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THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO COMPREHENSIVE HEALTHCARE
SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
5% CONVERTIBLE NOTE
FOR VALUE RECEIVED, COMPREHENSIVE HEALTHCARE
SOLUTIONS, INC., a Delaware corporation (hereinafter called
"Borrower"), hereby promises to pay to Nite Capital, LP (the
"Holder") or order, without demand, the sum of one hundred thousand
($100,000), with simple interest accruing at the rate described
below, on May 29, 2007 (the "Maturity Date").
This Note has been entered into pursuant to the
terms of a subscription agreement between the Borrower and the
Holder, dated of even date herewith (the "Subscription Agreement"),
and shall be governed by the terms of such Subscription Agreement.
Unless otherwise separately defined herein, all capitalized terms
used in this Note shall have the same meaning as is set forth in
the Subscription Agreement. The following terms shall apply to this
Note:
ARTICLE I
GENERAL PROVISIONS
1.1 Interest Rate. Subject to Section 4.7 hereof,
interest payable on this Note shall accrue from the date hereof at
a rate per annum (the "Interest Rate") equal to five percent (5%),
subject to adjustment pursuant to Section 1.2. Interest on the
principal amount outstanding shall be payable quarterly, in
arrears, commencing on March 1, 2006 and on the first day of each
third calendar month thereafter and on the Maturity Date, whether
by acceleration or otherwise. Interest shall be computed for actual
days elapsed on the basis of a 360 day year consisting of twelve
30-day months.
1.2 Payment Grace Period. From and after the 10th
day after an Event of Default under Section 3.1, the Interest Rate
applicable to any unpaid amounts owed hereunder shall be increased
to sixteen percent (16%) per annum.
1.3 Conversion Privileges. The Conversion
Privileges set forth in Article II shall remain in full force and
effect immediately from the date hereof and until the Note is paid
in full regardless of the occurrence of an Event of Default. The
Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article
II hereof; provided, that if an Event of Default has occurred, the
Holder may elect to extend the Maturity Date by the amount of days
of the pendency of the Event of Default.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the
principal and accrued and unpaid interest due under this Note into
Shares of the Borrower's Common Stock, $.10 par value per share
("Common Stock") as set forth below.
2.1 Conversion into the Borrower's Common
Stock.
(a) The Holder shall have the right from and
after the date of the issuance of this Note and then at any time
until this Note is fully paid, to convert any outstanding and
unpaid principal portion of this Note, and accrued interest, at the
election of the Holder (the date of giving of such notice of
conversion being a "Conversion Date") into fully paid and
nonassessable shares of Common Stock as such stock exists on the
date of issuance of this Note, or any shares of capital stock of
Borrower into which such Common Stock shall hereafter be changed or
reclassified, at the conversion price as defined in Section 2.1(b)
hereof (the "Conversion Price"), determined as provided herein.
Upon delivery to the Borrower of a completed Notice of Conversion,
a form of which is annexed hereto, Borrower shall issue and deliver
to the Holder within five (5) business days from the Conversion
Date (such third day being the "Delivery Date") that number of
shares of Common Stock for the portion of the Note converted in
accordance with the foregoing. At the election of the Holder, the
Borrower will deliver accrued but unpaid interest on the principal
amount of the Note being converted in the manner provided in
Section 1.1 through the Conversion Date directly to the Holder on
or before the Delivery Date (as defined in the Subscription
Agreement). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that
portion of the principal of the Note and accrued interest to be
converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section
2.1(c) hereof, the Conversion Price per share shall be
$.25.
(c) The Conversion Price and number and kind of
shares or other securities to be issued upon conversion determined
pursuant to Section 2.1(a), shall be subject to adjustment from
time to time upon the happening of certain events while this Note
remains outstanding, as follows:
A. Reorganization, Consolidation, Merger, etc. In
case at any time or from time to time, the Company shall (a) effect
a reorganization, (b) consolidate with or merge into any other
person or (c) transfer all or substantially all of its properties
or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction,
proper and adequate provision shall be made by the Company whereby
the Holder of this Note, on the conversion hereof as provided in
Article II, at any time after the consummation of such
reorganization, consolidation or merger or the effective date of
such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such conversion
prior to such consummation or such effective date, the stock and
other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection
with such dissolution, as the case may be, if such Holder had so
converted this Note, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section
2.1(c)(E).
B. Dissolution. In the event of any dissolution
of the Company following the transfer of all or substantially all
of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered
the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Notes after the
effective date of such dissolution pursuant to this Article II to a
bank or trust company (a "Trustee") having its principal office in
New York, NY, as trustee for the Holder of the Notes.
C. Continuation of Terms. Upon any
reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this Article II,
this Note shall continue in full force and effect and the terms
hereof shall be applicable to the Other Securities and property
receivable on the conversion of this Note after the consummation of
such reorganization, consolidation or merger or the effective date
of dissolution following any such transfer, as the case may be, and
shall be binding upon the issuer of any Other Securities,
including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed
the terms of this Note as provided in Section 2.1(c)(E). In the
event this Note does not continue in full force and effect after
the consummation of the transaction described in this Article II,
then only in such event will the Company's securities and property
(including cash, where applicable) receivable by the Holder of the
Notes be delivered to the Trustee as contemplated by Section
2.1(c)(B).
D. Share Issuance. Until the Expiration Date, if
the Company shall issue any Common Stock except for the Excepted
Issuances (as defined in the Subscription Agreement), prior to the
complete conversion of this Note for a consideration less than the
Purchase Price that would be in effect at the time of such issue,
then, and thereafter successively upon each such issue, the
Purchase Price shall automatically and with no action required by
the Company or Holder, be reduced to such other lower issue price.
For purposes of this adjustment, the issuance of any security or
debt instrument of the Company carrying the right to convert such
security or debt instrument into Common Stock or of any Note, right
or option to purchase Common Stock shall result in an adjustment to
the Purchase Price upon the issuance of the above-described
security, debt instrument, Note, right, or option and again at any
time upon any subsequent issuances of shares of Common Stock upon
conversion of such conversion or purchase rights if such issuance
is at a price lower than the Purchase Price in effect upon such
issuance. The reduction of the Purchase Price described in this
Section Section 2.1(c)(D) is in addition to the other rights of the
Holder described in the Subscription Agreement.
E. Extraordinary Events Regarding Common Stock.
In the event that the Company shall (a) issue additional shares of
the Common Stock as a dividend or other distribution on outstanding
Common Stock, (b) subdivide its outstanding shares of Common Stock,
or (c) combine its outstanding shares of the Common Stock into a
smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening
of such event, be adjusted by multiplying the then Purchase Price
by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events
described herein in this Section 2.1(c)(E). The number of shares of
Common Stock that the Holder of this Note shall thereafter, on the
conversion hereof as provided in Article II, be entitled to receive
shall be adjusted to a number determined by multiplying the number
of shares of Common Stock that would otherwise (but for the
provisions of this Section 2.1(c)(E)) be issuable on such
conversion by a fraction of which (a) the numerator is the Purchase
Price that would otherwise (but for the provisions of this Section
2.1(c)(E)) be in effect, and (b) the denominator is the Purchase
Price in effect on the date of such conversion.
F. Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or
Other Securities) issuable on the conversion of the Notes, the
Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or
readjustment in accordance with the terms of the Note and prepare a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or deemed
to be outstanding, and (c) the Purchase Price and the number of
shares of Common Stock to be received upon conversion of this Note,
in effect immediately prior to such adjustment or readjustment and
as adjusted or readjusted as provided in this Note. The Company
will forthwith mail a copy of each such certificate to the Holder
of the Note and any transfer agent of the Company.
(d) Whenever the Conversion Price is adjusted
pursuant to Section 2.1(c) above, the Borrower shall promptly mail
to the Holder a notice setting forth the Conversion Price after
such adjustment and setting forth a statement of the facts
requiring such adjustment.
2.2 Method of Conversion. This Note may be
converted by the Holder in whole or in part as described in Section
2.1(a) hereof and the Subscription Agreement. Upon partial
conversion of this Note, a new Note containing the same date and
provisions of this Note shall, at the request of the Holder, be
issued by the Borrower to the Holder for the principal balance of
this Note and interest which shall not have been converted or
paid.
2.3 Maximum Conversion.
(a) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be
acquired by the Subscriber upon conversion of the Notes (or
otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then
beneficially owned by such Subscriber and its affiliates and any
other persons whose beneficial ownership of Common Stock would be
aggregated with the Subscriber's for purposes of Section 13(d) of
the 1934 Act, does not exceed 4.999% of the total number of issued
and outstanding shares of Common Stock (including for such purpose
the shares of Common Stock issuable upon such conversion). For such
purposes, beneficial ownership shall be determined in accordance
with Section 13(d) of the 1934 Act and the rules and regulations
promulgated thereunder. By written notice to the Company, a
Subscriber may waive the provisions of this Section 2.3(a) as to
itself but any such waiver will not be effective until the 61st day
after delivery thereof and such waiver shall have no effect on any
other Investor.
(b) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be
acquired by the Subscriber upon conversion of the Notes (or
otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then
beneficially owned by such Subscriber and its affiliates and any
other persons whose beneficial ownership of Common Stock would be
aggregated with the Subscriber's for purposes of Section 13(d) of
the 1934 Act, does not exceed 9.999% of the total number of issued
and outstanding shares of Common Stock (including for such purpose
the shares of Common Stock issuable upon such conversion). For such
purposes, beneficial ownership shall be determined in accordance
with Section 13(d) of the 1934 Act and the rules and regulations
promulgated thereunder. This provision may not be
waived.
2.4 Conversion of Note.
(a) Upon the conversion of a Note or part
thereof, the Company shall, at its own cost and expense, take all
necessary action, including obtaining and delivering, an opinion of
counsel to assure that the Company's transfer agent shall issue
stock certificates in the name of Subscriber (or its nominee) or
such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number
of shares of Common Stock issuable upon such conversion. The
Company warrants that no instructions other than these instructions
have been or will be given to the transfer agent of the Company's
Common Stock and that, unless waived by the Subscriber, the Shares
will be free-trading, and freely transferable, and will not contain
a legend restricting the resale or transferability of the
Shares
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