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Exhibit 2.4
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SENIOR DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), 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
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION" OR THE
"SEC") 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: $7,000,000
PRICE: $7,000,000
DEBENTURE NUMBER: November 2007 101
ISSUANCE DATE: November 1, 2007
MATURITY DATE: November 1, 2012
FOR VALUE RECEIVED, Patient Portal Technologies, Inc., a
Delaware
corporation ("Company"), hereby promises to pay DUTCHESS PRIVATE
EQUITIES FUND,
LTD. ("Holder") by November 1, 2012 (the "Maturity Date"), the
principal amount
of Seven Million U.S. Dollars ($7,000,000) (the "Face Amount"),
and to pay
interest and redemption on the principal amount thereof, and any
accrued
penalties, in such amounts, at such times and on such terms and
conditions as
are specified herein.
This Senior Debenture (this "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 Article 3.2(c) hereof.
Article 1 Interest.
(a) Company shall pay interest ("Interest") at the rate of
twelve
percent (12%) per annum, compounded daily, on the unpaid Face
Amount of this
Debenture at such times and in such amounts as outlined in this
Article 1.
Company shall make mandatory monthly payments of interest (the
"Interest
Payments"), in an amount equal to the interest accrued on the
principal balance
of the Debenture from the last Interest Payment until such time
as the current
Interest Payment is due and payable. The Interest Payments shall
commence the
first month following the Issuance Date and shall continue until
the Face Amount
is paid in full, and the Interest Payments shall be paid the
last day of each
such month. Holder shall retain the right, but not the
obligation, to convert
any Interest due and payable under this Debenture on terms
outlined in Section 3
of this Debenture.
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(b) Any monies paid to Holder in excess of the Interest due when
paid
shall be credited toward the redemption of the Face Amount of
this Debenture.
Article 2 Method of Payment.
Section 2.1 Repayment of Debenture.
(a) Commencing on the seventh (7th) month following the Issuance
Date,
Company shall make the Interest Payment outlined in Article 1
hereof and monthly
amortizing payments to Holder (the "Amortizing Payments") on the
Face Amount of
the Debenture, plus the Redemption Amount on the principal (as
defined in
Article 14 hereof), with such Amortizing Payments to be paid on
the last
business day of each month for so long as there is an
outstanding balance on
this Debenture, in the amount of One Hundred and Eighty-Three
Thousand Eight
Hundred and Twenty-Five dollars and 17/100 U.S. dollars
($183,825.17) (the
"Amortizing Payment Amount").
(b) At the end of the thirty-six (36) month anniversary of the
Issuance
Date ("Anniversary Date"), all amount then currently owed under
the Debenture
shall become immediately due and payable to Holder.
(c) Notwithstanding any provision to the contrary in this
Debenture,
Company may pay in full to Holder the Face Amount, or any
balance remaining
thereon, in readily available funds, at any time and from time
to time without
penalty.
(d) After the date (the "Effective Date") on which United
States
Securities and Exchange Commission (the "Commission" or the
"SEC") declares the
registration statement (the "Registration Statement") covering
the shares
underlying the conversion of this Debenture (the "Conversion
Shares") effective:
(i) if the Conversion Price, as defined herein, is above the
Maximum Conversion Price, as defined herein, Holder, at its
sole
option, shall be entitled to either (i) request an Interest
Payment and Amortizing Payment from Company in the amounts
set
forth above; or (ii) elect to convert a portion of this
Debenture
pursuant to Article 3 hereof in an amount equal to or greater
than
the Amortizing Payment Amount. In the event Holder is unable
to
convert that portion of this Debenture equal to the
Amortizing
Payment Amount during any calendar month, Holder shall send
a
notice to Company within three (3) days of the date on which
such
Interest Payment and Amortizing Payment is due (the "Payment
Date") with the total amount then due and Company shall make
a
payment in cash in an amount equal to the difference between
the
amount converted by Holder and the Amortizing Payment Amount
due
for that month.
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(ii) if the Conversion Price, as defined herein, is below
the
Maximum Conversion Price, as defined herein, Company, at its
sole
option, shall be entitled to either (i) make an Interest
Payment
and Amortizing Payment to Holder in the amounts set forth
above;
or (ii) request Holder to convert a portion of this
Debenture
pursuant to Article 3 hereof in an amount equal to or greater
than
the Amortizing Payment Amount. In the event Holder is unable
to
convert that portion of this Debenture equal to the
Amortizing
Payment Amount during any calendar month, Holder shall send
a
notice to Company within three (3) days of the Payment Date
with
the total amount then due and Company shall make a payment in
cash
in an amount equal to the difference between the amount
converted
by Holder and the Amortizing Payment Amount due for that
month.
(e) Nothing contained in this Article 2 shall limit the amount
Holder
can elect to convert during a calendar month except as defined
in Section 3.2
(i) hereof.
(f) All payments made under this Article 2 shall be applied
toward the
total Redemption Amount as outlined in Article 14 hereof.
(g) Company may make additional payments toward Redemption
("Prepayments") without any penalties.
Article 3 Conversion.
Section 3.1 Conversion Privilege.
(a) Holder of this Debenture, subject to Article 2 above, shall
have
the right to convert (a "Conversion") any and all amounts owing
under this
Debenture into shares of common stock of Company, par value
$0.001 per share
(the "Common Stock"), at any time following the Closing Date (as
such term is
defined in that certain Subscription Agreement, of even date
herewith, by and
between Company and Holder (the "Subscription Rights
Agreement")) but which is
before the close of business on the Maturity Date, except as set
forth in
Section 3.2(c) hereof. The number of shares of Common Stock
issuable upon the
Conversion of this Debenture is determined pursuant to Section
3.2 hereof and
rounding the result up to the nearest whole share.
(b) This Debenture may only be converted, whether in whole or in
part,
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
shall automatically be converted into shares of Common Stock on
such date in the
manner set forth in Section 3.2 hereof.
Section 3.2 Conversion Procedure.
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(a) Conversion Procedures. Holder may elect to convert the
unpaid Face
Amount of and accrued Interest on this Debenture, in whole or in
part, at any
time following the Closing Date. Such Conversion shall be
effectuated by Holder
sending to Company a facsimile or electronic mail version of the
signed Notice
of Conversion, attached hereto as Exhibit A, which evidences
Holder's intention
to convert the Debenture as indicated. The date on which the
Notice of
Conversion is delivered (the "Conversion Date") shall be deemed
to be the date
on which Holder has delivered to Company a facsimile or
electronic mail of the
signed Notice of Conversion. Notwithstanding the above, any
Notice of Conversion
received by 5:00 P.M. Boston time shall be deemed to have been
received the
previous business day, with receipt being via a confirmation of
time of
facsimile of Holder.
(b) Common Stock to be Issued. Upon Holder's Conversion of
any
Debenture, Company shall issue the number of shares of Common
Stock equal to the
Conversion. If, at the time of Conversion, the Registration
Statement has been
declared effective, Company shall instruct its transfer agent to
issue stock
certificates without restrictive legend (other than a legend
referring to such
Registration Statement and prospectus delivery requirements) or
stop transfer
instructions. If, at the time of Holder's Conversion, the
Registration Statement
has not been declared effective, Company shall instruct the
transfer agent to
issue the certificates with an appropriate legend. Company shall
act as
Registrar and shall maintain an appropriate ledger containing
the necessary
information with respect to this Debenture. Company represents
and warrants to
Holder 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 otherwise set forth herein.
(c) Conversion Price. Holder is entitled to convert the unpaid
Face
Amount of this Debenture, plus accrued interest, any time
following a Closing
Date, at the lesser of the following prices (each (i) and (ii)
being the
"Conversion Price"): (i) eighty-five percent (85%) of the lowest
closing bid
price of the Common Stock during the twenty (20) trading days
immediately prior
to a Conversion Notice; or (ii) 46/100 U.S. dollars ($0.46)
("Maximum Conversion
Price"). No fractional shares or scrip representing fractions of
shares will be
issued upon Conversion, but the number of shares issuable shall
be rounded up,
in the event of a partial share, to the nearest whole share.
Holder shall retain
all rights of Conversion during any partial trading days.
(d) Maximum Interest. Nothing contained in this Debenture shall
be
deemed to establish or require Company to pay interest to Holder
at a rate in
excess of the maximum rate permitted by applicable law. In the
event that the
rate of interest required to be paid exceeds the maximum rate
permitted by
applicable law, the rate of interest required to be paid
thereunder shall be
automatically reduced to the maximum rate permitted under
applicable law and
such excess, if so ordered, shall be credited on any remaining
balances due to
Holder. In the event that the interest rate on this Debenture is
required to be
adjusted pursuant to this Section 3.2(d), then the parties
hereto agree that the
terms of this Debenture shall remain in full force and effect
except as is
necessary to make the interest rate comply with applicable
law.
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(e) Opinion Letter. It shall be 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
or entity 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, Company shall
issue to Holder a
new Debenture equal to the unconverted amount. Company hereby
acknowledges that
the date of consideration for this Debenture is the Issuance
Date and shall use
all commercially reasonable best efforts to facilitate sales
under Rule 144 of
the Securities Act.
(f) Delivery of Shares.
(i) Within three (3) business days after receipt of the Notice
of
Conversion (the "Certificate Deadline"), Company shall deliver a
certificate, in
accordance with Section 3.2(c) hereof for the number of shares
of Common Stock
issuable upon a Conversion. In the event Company does not make
delivery of said
certificate by the Certificate Deadline, Company shall pay to
Holder in cash, as
liquidated damages, an additional fee per day equal to three
percent (3%) of the
dollar value of the Debentures being converted.
(ii) If the failure of Company to issue the certificate
pursuant
to this Article 3.2(f) is due to the unavailability of a
sufficient number of
authorized shares of Common Stock of Company, then the
provisions of this
Article 3.2(f) shall apply as well as the provisions of Article
3.2(k) hereof
shall apply.
(iii) Company shall make any payments required under this
Article
3.2(f) in immediately available funds by the Certificate
Deadline. Nothing
herein shall limit Holder's right, at Holder's sole discretion,
to pursue actual
damages or cancel the conversion for Company's failure to issue
and deliver the
certificate by the Certificate Deadline.
(iv) 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
full amount of
the Debentures then outstanding and due to Holder, unless so
waived by Holder in
writing. If, at any time, Holder submits a Notice of Conversion
and 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"), Company shall issue to Holder all of the shares
of Common Stock
which are then currently available. Any Debentures or any
portion thereof, which
cannot be converted due to Company's lack of sufficient
authorized common stock
(the "Unconverted Debentures"), may be deemed null and void upon
written notice
sent by Holder to Company. Company shall provide notice of such
Conversion
Default ("Notice of Conversion Default") to Holder, by
facsimile, within one (1)
business days of such default.
(v) In the event of Conversion Default, Company will pay to
Holder
an amount computed as follows (the "Conversion Default
Rate"):
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(N / 365) x (0.24) x (initial issuance price of outstanding
and/or
tendered but not converted Debentures held by Holder)
Where N is equal to the number of days from the Conversion
Default
Date to the date that Company authorizes a sufficient number of
shares of Common
Stock to effect conversion of all remaining Debentures (the
"Authorization
Date"). Company shall send notice to Holder of the outstanding
Debentures that
additional shares of Common Stock have been authorized, stating
the
Authorization Date and the amount of Holder's accrued Conversion
Default
payments ("Authorization Notice"). 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 Holder to Company, as follows: (i) in the
event Holder
elects to take such payment in cash, cash payment shall be made
to Holder within
five (5) business days, or (ii) in the event Holder elects to
take such payment
in stock, Holder may convert at the Conversion Default Rate
within five (5)
business days until the expiration of the Conversion period.
(vi) 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 Debentures will cause Holder to suffer
irreparable
harm, and that damages 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 Company from its
obligations to
deliver the Common Stock pursuant to the terms of this
Debenture. Nothing herein
shall limit Holder's right to pursue actual damages for
Company's failure to
maintain a sufficient number of authorized shares of Common
Stock.
(vii) If by the Certificate Deadline, any portion of the shares
of
the Debentures have not been delivered to Holder and Holder
purchases, in an
open market transaction or otherwise, shares of Common Stock
necessary to make
delivery of shares which would have been delivered if the full
amount of the
shares to be converted and delivered to Holder by Company (the
"Covering
Shares"), then Company shall pay to 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) Holder's total
purchase price
(including brokerage commissions, if any) for the Covering
Shares, minus (y) the
net proceeds (after brokerage commissions, if any) received by
Holder from the
sale of the sold shares. Company shall pay the Buy-In Adjustment
Amount to
Holder in immediately available funds within five (5) business
days of written
demand by Holder. By way of illustration and not in limitation
of the foregoing,
if 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 Company would be required to pay to
Holder would be
$1,000.
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(g) Prospectus and Other Documents. Company shall furnish to
Holder one (1) prospectus and any other documents incidental to
the registration
of the Conversion Shares, including any amendment of or
supplements thereto. Any
filings submitted via EDGAR will constitute fulfillment of
Company's obligation
under this Section.
(h) Limitation on Issuance of Shares. If Company's Common
Stock
becomes listed on the Nasdaq SmallCap Market after the issuance
of this
Debenture, Company may be limited in the number of shares of
Common Stock it may
issue by virtue of (A) the number of authorized shares or (B)
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)
Company will take all steps necessary to issue the Conversion
Shares without
violating the Cap Regulations, and (ii) if, despite taking such
steps, Company
cannot issue such Conversion Shares without violating the Cap
Regulations or
Holder cannot convert as a result of the Cap Regulations (each
such Debenture,
an "Unconverted Debenture") Holder shall have the right to elect
either of the
following options:
(i) if permitted by the Cap Regulations, require Company to
issue shares of Common Stock in accordance with 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 adjust
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