Document:

Exhibit
4.1

 

FOR
ACCREDITED INVESTORS ONLY

 

MEDICOR
LTD.

FORM OF
INVESTMENT AGREEMENT

10%
CONVERTIBLE DEBENTURE DUE 2006

 

This INVESTMENT
AGREEMENT (the “Agreement”)
is by and between
                                                      (the
“Holder”) and MEDICOR LTD., A DELAWARE CORPORATION (the “Company”).

 

RECITALS:

 

WHEREAS:

 

A.            The Holder agrees
to purchase one of the Company's 10% Convertible Debentures due 2006 (“Convertible Debenture”), convertible, at
the Holder's option, into the Company's common stock, $.001 par value per share
(the “Common Stock”) or other
securities of the Company, on the terms set forth below and in the Convertible
Debenture; and

 

B.            The Company and
the Holder wish to enter into this Agreement to reflect the terms of the investment.

 

AGREEMENT

 

NOW,
THEREFORE, intending to be legally bound, the parties hereto
agree as follows:

 

1.             INVESTMENT.    The Holder hereby agrees
to purchase
                             
DOLLARS
(US$                       .00)
in principal amount of Convertible Debentures, convertible into shares of the
Common Stock of the Company (the “Debenture
Shares”) or other securities of the Company (together with the
Debenture Shares and any other securities into which they are convertible,
exchangeable or exercisable, the “Debenture
Securities”), at the Holder's option as provided below:

 

(a)                      The
Convertible Debenture shall initially be convertible, at the Holder's option,
into a dollar amount (based on the subscription price therefor) of securities
proposed to be offered by the Company to certain institutional investors (the “Institutional Investors”) in connection
with the Company's presently proposed acquisition of another corporation (the “Institutional Offering”), the closing of
which is anticipated to occur in or about January 2004 (the “Institutional Conversion Right”), equal to
the initial principal amount of the Convertible Debenture.

 

(b)                     In the event
the Holder does not elect to exercise the Institutional Conversion Right, the
Convertible Debenture shall be convertible, at the Holder's option, on the
first anniversary date of original issuance thereof and thereafter at the
18-month, 24-month, 30-month and 36-month anniversary of the issuance date
(each a “Conversion Date”), at a
price equal to the greater of (i) seventy-five percent 

 

MEDICOR
LTD.

INVESTMENT
AGREEMENT

 

1

 

(75%) of the daily weighted average trading price per
share of the Company's Common Stock over a period of twenty (20) trading days
prior to the Conversion Date or (ii) Five Dollars ($5.00) (the “Conversion Price”), as noticed to the
Company in writing by the Holder not less than ten (10) business days prior to
the respective Conversion Date (the “Extended
Conversion Right”).

 

2.             HOLDER'S CONVERSION OPTIONS.

 

2.1 Institutional
Conversion Right. As soon as practicable but in any event
not less than five (5) business days prior to the proposed closing date of the
Institutional Offering, the Company shall give notice to the Holder of the
proposed terms and closing date of the Institutional Offering. Not less than
two (2) business days prior to the scheduled closing date of the Institutional
Offering, the Holder shall, if it elects to exercise the Institutional
Conversion Right, give notice thereof to the Company of the Holder's election
to convert the Convertible Debenture. The Holder may elect to convert all or
part (but in any event in integral multiples of $100,000 of the Convertible
Debenture) into a like amount of the securities offered in the Institutional
Offering. If the Holder so elects to convert all or part of the Convertible
Debenture, then, subject to and with the consent of the Institutional
Investors, the Convertible Debenture (based on the outstanding principal amount
shall be converted into the securities) sold to the Institutional Investors in
the Institutional Offering. If more than one security is sold in the
Institutional Offering, then the Holder may, subject to and with the consent of
the Institutional Investors, convert the Convertible Debenture (in integral
multiples of $100,000) into each such security. If the Institutional Investors
do not consent to such conversion (or part thereof) then the Convertible
Debenture (or part thereof) as to which consent is not given shall not be
converted and shall remain outstanding. If the Holder does not so notify the
Company prior to the second business day prior to the closing date of the
Institutional Offering, then the Convertible Debenture will not be converted
and will continue to be outstanding.

 

2.2 Extended
Conversion Right. In the sole discretion of the Holder,
not more than twenty (20) business days nor less than ten (10) business days
prior to the first anniversary of the date of original issuance of the
Convertible Debenture or thereafter at the 18-month, 24-month, 30-month and
36-month anniversary of the issuance date, the Holder may elect to: (a) have
the entire outstanding principal amount of the Convertible Debenture repaid to
the Holder, along with any accrued and unpaid interest thereon; (b) covert the
entire outstanding principal amount of the Convertible Debenture into the
Debenture Shares at the Conversion Price; or (c) continue to hold the
Convertible Debenture until the third anniversary of the date of original
issuance thereof (the “Maturity Date”).
If the Holder does not so notify the Company prior to the first anniversary of
the issuance date or thereafter at the 18-month, 24-month, 30-month or 36-month
anniversary of the issuance date, the Convertible Debenture will remain
outstanding. In the sole discretion of the Holder, not more than twenty (20)
business days nor less than ten (10) business days prior to the Maturity Date
as defined above, the Holder may elect to: (a) have the entire outstanding
principal amount of the Convertible Debenture repaid to the Holder, along with
any accrued and unpaid interest thereon; or (b) covert the entire outstanding
principal amount of the Convertible Debenture into the Debenture Shares at the
Conversion Price on the Maturity Date. If the Holder does not so notify the
Company prior to the Maturity Date, the

 

2

 

Convertible Debenture will automatically convert into the Debenture
Shares at the Conversion Price and, upon such conversion, any and all
obligations of the Company to the Holder in respect of the Convertible
Debenture shall be satisfied.

 

3.             INTEREST.    The
Company agrees to pay interest to the Holder on the outstanding principal
amount of the Convertible Debenture at a rate of ten percent (10%) per annum
for as long as the Convertible Debenture is outstanding. Interest shall be paid
to the Holder by the Company on a quarterly basis, payable within thirty (30)
days from the end of each calendar quarter. Interest shall be prorated for the
initial period ending on the last day of the calendar quarter in which the
Convertible Debenture is issued. If the Holder converts the Convertible
Debenture into the Debenture Securities or elects to have the outstanding
principal amount of the Convertible Debenture repaid to the Holder as described
in Section 2 above, the Company will pay any accrued and unpaid interest due
the Holder and no further interest past the Conversion Date will be due to the
Holder by the Company with respect to the principal amount of the Convertible
Debenture so converted.

 

4.             COMPANY'S REPRESENTATIONS AND
WARRANTIES. The Company hereby makes the following
representations and warranties to the Holder:

 

4.1          Organization, Good Standing and
Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all necessary corporate powers to own its properties, and to
carry on its business as now owned and operated by it, and is qualified to do intrastate
business, and is in good standing in the State of Delaware and in all other
jurisdictions in which the nature of the Company's business, or of its
properties, makes such qualification necessary, except jurisdictions where
failure to so qualify would not have a material adverse effect on the business
of the Company.

 

4.2          Capital Structure.  The authorized capital stock of the Company
consists of One Hundred Million (100,000,000) shares of Common Stock and Twenty
Million (20,000,000) shares of Preferred Stock. The Debenture Securities to be
issued to the Holder shall be validly issued, fully paid and non-assessable,
and will be issued pursuant to applicable exemptions from the registration
provisions of all federal and state securities laws.

 

4.3          Compliance with Laws.

 

4.3.1       To the best of the
Company's knowledge, the Company has complied in all material respects with,
and the Company has not been cited for any violation of, federal, state or
local environmental protection laws and/or regulations, including specifically,
without limitation, all laws and regulations related to the sale of its
products by the Company to state or local or federal government purchasers or
contracts to those governmental agencies, and the Company has not received
notice of any past, present or future events which would reasonably be expected
to give rise to any liability for failure to comply with any federal, state, or
local laws or regulations now in force relating to the protection of the
environment.

 

3

 

4.3.2       To the best of the Company's knowledge,
the Company is not, and has not received notice from any governmental agency
that it is currently in violation of any other applicable federal, state or
local statute, law or regulation (including, without limitation, any applicable
building, or other law, ordinance, or regulation) affecting its assets or the
operation of its business, except for possible instances of non-compliance
which individually would not be expected to have a material adverse effect on
the business of the Company.

 

4.3.3       To the best of the Company's knowledge,
the Company and all of the products which it manufactures, sells, licenses,
imports or distributes have been at all times and continue to be in substantial
compliance with the Food, Drug and Cosmetic Act and all regulations promulgated
thereunder by the U.S. Food and Drug Administration.

 

4.3.4       Subject to the truth and accuracy of the
representations of the Holder set forth in Section 6 hereof, the offer, sale
and issuance of the Convertible Debenture and the Debenture Securities are or
will be exempt from the registration requirements of the Securities Act of
1933, as amended (the “Act”). The
Company has complied with all applicable state “blue sky” or securities laws in
connection with the offer, sale and issuance of this Convertible Debenture as
contemplated by this Agreement.

 

4.4          Full and Correct Disclosure.
No representation or warranty made by the Company contained in this Agreement
or other information provided, and to be provided by the Company in any other
writing furnished pursuant hereto contains or will contain an untrue statement
of a material fact or fails or will fail to state a material fact required to
be stated herein or therein necessary to make the statements and facts
contained herein or therein, in light of the circumstances which they were or
are made, not false nor misleading.

 

4.5          Non-Contravention.
The execution and delivery of the Agreement by the Company, and the
consummation of the transactions contemplated hereby, do not conflict with any
material terms or provisions of any contract, agreement or indenture to which
the Company is a party, or by which the Company or any of its properties is
subject, or the Company's Certificate of Incorporation and Bylaws, each as
amended to date.

 

4.6          Authority; Binding Effect.  The Company has obtained all necessary
authorizations and approvals from its Board of Directors and stockholders, if
any, required for the execution and delivery of this Agreement and the
consummations of the transactions contemplated hereby.  This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.

 

5.             COVENANTS OF THE COMPANY.  The Company hereby makes the following
covenants, intending to be bound hereby.

 

5.1          The Company agrees to make and keep
public information regarding the Company available as those terms are
understood and defined in Rule 144 promulgated under the Act (“Rule 144”), at all times and to file with
the Securities and Exchange Commission (“SEC”)

 

4

 

in a timely manner all reports and other documents required of the
Company under the Act and the Securities Exchange Act of 1934 (the “1934 Act”) at all times that the Company
is subject to such reporting requirements.

 

5.2          The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
for the purpose of complying with the terms of Section 1 of this Agreement,
such number of its duly authorized shares of Common Stock as shall be
sufficient to issue the Debenture Shares to the Holder pursuant to, and in
accordance with, the terms of Section 1 hereof.  If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient for the Company to issue additional shares
of Common Stock to the Holder pursuant to, and in accordance with, the terms of
Section 1 hereof, the Company will forthwith take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes.

 

6.             HOLDER'S REPRESENTATIONS, WARRANTS
AND COVENANTS. 
The Holder hereby makes the following representations, warrants and
covenants to the Company:

 

6.1          The Holder
represents and warrants that the Holder is an “accredited investor” within the
meaning of Rule 501(a) of Regulation D promulgated under the Act. The Holder is
a resident of the State of Nevada.

 

6.2          The Holder is, by
reason of the Holder's business or financial experience, or by reason of the
business or financial experience of the Holder's professional adviser, who is
not affiliated with and is not compensated directly or indirectly by the
Company, or any affiliate or selling agent of the Company, is capable of
evaluating the merits and risks of the purchase of the Convertible Debenture
and the Debenture Securities and of protecting the Holder's own interests in
connection with the investment contemplated herein.

 

6.3          The Holder
acknowledges that it has received and carefully reviewed this Agreement and the
form of Convertible Debenture attached hereto as Exhibit A. This Agreement and
the form of Convertible Debenture are hereinafter collectively referred to as
the “Materials,” and the Holder
further acknowledges that it has read all of the disclosures set forth in the
Materials. The Holder has had the opportunity to ask questions and receive
answers from the Company concerning the Company and its business, assets and
prospects and the terms and conditions of this Agreement. The Holder recognizes
that the Company has a limited operating history and is a speculative venture,
and that if the Holder invests therein, the Holder may lose the entire amount
of its investment. The Holder acknowledges that its representatives and the
Holder have been provided with the opportunity to obtain any additional
information necessary to verify the accuracy of all information provided to the
Holder.

 

6.4          In deciding whether
to acquire the Convertible Debenture or the Debenture Shares, the Holder has
relied or will rely exclusively upon consultations with its legal, financial
and tax advisers with respect to the nature of the investment and the
information provided by the Company in the Materials and this Agreement. None
of the Holder's advisors are affiliated with,

 

5

 

or compensated directly or indirectly by, the Company or any affiliate
or selling agent of the Company.

 

6.5          The Holder
understands that neither the SEC, nor any other governmental agency having
jurisdiction over the sale and issuance of the Convertible Debenture or the
Debenture Securities will make any finding or determination relating to the
appropriateness for investment of the Convertible Debenture or the Debenture
Securities and that none of them has or will recommend or endorse the
Convertible Debenture or the Debenture Securities.

 

6.6          The Holder
represents that the Convertible Debenture is being purchased and the Debenture
Securities will be purchased for its own account for investment and is not
being purchased and will not be purchased with a view to the resale or
distribution thereof, and that the Holder does not have and will not have a
present intention of distributing or reselling any portion of the Convertible
Debenture or the Debenture Securities. The Holder acknowledges that it has been
informed by the Company that the Convertible Debenture, and the Debenture
Securities to be issued and delivered, have not been registered under the Act
and that the Convertible Debenture and Debenture Securities must be held
indefinitely unless subsequently registered under the Act or an exemption for
such registration is available. The Holder acknowledges that, other than as may
be set forth in the Materials, the Company has no obligation to register the
Convertible Debenture or the Debenture Securities under the Act. The Holder
also acknowledges that it is fully aware of the restrictions on disposing of
the Convertible Debenture and the Debenture Securities resulting from the
provisions of the Act and the rules and regulations of the SEC thereunder.

 

6.7          The Holder
understands that the Convertible Debenture is not and the Debenture Securities
upon issuance will not be freely transferable.

 

6.8          The Holder
recognizes that there is not a public market for the Convertible Debenture or
any Convertible Securities other than the Common Stock and that there is not
anticipated to be in the future a market for the Convertible Debenture or any
Convertible Securities other than the Common Stock. The Holder understands that
it may have to hold the Convertible Debenture and any Debenture Security
indefinitely due to the lack of such a market or restrictions on transfer of
such security.

 

6.9          The Holder
recognizes that no escrow or minimum amount has been established for the sale
of Convertible Debentures and that the proceeds will be immediately received by
the Company. The Holder recognizes that the Company's inability to raise such
funds, or additional funds, promptly may significantly and adversely affect the
Company's ability to achieve its financial objectives.

 

6.10        The Holder represents
that it possesses such knowledge and experience in business and financial
matters that it is capable of evaluating the merits and risks of its investment
in the Convertible Debenture and the Debenture Securities. The Holder also has
the degree of sophistication in these matters necessary to understand (1) the
financial and operational information provided to it relating to the Company,
and (2) the potential risk of losing all or a

 

6

 

portion of its investment in the Convertible Debenture and the
Debenture Securities. The Holder represents that it is able to bear the
economic risk of a loss of its investment in the securities that it has funds
adequate to meet personal needs and contingencies and that it has no need for
liquidity of the investment in the Convertible Debenture or the Debenture
Securities.

 

6.11        The Holder recognizes
that “stop transfer” instructions will be issued against the Convertible
Debenture and the Debenture Securities and that the following legend will be
placed on the Convertible Debenture and the Debenture Securities issued:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.  THE SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT.

 

6.12        The Holder hereby agrees that commencing
thirty (30) trading days prior to any Conversion Date as defined above and
ending on the Conversion Date, Holder and any representative under Holder's
direction, will refrain from any direct or indirect trading in the Company's
Common Stock, including trading of any options or derivative securities and
lending of any Common Stock or related derivative securities, in order that the
Conversion Price not be influenced in any way by the Holder, directly or in
directly.

 

7.             TRANSFER.  With respect to any offer,
sale or other disposition of the Convertible Debenture or the Debenture
Securities, the Holder will give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of
Holder's counsel in form and substance acceptable to the Company, to the effect
that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect).
Promptly upon receiving such written notice and opinion, the Company shall
notify such Holder whether such Holder may sell or otherwise dispose of the
Convertible Debenture or the Debenture Securities, all in accordance with the
terms of the notice delivered to the Company.

 

8.             CERTAIN CORPORATE TRANSACTIONS.  Nothing in this Agreement shall in any way prohibit the Company
from merging with or consolidating into another corporation or other entity, or
from selling or transferring all or substantially all of its assets, or from
distributing all or substantially all of its assets to its stockholders in
liquidation, or from dissolving and terminating its corporate existence, and, in
any such event (other than a merger in which the Company is the surviving
corporation and under the terms of which the shares of Common Stock outstanding
immediately prior to the merger remain outstanding and unchanged), Holder shall
have the right exercisable not less than ten (10) business days prior to the
completion of such merger, consolidation, sale or transfer of assets,
liquidation or dissolution, to elect to: (a) have the outstanding principal
amount of the Convertible Debenture repaid to Holder or (b) have the entire
outstanding principal amount of the Convertible Debenture converted into the
Debenture Shares at a price equal to the price that would be applicable if
Holder were exercising the Extended Conversion Right, with the date of the announcement
by the Company

 

7

 

of such transaction as noticed to the Company in writing by the Holder
being the Conversion Date for purposes of calculating the Conversion Price. To
the extent that Holder's right to convert the Convertible Debenture into the
Debenture Shares is accelerated under this Section 8, the conversion or payment
of the entire outstanding principal amount of the Convertible Debenture shall
be contingent upon the consummation of such merger, consolidation, sale or
transfer of assets, liquidation or dissolution. Any conversion upon exercise of
the Institutional Conversion Right shall be subject to consummation of the
Institutional Offering.

 

9.             GENERAL PROVISIONS.

 

9.1          Survival of Representations and
Warranties.  All
representations and warranties of the parties hereto contained in this
Agreement will survive the Closing, are material and have been or will be
relied upon by the other parties.

 

9.2          No Third-Party Beneficiaries.  This Agreement is made for the purpose of
defining and setting forth certain obligations, rights and duties of the
Company and the Holder in connection with the obligations under this
Agreement.  This Agreement is made for
the sole protection of the Company and the Holder.  No other person shall have any rights of any nature hereunder or
by reason hereof.

 

9.3          Binding Effect.  This Agreement shall bind, and shall inure
to the benefit of, the Company and the Holder, and their respective heirs,
successors, personal representatives and assigns.

 

9.4          Execution in Counterparts.  This Agreement may be executed in any number
of counterparts and any party hereto or thereto may execute any counterpart,
each of which when executed and delivered will be deemed to be an original and
all of which counterparts of this Agreement taken together will be deemed to be
but one and the same instrument.  The
execution of this Agreement by any party hereto will not become effective until
counterparts hereof or thereof, as the case may be, have been executed by all
the parties hereto or thereto, and transmitted by facsimile copy with delivery
of manually executed copies in person, by overnight courier or by mail.

 

9.5          Prior Agreements; Amendments;
Consents.  This
Agreement contains the entire agreement between the Holder and the Company with
respect to the Convertible Debenture and the Debenture Securities and all prior
negotiations, understandings and agreements with regards to the offering
thereof are superseded by this Agreement. No amendment, modification,
supplement, termination or waiver of any provision of this Agreement, and no
consent to any departure by the Company therefrom, shall be effective unless in
writing and signed by the Holder, and then only in the specific instance and
for the specific purpose given.

 

9.6          Governing Law.    THIS AGREEMENT AND ALL AMENDMENTS,
SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE

 

8

 

WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.  EACH PARTY HEREBY IRREVOCABLY
SUBMITS ITSELF TO THE JURISDICTION OF THE COURTS SITTING IN THE STATE OF
DELAWARE AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN
ANY LEGAL PROCEEDINGS RELATING HERETO BY ANY MEANS ALLOWED UNDER DELAWARE LAW.

 

9.7          Mandatory Arbitration.      Any dispute arising in
connection with the interpretation or enforcement of the provisions of this
Agreement or arising in connection with the Convertible Debenture or the
Debenture Securities, or its or their application or validity, will be
submitted to arbitration. Such arbitration proceedings will be held in the
State of Delaware. This agreement to arbitrate is specifically enforceable. Any
award rendered in any such arbitration proceeding will be final and binding on
each of the parties, and judgment may be entered thereon in any court of
competent jurisdiction. The costs and fees of any such arbitration proceeding
will be borne by the respective parties. The arbitrators may in their
discretion award costs and reasonable attorneys' fees to the prevailing party.

 

9.8          Severability of Provisions;
Conflict.  Any
provision in this Agreement that is held to be inoperative, unenforceable or
invalid shall be inoperative, unenforceable or invalid without affecting the
remaining provisions, and to this end the provisions of this Agreement are
declared to be severable.  In the event
of a conflict between this Agreement and the Materials as defined herein, the
terms of this Agreement shall prevail.

 

9.9          Confidentiality.  The Holder acknowledges and agrees that the
non-public information it has received and will receive about the Company and
the Company's financial performance is confidential, and agrees to use all
reasonable efforts to maintain the confidentiality thereof. Any confidentiality
agreement between the Holder and the Company, including the foregoing, is
hereby modified, only to the extent necessary, to permit the Holder to exercise
and protect its rights under this Agreement, or as a stockholder of the
Company.

 

10.          NOTICES.  Any notice to the Company
provided for in the Convertible Debenture shall be given by personal delivery
or by mailing such notice by first class or certified mail, return receipt requested,
addressed to the Company at the property address stated below, or to such other
address as the Company may designate by written notice to the Holder. Any
notice to the Holder shall be given by personal delivery or by mailing such
notice by first class or certified mail, return receipt requested, to the
Holder at the address stated on the signature page of the Agreement, or at such
other address as may have been designated the Holder by written notice to the
Company. Mailed notices shall be deemed delivered and received on the delivery
date as shown on the postal return receipt or the receipt furnished by an
independent courier service, and any notices transmitted by confirmed facsimile
transmission will be deemed delivered and received as of the date of the
transmission.

 

 

SIGNATURE
FOLLOWS

 

9

 

 

IN
WITNESS WHEREOF, the parties have signed this Agreement as of
                            ,
2003 at Las Vegas, Nevada.

 

 

	
   

  	
   

  	
  “HOLDER”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Phone:

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
  E-mail:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax I.D. or Social Security Number:

  	
   

  
				

 

THIS
AGREEMENT IS NOT EFFECTIVE UNTIL AFTER THE RECEIPT AND VERIFICATION OF GOOD
FUNDS FROM THE HOLDER TO THE BANK ACCOUNT LISTED BELOW AND ACCEPTANCE BY THE
COMPANY AS WITNESSED BY THE SIGNATURE ON THE NEXT PAGE

 

Wires
should be sent via the Fed Wire system to:

U.S. Bank of Nevada

Nevada Financial Center

2300 West Sahara Avenue

Las Vegas, NV 89102

ABA #121201694

Credit to the Account of:

MediCor Ltd.

Account #153790902537

 

10

 

Funds
(other than wires) should be made payable to MediCor Ltd. and sent to:

MediCor Ltd.

4560 South Decatur
Boulevard

Suite 300

Las Vegas, NV  89103-5253

Phone: (702) 932-4560

Fax:      (702) 932-4561

 

THE COMPANY:

 

	
  MediCor
  Ltd.

  	
  Effective
  Date:

  
	
   

  
	
  By: 

  	
   

  	
   

  	
   

  	
  , 2003

  
	
   

  	
   

  
	
   

  	
   

  
	
  Its: 

  	
   

  	
   

  	
   

  

 

Address for Notices:

MediCor Ltd.

4560 South Decatur Boulevard

Suite 300

Las Vegas, NV 89103-5253

Phone: 702/932-4560

Fax:     702/932-4561

 

11

 

EXHIBIT
A

TO
INVESTMENT AGREEMENT

 

FORM OF
CONVERTIBLE DEBENTURE

 

12Exhibit
4.2

 

THE DEBENTURES OFFERED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”),
AND HAVE NOT BEEN QUALIFIED UNDER THE SECURITIES LAWS OF ANY OTHER STATE.  THE DEBENTURES CANNOT BE SOLD OR TRANSFERRED
WITHOUT SUCH REGISTRATION OR QUALIFICATION UNLESS AN EXEMPTION FROM SUCH
REGISTRATION OR QUALIFICATION IS THEN AVAILABLE.

 

MEDICOR LTD.

FORM OF 10% CONVERTIBLE DEBENTURE DUE
2006

 

	
  DEBENTURE
  #:

  	
   

  	
  DATE
  OF ISSUANCE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PRINCIPAL
  AMOUNT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  $

  	
   

  	
   

  

 

FOR VALUE RECEIVED,
the undersigned, MEDICOR LTD., a
Delaware corporation (the “Company”)
promises to pay to the order of
                                                 
(the “Holder”), as
defined in the MediCor Investment Agreement for 10% Convertible Debentures due
2006 dated as of the Date of Issuance set forth above between the Company and
the Holder and hereby incorporated herein by this reference (the “Agreement”), or order, at Holder's
address as designated on the signature page of the Agreement, or at such other
address as the Holder designates, the entire outstanding principal amount of
this Debenture or to issue to the Holder the Debenture Securities at the price
and on the terms and conditions set forth in the Agreement, at the Holder's
option, upon on conversion of this Debenture.

 

1.         PAYMENTS
AND INTEREST.     The
outstanding principal amount of this Debenture shall bear interest at a rate of
Ten Percent (10%) per annum, for as long as the Debenture is outstanding.
Interest shall be paid to the Holder by the Company on a quarterly basis,
payable within thirty (30) days from the end of each calendar quarter. If the
Holder converts this Debenture into the Debenture Securities or elects to have
the outstanding principal amount of this Debenture repaid to the Holder as
described in Section 2 of the Agreement, the Company will pay any accrued and
unpaid interest, pro-rated to the Conversion Date (or the effective date of any
exercise of the Institutional Conversion Right) on the basis of a 365 day year,
due the Holder and no further interest past the

 

MEDICOR
LTD.

10% Convertible Debenture
due 2006#    

 

1

 

Conversion Date (or the
effective date of any exercise of the Institutional Conversion Right) will be
due to the Holder by the Company with respect to the principal amount of this
Debenture so converted. This Debenture is payable only by the either: (i) the
payment to the Holder by the Company of the outstanding principal amount of
this Debenture; or (ii) by the issuance by the Company of the Debenture
Securities, with the exception of any fractional shares which may be issuable
hereunder, which will be paid in cash by the Company.

 

2.         SECURITY.     This
Debenture is an unsecured obligation of the Company.

 

3.         SEVERABILITY.     If
any provision of this Debenture is invalid by operation of any law or
interpretation placed thereon by any court, this Debenture shall be construed
as not containing such provision and all other provisions of this Debenture
which are otherwise lawful shall remain in full force and effect, and to this
end the provisions of this Debenture are declared to be severable.

 

4.         GOVERNING
LAW.     THIS DEBENTURE AND ALL AMENDMENTS,
SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 
EACH PARTY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE
COURTS SITTING IN THE STATE OF DELAWARE AND AGREES AND CONSENTS THAT SERVICE OF
PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDINGS RELATING HERETO BY ANY
MEANS ALLOWED UNDER DELAWARE LAW.

 

5.         ASSIGNMENT.     With
respect to any offer, sale or other disposition of this Debenture, the Holder
will give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of Holder's counsel in form and
substance acceptable to the Company, to the effect that such offer, sale or
other distribution may be effected without registration or qualification (under
any federal or state law then in effect). 
Promptly upon receiving such written notice, the Company shall notify
such Holder whether such Holder may sell or otherwise dispose of this
Debenture, all in accordance with the terms of the notice delivered to the
Company.

 

6.         FORBEARANCE
NOT A WAIVER.     No delay or
omission on the part of the Holder in exercising any rights under this
Debenture or under the Agreement as defined herein, on default by the Company,
shall operate as a waiver of such right or of any other right under this
Debenture, for the same default or any other default.

 

7.         MANNER
OF NOTIFICATION.     Any notice
or surrender to the Company provided for in this Debenture shall be given by
personal delivery or by mailing such notice or making such surrender by first
class or certified mail, return receipt requested, addressed to the Company at
the property address stated below, or to such other address as the Company may
designate for such purpose by written notice to the Holder.  Any notice to the Holder shall be given by
personal delivery or by mailing such notice by first class or certified mail,
return receipt requested, to the Holder at the address stated on the signature
page of the Agreement, or at such other address as may have been designated the
Holder by written notice to the Company. 
Mailed notices shall be deemed delivered and received on the delivery
date as shown on the postal return receipt or the receipt furnished by an
independent

 

2

 

courier service, and any
notices transmitted by confirmed facsimile transmission will be deemed
delivered and received as of the date of the transmission.

 

8.         CONVERSION
RIGHTS OF HOLDER.

 

8.1       Institutional
Conversion Right. As soon as practicable but in any event
not less than five (5) business days prior to the proposed closing date of the
Institutional Offering (as defined in the Agreement), the Company shall give
notice to the Holder of the proposed terms and closing date of the
Institutional Offering.  Not less than
two (2) business days prior to the scheduled closing date of the Institutional
Offering, the Holder shall, if it elects to exercise the Institutional
Conversion Right, give notice thereof to the Company of the Holder's election
to convert the Convertible Debenture. The Holder may elect to convert all or
part (but in any event in integral multiples of $100,000 of this Debenture)
into a like amount of the securities offered in the Institutional Offering.  If the Holder so elects to convert all or
part of this Debenture, then, subject to and with the consent of the
Institutional Investors, this Debenture (based on the outstanding principal
amount) shall be converted into the securities sold to the Institutional
Investors in the Institutional Offering. 
If more than one security is sold in the Institutional Offering, then
the Holder may, subject to and with the consent of the Institutional Investors,
convert this Debenture (in integral multiples of $100,000) into each such
security.  If the Institutional
Investors do not consent to such conversion (or part thereof), then this
Debenture (or part hereof) as to which consent is not given shall not be
converted and shall remain outstanding. 
If the Holder does not so notify the Company prior to the second
business day prior to the closing date of the Institutional Offering, then this
Debenture will not be converted and will continue to be outstanding.

 

8.2       Extended
Conversion Right.  In the sole discretion of
the Holder, not more than twenty (20) business days nor less than ten (10)
business days prior to the first anniversary of the Date of Issuance set forth
above or thereafter at the 18-month, 24-month, 30-month and 36-month
anniversary of the Date of Issuance, the Holder may elect to: (a) have the
entire outstanding principal amount of this Debenture repaid to the Holder,
along with any accrued and unpaid interest thereon; (b) covert the entire
outstanding principal amount of this Debenture into the Debenture Shares at the
Conversion Price; or (c) continue to hold the Convertible Debenture until the
third anniversary of the Date of Issuance (the “Maturity Date”).  If
the Holder does not so notify the Company prior to the first anniversary of the
Date of Issuance or thereafter at the 18-month, 24-month, 30-month or 36-month
anniversary of the Date of Issuance, this Debenture will remain
outstanding.  If the Holder does not so
notify the Company prior to the Maturity Date, this Debenture will
automatically convert into the Debenture Shares at the Conversion Price and,
upon such conversion, any and all obligations of the Company to the Holder in
respect of this Debenture shall be satisfied.

 

8.3       Conversion
Procedure; Notice of Conversion.    Before
the Holder shall be entitled to convert this Debenture into the Debenture
Securities, the Holder shall surrender this Debenture to the Company at the
address of the Company provided for such purpose pursuant to Section 7 and
shall give written notice by mail, postage prepaid, to the Company, of the
election to convert the same, all as described in the Agreement and in Section
8 hereof.  The Company shall, as soon as
practicable thereafter, issue and deliver to the Holder pursuant to Section 8.4
a certificate or certificates for the Debenture Securities to which the Holder
shall be entitled as aforesaid (bearing such legends as are required by
applicable state and federal securities laws in the opinion of counsel to the
Company), including a check payable to the Holder for any cash amounts payable
as described in Section 8.4. Such

 

3

 

conversion shall be
deemed to have been made immediately prior to the close of business on the
Conversion Date as defined in Section 1 of the Agreement (or the effective date
of any exercise of the Institutional Conversion Right), and the Holder shall be
treated for all purposes as the record holder or holders of the Conversion
Securities issuable on conversion as of such date.

 

8.4       Mechanics
and Effect of Conversion.  No fractional
Conversion Securities shall be issued upon conversion of this Debenture.  In lieu of the Company issuing any
fractional securities to the Holder upon the conversion of this Debenture, the
Company shall pay to the Holder the amount of outstanding principal that is not
so converted because of a fractional share, such payment to be in the form as
provided below.  Upon the conversion of
this Debenture pursuant to Section 8, the Holder shall surrender this
Debenture, duly endorsed, at the Company's address provided for such purpose
pursuant to Section 7.  At is expense,
the Company shall, as soon as practicable thereafter, issue and deliver to such
Holder by mail a certificate or certificates for the number of whole Debenture
Securities to which the Holder shall be entitled upon such conversion (bearing
such legends as are required by applicable state and federal securities laws in
the opinion of counsel to the Company). 
Upon conversion of this Debenture or repayment of the entire principal
amount of this Debenture to the Holder, the Company shall be forever released
from all of its obligations and liabilities under this Debenture and under the
Agreement.

 

9.         HEADING;
REFERENCES.       All
headings used herein are used for convenience only and shall not be used to
construe or interpret this Debenture. 
Except where otherwise indicated, all references herein to Sections
refer to the numbered and lettered sections hereof.

 

IN WITNESS WHEREOF, the undersigned has caused this
Debenture to be signed by its duly authorized officer.

 

	
   

  	
  THE
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  MEDICOR
  LTD.

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
    

  	
  Its:

  	
  Chairman

  
	
   

  	
   

  
	
   

  	
  Address
  for Notices:

  
	
   

  	
   

  
	
   

  	
  4560
  South Decatur Boulevard

  
	
   

  	
  Suite
  300

  
	
   

  	
  Las
  Vegas, NV 89103-5253

  

 

4

 

NOTICE OF CONVERSION

 

(To be signed only upon Conversion of
Debenture)

 

TO:        MEDICOR
LTD.

4560 South Decatur Boulevard

Suite 300

Las Vegas, NV 89103-5253

 

The undersigned, the Holder of the foregoing 10%
Convertible Debenture due 2006, hereby surrenders such Debenture for conversion
into the Conversion Securities issuable upon conversion thereof in accordance
with the terms thereof and of the Agreement (as defined therein), to the extent
of the outstanding principal amount of the Debenture set forth below (in
integral multiples of $100,000), and requests that the certificates for such
securities be issued in the name of, and delivered to:

 

	
   

  
	
  whose address
  is:

  
	
   

  
	
   

  

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signed:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature must
  conform in all respects to the name of

  the Holder as specified on the face of the Debenture)

  

 

	
  Principal Amount
  Converted:

  	
   

  
	
   

  	
   

  
	
  $

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  

 

5

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