Exhibit 4.3
SECOND DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER RULE 504 OF REGULATION D PROMULGATED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS.
US $7,250 September 22, 2003
1% CONVERTIBLE DEBENTURE DUE SEPTEMBER 21, 2008
THIS DEBENTURE of Ophthalmic Solutions, Inc., a Delaware corporation (the
"Company") in the aggregate principal amount of Seven Thousand Two Hundred Fifty
Dollars (US $7,250), is designated as its $7,250, 1% Convertible Debenture due
September 21, 2008 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to HEM Mutual Assurance LLC
or its registered assigns (the "Holder"), the principal sum of Seven Thousand
Two Hundred Fifty Dollars (US $7,250), on or prior to September 21, 2008 (the
"Maturity Date") and to pay interest to the Holder on the principal sum at the
rate of one percent (1%) per annum. Interest shall accrue daily commencing on
the Original Issuance Date (as defined in Section 1 below) in the form of cash
or common stock of the Company selected by the Holder subject to the provisions
of Section 2(b) hereof, until payment in full of the principal sum, together
with all accrued and unpaid interest, has been made or duly provided for. If at
any time after the Original Issuance Date an Event of Default has occurred and
is continuing, interest shall accrue at the rate of eight percent (8%) per annum
from the date of the Event of Default and the applicable cure period through and
including the date of payment. Interest due and payable hereunder shall be paid
to the person in whose name this Debenture (or one or more successor Debentures)
is registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register"); provided, however, that the
Company's obligation to a transferee of this Debenture shall arise 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 (the
"Purchase Agreement") by and between the Company and the Purchaser (as such term
is defined in the Purchase Agreement), dated as of September 22, 2003, as may be
amended from time to time. 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.
In accordance with Section 4.33 of the Purchase Agreement and
notwithstanding anything to the contrary herein or in the Purchase Agreement,
the Holder may not convert this Debenture in a principal amount in excess of
Three Thousand Six Hundred Twenty Five Dollars ($3,625) until the
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First Debenture B becomes convertible by the Holder and subject to repayment at
its maturity by the Company and the Note has been paid in full.
If the Company in order to consummate a merger (the "Merger") enters into a
merger agreement or similar agreement with other parties (the "Merger
Partners"), the Merger Partners will effective upon the consummation of any such
Merger assume all of the obligations, jointly and severally, with the Company,
under this Debenture and substitute the Company's Common Stock, into which this
Debenture is convertible, for common stock of such Merger Partner ("MP Common
Stock") including depositing 5,000,000 shares of MP Common Stock with the Escrow
Agent (as defined in the Purchase Agreement). If and when the Merger occurs, at
the time such Merger is effective, the Escrow Agent will deliver the Company's
Common Stock being held in accordance with the Purchase Agreement and this
Debenture to the Company. If the Merger occurs, then (i) references herein to
Company Common Stock shall be references to MP Common Stock and (ii) any
references the Company shall be read as references to the MP that issued the MP
Common Stock as if this Debenture were issued on the date hereof by the MP that
issued the MP Common Stock and the Company shall have no further obligations to
issue shares of Common Stock hereunder. For the benefit of the Holder, the
Company shall use its best efforts to effectuate the intentions of this
paragraph.
If there is a Merger all of the provisions of this Debenture (specifically
including Section 4) shall be read and interpreted as if this Debenture was
issued by the Merger Partner issuing the MP Common Stock on the date hereof and
this Debenture was initially convertible into MP Common Stock.
This Debenture is subject to the following additional provisions:
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Adjusted Conversion Price" means the lesser of the Fixed Conversion Price
or the Floating Conversion Price one day prior to the record date set for the
determination of stockholders entitled to receive dividends, distributions,
rights or warrants as provided for in Sections 4(c)(ii), (iii) and (iv).
"Company" shall mean the Company (as defined in the Purchase Agreement) or
in the event there is a Merger, shall mean such Merger Partner that issues the
MP Common Stock.
"Common Stock" shall mean the Common Stock (as defined in the Purchase
Agreement) and in the event there is a Merger, shall mean the MP Common Stock
(as adjusted for any reverse splits, forward splits, combination,
reclassification or stock dividend from the date the Purchase Agreement is
signed).
"Conversion Date" shall have the meaning set forth in Section 4(a) hereof.
"Conversion Ratio" means, at any time, a fraction, the numerator of which
is the then outstanding principal amount represented by the Debentures plus
accrued but unpaid interest thereon, and the denominator of which is the
conversion price at such time.
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"Conversion Price" shall have the meaning set forth in Section 4(c)(i)
hereof.
"Notice of Conversion" shall have the meaning set forth in Section 4(a)
hereof.
"Original Issuance Date" shall mean the date of the first issuance of this
Debenture regardless of the number of transfers hereof.
Section 2. Denominations of Debentures; Interest on Debentures. The
Debentures are exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holder
surrendering the same, but shall not be issuable in denominations of less than
integral multiplies of One Thousand Dollars (US$1,000.00). No service charge to
the Holder will be made for such registration of transfer or exchange.
Section 3. Events of Default and Remedies.
I. "Event of Default," when used herein, means any one of the following
events (whatever the reason and whether any such event 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 for more than five (5) Business Days after the same shall become due
and payable either at the Maturity Date, by acceleration, conversion, 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 five
(5) Business Days of its receipt of notice of such failure or breach;
(c) the occurrence of any event or breach or default by the Company under
the Purchase Agreement or any other Transaction Document and , if there is a
cure period, such failure or breach shall not have been remedied within the cure
period provided for therein;
(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 thirty (30) days, or is not dismissed within sixty (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 sixty (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
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or unstayed for a period of thirty (30) days; or the Company makes a general
assignment for the benefit of creditors; or the Company shall fail to pay, or
shall state in writing that it is unable to pay its debts generally as they
become due; or the Company 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
One Hundred Thousand Dollars ($100,000.00), 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 deleted or delisted, as the
case may be, from the AMEX, 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 listed or relisted on the
same or another national securities exchange, market, or the OTCBB or have such
suspension lifted, as the case may be, within ten (10) Trading Days of such
deletion or delisting;
(g) notwithstanding anything herein to the contrary, but subject to the
limitations set forth in the Debentures and Section 4.14 of the Purchase
Agreement, the Company shall fail to deliver to the Escrow Agent share
certificates representing the shares of Common Stock to be issued upon
conversion of the Debentures within five (5) Business Days after to the
Company's receipt of notice from the Escrow Agent to the Company that additional
shares of Common Stock are required to be placed in escrow pursuant to Section
4.14 of the Purchase Agreement, Article 2 of the Escrow Agreement, and/or
Section 4(b) of this Debenture;
(h) the Company shall issue a press release, or otherwise make publicly
known, that it is not honoring a properly executed and duly delivered Notice of
Conversion complying with the terms of this Debenture, the Purchase Agreement
and the Escrow Agreement, for any reason whatsoever; and
(i) the Company issues or enters into an agreement to issue any floorless
convertible security, any equity line of credit, or any security issued pursuant
to Rule 504 of Regulation D promulgated under the Securities Act, other than to
the Purchaser or any of its Affiliates or assigns, during the period commencing
on the date hereof and ending on the four month anniversary of the Post-Closing
Date. Except as specifically set forth above, the Company may engage in any
other debt or equity financing during such four month period.
(j) the Company issues or enters into an agreement to issue additional
equity or debt financings without complying with Section 4.17(b) of the Purchase
Agreement.
II. (a) If any Event of Default occurs, and continues beyond a cure period,
if any, then the Holder may, by written notice to the Company, accelerate all of
the payments due under this
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Debenture by declaring all amounts so due under this Debenture, 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 contained herein to the contrary, and the Holder may
immediately and without expiration of any additional 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 the
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. This shall include, but not be limited to the right to temporary,
preliminary and permanent injunctive relief without the requirement of posting
any bond or undertaking.
(b) The Holder may thereupon proceed to protect and enforce its rights
either by suit in equity and/or by action at law or by other appropriate
proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Debenture or in aid of the
exercise of any power granted in this Debenture, and proceed to enforce the
payment of any of the Debentures held by it, and to enforce any other legal or
equitable right of such Holder.
(c) Except as expressly provided for herein, the Company specifically
waives all rights it may have (A) to notice of nonpayment, notice of default,
demand, presentment, protest and notice of protest with respect to any of the
obligations hereunder or the shares of Common Stock and (B) notice of acceptance
hereof or of any other action taken in reliance hereon, notice and opportunity
to be heard before the exercise by the Holder of the remedies of self-help,
set-off, or other summary procedures and all other demands and notices of any
type or description except for cure periods, if any.
(d) As a non-exclusive remedy, upon the occurrence of an Event of Default,
the Holder may convert the remaining principal amount of the Debentures and
accrued interest thereon at the Conversion Price upon giving a Notice of
Conversion to the Company. Except as otherwise provided herein, the Company
shall not have the right to object to the conversion or the calculation of the
applicable conversion price, absent manifest error and the Escrow Agent shall
release the shares of Common Stock from escrow two (2) business days after upon
notifying the Company of the conversion.
III. To effectuate the terms and provision of this Debenture, the Holder
may give notice of any default to the Attorney-in-Fact as set forth herein and
give a copy of such notice to the Company and its counsel, simultaneously, and
request the Attorney-in-Fact to comply with the terms of this Debenture and the
Purchase Agreement and all agreements entered into pursuant to the Purchase
Agreement on behalf of the Company.
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Section 4. Conversion.
(a) Except as otherwise set forth herein or in the Purchase Agreement, the
unpaid principal amount of this Debenture shall be convertible into shares of
Common Stock at the Conversion Ratio as defined above, and subject to the
Limitation on Conversion described in Section 4.18 of the Purchase Agreement and
subject to the limitation set forth in Section 4.33 of the Purchase Agreement
and in the paragraph immediately following the paragraph beginning "For Value
Received" and provided that the Company shall never be required to issue more
than an aggregate of 5,000,000 shares of Common Stock (as adjusted for stock
splits, reverse stock splits and the like) unless such shares are issued in
compliance with all applicable Shareholder Approval Rules (as defined in the
Purchase Agreement), at the option of the Holder, in whole or in part, at any
time, commencing on the Original Issuance Date. Such shares of Common Stock
shall be without any restriction and freely tradable pursuant to Rule 504 of
Regulation D of the Securities Act. Any conversion under this Section 4(a) shall
be for a minimum principal amount of $1,000.00 of the Debentures plus the
interest accrued and due thereon. The Holder shall effect conversions by
surrendering the Debenture to be converted to the Escrow Agent, together with
the form of notice attached hereto as Appendix I ("Notice of Conversion") in the
manner set forth in Section 4(j) hereof. Each Notice of Conversion shall specify
the principal amount of Debentures to be converted and the date on which such
conversion is to be effected (the "Conversion Date") which date shall not be
less than two (2) Business Days after the date on which the Notice of Conversion
is delivered to the Escrow Agent. Subject to the last paragraph of Section 4(b)
hereof, each Notice of Conversion, once given, shall be irrevocable. If the
Holder is converting less than all of the principal amount represented by the
Debentures tendered by the Holder in the Notice of Conversion, the Company shall
deliver to the Holder a new Debenture for such principal amount as has not been
converted within two (2) Business Days of the Conversion Date. In the event that
the Escrow Agent holds the Debentures on behalf of the Holder, the Company
agrees that in lieu of surrendering the Debentures upon every partial
conversion, the Escrow Agent shall give the Company and the Holder written
notice of the amount of the Debentures left unconverted. Upon conversion in full
of the Debentures or upon the Maturity Date, the Escrow Agent shall return the
Debentures and the Escrow Shares, if any, to the Company for cancellation.
(b) Not later than two (2) Business Days after the Conversion Date, the
Escrow Agent shall deliver to the Holder (i) a certificate or certificates
representing the number of shares of Common Stock being acquired upon the
conversion of the Debentures, and once the Debentures so converted in part shall
have been surrendered to the Company, the Company shall deliver to the Holder
Debentures in the principal amount of the Debentures not yet converted;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of the
Debentures, until the Debentures are either delivered for conversion to the
Escrow Agent or 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 an affidavit of loss and an agreement
reasonably acceptable to the Company indemnifying the Company from any loss
incurred by it in connection with such loss, theft or destruction. In the case
of a conversion pursuant to a Notice of Conversion, if such certificate or
certificates are not delivered by the date required under this Section 4(b), the
Holder shall be entitled, upon providing written notice to the Company at any
time on or before its receipt of such certificate or certificates
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thereafter, to rescind such conversion, in which event, the Company shall
immediately return the Debentures tendered for conversion.
Subject to any limitations set forth in the Purchase Agreement, including
Section 4.14(e), the Company agrees that at any time the conversion price of the
Debentures are such that the number of Escrow Shares is less than 200% of the
Full Conversion Shares, upon five (5) Business Days of the Company's receipt of
notice of such circumstance from the Purchaser and/or the Escrow Agent, the
Company shall issue share certificates in the name of the Purchaser and deliver
the same to the Escrow Agent, in such number that the new number of Escrow
Shares is equal to 200% of the Full Conversion Shares.
(c) (i) The conversion price for the Debentures in effect on any Conversion
Date shall be $0.01 (the "Conversion Price"); provided, however, that the
aggregate maximum number of shares of Common Stock that the First Debenture A,
First Debenture B and Second Debenture may be converted into shall be Five
Million (5,000,000) shares (the "Maximum Conversion"); and further provided,
however, that upon the Maximum Conversion, the Company may, at its option (a)
increase the Maximum Conversion or (b) redeem the unconverted amount of the
First Debenture A, First Debenture B and Second Debenture in whole or in part at
one hundred forty percent (140%) of the unconverted amount of such Debentures
being redeemed plus accrued interest thereon. For purposes of determining the
closing bid price on any day, reference shall be to the closing bid price for a
share of Common Stock on such date on the American Stock Exchange (or such other
exchange, market, or other system that the Common Stock is then traded on), as
reported on Bloomberg, L.P. (or similar organization or agency succeeding to its
functions of reporting prices).
(ii) If the Company, at any time while any of the Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock 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 any shares of capital stock of the
Company, the Conversion Price as applied in Section 4(c)(i) shall be multiplied
by a fraction, the numerator of which shall be the number of shares of Common
Stock of the Company outstanding immediately before such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such event. Any adjustment made pursuant to
this Section 4(c)(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 reclassification, provided that no
adjustment shall be made if the Company does not complete such dividend,
distribution, subdivision, combination or reclassification.
(iii) If, at any time while any of the Debentures are outstanding, the
Company issues or sells shares of Common Stock, or options, warrants or other
rights to subscribe for or purchase shares of Common Stock (excluding shares of
Common Stock issuable upon the conversion of the Debentures or upon the exercise
of options, warrants or conversion rights granted prior to the date hereof) and
at a price per share less than the Per Share Market Value (as defined in
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the Purchase Agreement) of the Common Stock at the issue date mentioned below,
the Conversion Price shall be multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such shares, options, warrants or
rights 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, and
the denominator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
options, rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase. Such adjustment shall be made whenever
such options, rights or warrants are issued (and if such adjustment is made, no
further adjustment will be made when such options, rights or warrants are
exercised), and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such options, rights or
warrants. However, upon the expiration of any options, right or warrant to
purchase Common Stock, the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section 4(c)(iii), if any such options, right
or warrant shall expire and shall not have been exercised, the Conversion Price
shall immediately upon such expiration be recomputed and effective immediately
upon such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the conversion price made pursuant to the
provisions of this Section 4 after the issuance of such rights or warrants) had
the adjustment of the conversion price made upon the issuance of such options,
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 options, rights or warrants actually exercised. There will be
no adjustment under this Section 4(c)(iii) if Common Stock is issued due to the
exercise of (x) employee stock options that were issued to such employee, or (y)
other options, warrants or rights to subscribe for or purchase that, in any
case, are issued at an exercise or subscription price equal to Per Share Market
Value.
(iv) If, at any time while Debentures are outstanding, the Company
distributes to all holders of Common Stock (and not to holders of Debentures)
evidences of Company indebtedness or assets, or rights or warrants to subscribe
for or purchase any security (excluding those referred to in Section 4(c)(iii)
hereof), then, in each such case, the conversion price at which each Debenture
then outstanding shall thereafter be convertible shall be determined by
multiplying (A) the Conversion Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution by a fraction, the numerator of which shall be the Per Share Market
Value of the Common Stock determined as of the record date mentioned above 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 and the
denominator of which shall be the Per Share Market Value of the Common Stock on
such record date; 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
nationally 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 such fair market value shall be equal to the
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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. Holders shall pay all fees and expenses of any Appraiser selected by them
and Company shall pay all fees and expenses of any Appraiser selected by it.
(v) All calculations under this Section 4 shall be made to the nearest
1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any
calculation equal to or over .005 shall be rounded up to the next cent or share
and any calculation less than .005 shall be rounded down to the previous cent or
share.
(vi) In the event the conversion price is not adjusted pursuant to
Section 4(c)(ii) or (v), within two (2) Business Days following the occurrence
of an event described therein and, in the case of Section 4c(iv), within three
(3) Business Days following the determination of the fair market value by the
Appraiser(s), the Holder shall have the right to require the Company to redeem
the Debentures at 140% of the Purchase Price and simultaneously pay such amount
and all accrued interest and dividends to the Holder pursuant to the written
instructions provided by the Holder. The Company will have two (2) Business Days
to make the appropriate adjustment from the time the Company is provided with
written notice from the Holder of a failure to comply with this Section 4.
(vii) Whenever the Conversion Price is adjusted pursuant to Section
4(c)(ii),(iii) or (iv), the Company shall within two (2) Business Days after the
determination of the new Conversion Price mail and fax (in the manner set forth
in Section 4(j) hereof) to the Holder and to each other holder of Debentures, a
notice ("Company Notice of Conversion Price Adjustment") setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(viii) 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 (except in the event the
property is cash, then the Holder shall have the right to convert the Debentures
and receive cash in the same manner as other stockholders), and the Holder shall
be entitled upon such event to receive such amount of securities or property as
the holder of 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 4(c)(viii) upon any conversion
following such consolidation, merger, sale, transfer or share exchange. This
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provision shall similarly apply to successive reclassifications, consolidations,
mergers, sales, transfers or share exchanges;
(ix) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special non-recurring cash
dividend redemption of its Common Stock; or
(C) the Company shall authorize the grant 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 and faxed
to the Holder and each other holder of the Debentures at their last addresses
and facsimile number set forth in the Debenture Register at least twenty (20)
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of 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.
(d) If at any time conditions shall arise by reason of action or failure to
act by the Company, which action or failure to act, in the opinion of the Board
of Directors of the Company, is not adequately covered by the other provisions
hereof and which the Board of Directors of the
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Company determines in good faith is likely to materially and adversely affect
the rights of the Holder and all other holders of Debentures (different or
distinguishable from the effect generally on rights of holders of any class of
the Company's capital stock), the Company shall, at least twenty (20) calendar
days prior to the effective date of such action, mail and fax a written notice
to each holder of Debentures briefly describing the action contemplated, 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 4 and the terms of
the Purchase Agreement and the Debentures), 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 Company shall pay all fees and expenses of any Appraiser
selected under this Section 4(d). The Board of Directors of the Company 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 above the
conversion price then in effect.
(e) Subject to the terms and limitations set forth in the Debentures and
the Purchase Agreement, including without limitation, Sections 4.14, 4.28 and
4.33 thereof, the Company covenants and agrees that it shall, at all times,
reserve and keep available out of its authorized and unissued Common Stock
solely for the purpose of issuance upon conversion of the Debentures as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder of the Debentures, two (2) times such
number of shares of Common Stock as shall be issuable (taking into account the
adjustments and restrictions of Section 4(c) and Section 4(d) hereof) upon the
conversion of the aggregate principal amount of the outstanding Debentures,
provided, however, that the Company shall not be required to reserve and keep
available any shares pursuant to this Section 4(e) in violation of any
applicable Shareholder Approval Rules. The Company covenants that, subject to
the limitations set forth in this Section 4(e), all shares of Common Stock that
shall be issuable upon conversion of the Debentures shall, upon issuance, be
duly and validly authorized and issued and fully paid and non-assessable.
(f) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up
to the nearest whole share. If a fractional share interest arises upon any
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing to the Holder an additional full share of Common Stock.
(g) The issuance of a certificate or certificates for shares of Common
Stock upon conversion of the Debentures shall be made without charge to the
Holder for any documentary stamp or similar taxes that may be payable in respect
of the issuance 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
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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) The Debentures converted into Common Stock shall be canceled upon
conversion.
(i) On the Maturity Date, the unconverted principal amount of the
Debentures and all interest due thereon shall either be paid off in full by the
Company or, if payment in full is not received within two (2) Business Days
after the Maturity Date, convert automatically into shares of Common Stock at
the Conversion Price.
(j) Each Notice of Conversion shall be given by facsimile to the Escrow
Agent no later than 4:00 pm New York time on any Business Day. Upon receipt of
such Notice of Conversion, the Escrow Agent shall forward such Notice of
Conversion to the Company by facsimile by 6:00 p.m. New York time on the day on
which the Escrow Agent receives the Notice of Conversion, at the facsimile
telephone number and address of the principal place of business of the Company.
Any such notice shall be deemed given and effective upon the transmission of
such facsimile at the facsimile telephone number specified in the Purchase
Agreement (with printed confirmation of transmission). In the event that the
Escrow Agent receives the Notice of Conversion after 4:00 p.m. New York time or
the Company receives the Notice of Conversion after 6:00 p.m. New York time on
such day, or the Holder receives the Company Notice of Conversion Price
Adjustment after 6:00 p.m. New York time, any such notice shall be deemed to
have been given on the next Business Day.
(k) No adjustment under this Section 4 shall reduce the Conversion Price
below $0.01.
Section 5. Redemption of Debentures. (a) At any time after the Execution
Date, so long as no Event of Default has occurred and, if a cure period is
provided, has not been cured, the Company shall have the option to redeem any
unconverted amount of the Debentures, either in part or whole, upon no less than
thirty (30) days written notice thereof given to the Holder with a copy to the
Escrow Agent (the "Redemption Notice"), at one hundred forty percent (140%) of
the unconverted amount of the Debentures plus accrued interest thereon (the
"Redemption Price"). Notwithstanding anything contained herein to the contrary,
if the Company decides to redeem the outstanding principal amount of the
Debenture under the second proviso in the first sentence of Section 4(c)(i) of
this Debenture, the Company shall have three (3) Business Days from their
decision to redeem the Debenture in order to effectuate the redemption of such
principal amount of the outstanding Debenture.
(b) Within three (3) Business Days prior to the date fixed for redemption
in the Redemption Notice, the Company shall deposit the Redemption Price by wire
transfer to the IOLA account of the Escrow Agent. Upon receipt of the Redemption
Price, on such redemption date, the Escrow Agent shall release the Redemption
Price to the Holder and return the remaining Debentures, Escrow Shares and
Underlying Shares to the Company.
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(c) In the event that the Company fails to deposit the Redemption Price in
the Escrow Agent's IOLA account number within the time allocated in Section 5(b)
hereof, then the redemption shall be declared null and void.
Section 6. Intentionally Omitted.
Section 7. Absolute Payment Obligation; Limitation on Prepayment. 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. The Company
may not prepay any portion of the outstanding principal amount on the Debentures
except in accordance with the Purchase Agreement or Sections 4(c)(i) or 5
hereof.
Section 8. No Rights of Stockholders. Except as otherwise provided herein
or in the Purchase Agreement, 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 on or consent to any action, 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.
Section 9. Loss, Theft, Mutilation or Destruction. 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 an affidavit of such loss, theft or
destruction of such Debenture, and, if requested by the Company, an agreement to
indemnity the Company in form reasonably acceptable to the Company.
Section 10. Governing Law. This Debenture 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. Any action to
enforce the terms of this Debenture, the Purchase Agreement or any other
Transaction Document shall be exclusively brought in the state and/or federal
courts in the state and county of New York. Service of process in any action by
the Holder to enforce the terms of this Debenture may be made by serving a copy
of the summons and complaint, in addition to any other relevant documents, by
commercial overnight courier to the Company at its address set forth in the
Purchase Agreement.
Section 11. Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed duly given only if delivered
to the party personally or sent to the party by facsimile upon electronic
confirmation receipt (promptly followed by a hard-copy delivered in accordance
with this Section 12) or three days after being mailed by registered or
certified mail (return receipt requested), with postage and registration or
certification fees thereon prepaid, or if sent by nationally recognized
overnight courier, one day after being mailed, addressed to the party at
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its address as set forth in Section 7.3 of the Purchase Agreement or such other
address as may be designated hereafter by notice given pursuant to the terms of
this Section 11.
Section 12. Waiver. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this Debenture
in any other occurrence. Any waiver must be in writing.
Section 13. Invalidity. If any provision of this Debenture is held to be
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is held to be inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons and
circumstances.
Section 14. Payment Dates. 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 following Business Day.
Section 15. Transfer; Assignment. This Debenture may not be transferred or
assigned, in whole or in part, at any time, except in compliance by the
transferor and the transferee with applicable federal and state securities laws.
Section 16. Fees of Enforcement. In the event any Party commences legal
action to enforce its rights under this Debenture, the non-prevailing party
shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights.
[Signature Page Follows]
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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.
OPHTHALAMIC SOLUTIONS, INC.
Attest: By: /s/ Jehu Hand
--------------------- ---------------------------------------
Name: Jehu Hand
Title: President and Chief Executive Officer
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APPENDIX I
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debentures)
Except as provided by Section 4(b) of the Debentures, the undersigned hereby
irrevocably elects to convert the attached Debenture into shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of Ophthalmic Solutions,
Inc. (the "Company"), or, if a Merger (as defined in the Debenture) has
occurred, into shares of MP Common Stock (as defined in the Debenture) according
to the provisions 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. A fee of $350 will be charged by the Escrow Agent to the Holder for
each conversion. No other fees will be charged to the Holder, except for
transfer taxes, if any.
Conversion calculations:
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Date to Effect Conversion
----------------------------------------------
Principal Amount of Debentures to be Converted
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Interest to be Converted or Paid
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Applicable Conversion Price (Pursuant to
Section 4(c)(v))
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Number of Shares to be Issued Upon Conversion
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Signature
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Name
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Address
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