
to the extent permitted by law, to be an expense, fee, premium or liquidated
damages, rather than interest.
11. Modification of Debenture. The rights and obligations of Company
and of the Holder may be modified, the terms of this Debenture may be amended
and any right of the Holder or other provision hereof may be waived, with the
written consent of Company and the registered owners of not less than
sixty-seven percent (67%) in principal amount outstanding of all of the
Debentures at the time of such modification, amendment or waiver (whether or not
the Holder of this Debenture so consents); provided, however, that, without the
consent of the Holder of this Debenture, no such modification shall affect the
reduction of the principal amount, extend the Maturity Date or reduce the
interest rate of this Debenture. Any such consent by the then current Holder of
this Debenture shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Debenture and of any Debenture issued in
exchange herefor or in place hereof, irrespective of whether any notation of
such consent or waiver is made upon this Debenture or otherwise. Except as set
forth above, Holders shall not by any act of omission or commission be deemed to
waive any of its rights or remedies hereunder unless such waiver is in writing
and signed by ▇▇▇▇▇▇, and then only to the extent specifically set forth
therein.
12. Maintenance of Registry. Company will maintain at its Principal
Office or at the office of its agent appointed for such purpose, a registry for
the registration and transfer of the Debentures, in which it will register the
name and address (to be supplied by each registered owner) of each person to
whom the Debentures are issued and the name of each successive Holder presenting
a Debenture for registration as herein provided. Company and its agents may deem
and treat the person in whose name a Debenture is registered as the absolute
owner and Holder thereof for purpose of receiving payment of principal and
interest and for all other purposes, whether or not the Debenture is overdue and
regardless of any notices to Company or its agents, unless and until this
Debenture is presented for transfer duly endorsed or assigned by Holder.
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13. Choice of Law. This Debenture, and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
14. Jurisdiction; Service. With respect to any suit, action or
proceeding relating to this Debenture, each party irrevocably (i) submits to the
non-exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and
the United States District Court for the Eastern District, Commonwealth of
Pennsylvania; and (ii) waives any objection which it may have at any time to the
laying of venue of any proceedings brought in any such court, waives any claim
that such proceedings have been brought in any inconvenient forum and further
waives the right to object, with respect to such proceedings, that the court
does not have jurisdiction over such party. Service of process in any such
action may be made, and shall be deemed sufficient, in the manner for the giving
of notice set forth herein.
15. Loss or Destruction. Upon receipt by Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Debenture, and (in case of loss, theft or destruction) of indemnity satisfactory
to it, and upon reimbursement to Company of all reasonable expenses incidental
thereto, including reasonable attorneys' fees, and upon surrender and
cancellation of this Debenture, if mutilated, Company will make and deliver a
new Debenture of like tenor in lieu of this Debenture. The face amount of any
Debenture made and delivered in accordance with the provisions of this paragraph
shall reflect the principal balance then outstanding and shall be dated as of
the date to which interest has been paid on this Debenture.
16. Company Waivers. Except as herein above expressly otherwise
provided, Company waives presentment for payment, demand, notice of non-payment,
notice of protest, and protest of this Debenture, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Debenture, and agrees that its liability shall be
unconditional without regard to the liability of any other party.
17. Binding Nature of Debenture. This Debenture shall be binding
upon Company and its successors and assigns.
18. No Waiver, Indulgences, etc. Neither the failure nor any delay
on the part of the Holder to exercise any right, remedy, power or privilege
under this Debenture shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and, except as expressly provided above, unless it is
signed by the Holder asserted to have granted such waiver.
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19. Notices. All notices required or permitted by this Debenture
shall be in writing and shall be deemed to have been duly given when delivered,
or when deposited in the United States mails, certified mail, postage pre-paid,
return receipt requested, addressed to Company at the Principal Office and
addressed to Holder at ▇▇▇▇▇▇'s address as it appears on the records of Company.
Either party may change the address to which notices are to be sent by giving
notice of such change of address in conformity with the foregoing provisions.
20. No Guarantees or Third Party Liability. No recourse shall be had
for the payment of the principal, interest or redemption price of this
Debenture, or for any premium or other claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, employee, agent, officer
or director, past, present or future of Company, or by the enforcement of any
assessment or penalty, or otherwise, all such liability being expressly waived
and released by ▇▇▇▇▇▇'s acceptance of this Debenture.
21. Non-Registration; Investment Intent; Transferability. THIS
DEBENTURE AND THE SHARES INTO WHICH IT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES LAW OF ANY STATE.
THIS DEBENTURE HAS BEEN ACQUIRED, AND SUCH SHARES WILL BE ACQUIRED, BY THE
HOLDER FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH DEBENTURE OR
SHARES UNDER THE ACT, UNLESS IN THE OPINION OF COUNSEL (WHICH OPINION SHALL BE
IN FORM AND SUBSTANCE SATISFACTORY TO COMPANY AND SUCH COUNSEL SHALL BE
SATISFACTORY TO COMPANY), SUCH REGISTRATION IS NOT REQUIRED UNDER SAID ACT. By
acceptance of this Debenture, Holder represents and warrants to Company that the
Holder is acquiring this Debenture, and will acquire the shares into which it is
convertible, for the Holder's own individual investment account, and not with a
view to distribution or resale.
IN WITNESS WHEREOF, Company has caused this Debenture to be duly
executed on _____________, 1998.
CRYSTAL MEDICAL PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
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