Document:

fs1a2ex4i_internalfix.htm

Exhibit 4.1

Below is a list of the individuals that have signed note in Exhibit 4.1 along with the date the note was issued and the amount.

 

 

	
Name

	
Last Name

	
Note Amount

	
Date issued

	
Alberto

	
Cattabriga

	
20,000

	
2/3/2010

	
Alfred

	
Damus

	
10,000

	
2/3/2010

	
George

	
Ghawi

	
2,000

	
2/3/2010

	
Ken

	
West

	
25,000

	
3/10/2010

	
Brian

	
Levy

	
3,000

	
3/22/2010

	
Mario

	
Rivera

	
5,500

	
3/22/2010

	
Ricardo

	
Rivero

	
9,000

	
3/22/2010

	
Norman

	
Williams

	
5,000

	
3/22/2010

	
Armando

	
Cortina

	
5,000

	
3/25/2010

	
Glen

	
Falk

	
5,000

	
3/25/2010

	
Bill

	
Mills

	
5,000

	
3/25/2010

	
Norman

	
Wass

	
2,500

	
3/25/2010

	
Jon

	
Grossman

	
2,500

	
3/31/2010

	
Richard

	
Cole

	
50,000

	
4/1/2010

	
Henry

	
Amundson

	
5,000

	
4/5/2010

	
Mark

	
Bromson

	
100,000

	
4/5/2010

	
Carlos

	
Cruz

	
1,000

	
4/5/2010

	
Scott

	
Solomon

	
2,500

	
4/5/2010

	
Hugh

	
Quinn

	
75,000

	
4/6/2010

	
Jason

	
Becht

	
1,500

	
4/8/2010

	
Frank

	
Butaric

	
2,000

	
4/8/2010

	
George

	
Kolettis

	
100,000

	
4/8/2010

	
Christopher

	
Lopez

	
3,000

	
4/8/2010

	
Gilbert

	
Beauperthuy

	
30,000

	
4/14/2010

	
Robert

	
Dunne

	
50,000

	
4/14/2010

	
Stephan

	
Bess

	
25,000

	
4/15/2010

	
Lawrence

	
May

	
60,000

	
7/1/2010

	
Robert

	
Selner

	
40,000

	
7/6/2010

	  	
TOTAL

	
644,500

	  

 

  

  

  

 

PROMISSORY NOTE

 

	$	As of March ___, 2010

 

FOR VALUE RECEIVED, pursuant to this promissory note (this “Note”), the undersigned, Internal Fixation Systems, Inc. (the “Maker”), whose address is 10100 N.W. 116th Way, Suite 18, Miami, Florida 33178 promises to pay to the order of ___________ (the “Payee”), whose address is _____________; in lawful money of the United States of America, the principal sum of ____ THOUSAND AND 00/100 Dollars ($______.__), in accordance with the terms below.

BACKGROUND

The Maker anticipates entering into a Transaction (the “Proposed Transaction”) pursuant to which Maker will become a publicly traded company or a subsidiary of a publicly traded company within the next year after the launch of its new product line. Maker needs additional financing in the form of a Bridge Loan in order to manufacture inventory and purchase the necessary instruments and surgical sets.  This Bridge Loan will be no less than Two Hundred Thousand Dollars and no more than Five Hundred Thousand Dollars in total.  Notwithstanding the immediately preceding sentence, Payee shall have no obligation to lend or advance funds to Maker beyond the principal amount set forth in the initial paragraph of this Note.

1.           PAYMENTS.

 

1.1           PRINCIPAL.  Upon Closing of the Proposed Transaction the principal due hereunder shall be payable to the Payee within Fifteen (15) working days after the Closing Date. If the Proposed Transaction does not occur before November 30, 2010, the Principal and any accrued interest shall be due and payable on December 15, 2010.

 

1.2           INTEREST – Interest will accrue at 9% APR. Interest will be paid and compounded quarterly.

 

1.3           ADDITIONAL CONSIDERATION – As an additional inducement to enter into this Promissory Note, Maker shall issue one (1) share of Maker’s Common Stock for each one dollar ($1.00) of face value of this Promissory Note as described above (the “Shares”).  Maker represents that there are Ten Million shares of Common Stock authorized and Three Million shares outstanding immediately prior to the issuance of this bridge Loan.

 

2.           MANNER OF PAYMENT.  All payments of principal on this Note shall be made by certified or bank check at Payee’s address above, or at such other place in the United States of America as the Payee shall designate to the Maker in writing or by wire transfer of immediately available funds to an account designated by the Payee in writing. If any payment of principal on this Note is due on a day which is not a Business Day, such payment shall be due on the next succeeding Business Day. “Business Day” means any day other than a Saturday, Sunday or legal holiday in the State of Florida.

 

  

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3.           PREPAYMENT.  The Maker may, without premium or penalty, at any time and from time to time, prepay all or any portion of the outstanding principal balance due under this Note.

 

4.           SECURITY INTEREST.  Payment of any principal and interest due under this Note shall be secured by a lien and security interest in all of the current and future, tangible and intangible, assets of the Maker, which lien is and shall be subordinate only to the liens on Maker’s equipment leases.  Maker will, at its expense, execute, deliver, file and record (in such manner and form as Payee may require), or permit Payee to file and record, any financing statements, or any carbon, photographic or other reproduction of a financing statement, any specific assignments or other paper that may be reasonably necessary or desirable, or that Payee may request, in order to create, preserve, perfect or validate any security interest or to enable Payee to exercise and enforce its rights hereunder with respect to any of the collateral described above in this paragraph.  Maker hereby appoints Payee as Maker’s attorney-in-fact to execute in the name and behalf of Maker such additional financing statements as Payee may request.

5.           DEFAULTS.

 

5.1           EVENTS OF DEFAULT.  The occurrence of any one or more of the following events with respect to the Maker shall constitute an event of default hereunder (“Event of Default”):

 

(a)           The failure of Maker to make any payment to Payee due hereunder within three (3) days after such amount is due;

(b)           The failure by Maker to perform any other covenant or obligation of Maker under this Note which is not cured within ten (10) days after written notice thereof by Payee to Maker;

(c)           Any representation and warranty made by Maker in this Note not being materially true and correct on the date of this Note;

(d)           The filing of any petition under the federal Bankruptcy Code or any similar federal or state statute by or against the Maker and such petition is not discharged within ten (10) days after filing;

(e)           The appointment of a receiver for, the making of a general assignment for the benefit of creditors by, or the insolvency of the Maker and any of same is not discharged within ten (10) days after the occurrence thereof; or

(f)           The consummation of either the sale, assignment, transfer or other disposition of any of the issued and outstanding membership interest, voting interests or equity interests of the Maker, if the proceeds received by the Maker up to and including the amount of the outstanding principal under this Note are not paid to Payee within three (3) business days after the consummation of such transaction.

Upon the occurrence and during the continuance of an Event of Default hereunder, the Payee may, by written notice to the Maker, accelerate the indebtedness evidenced by this Note whereupon the outstanding principal amount of this Note shall forthwith become due and payable, without presentation, demand, protest or further notice of any kind, all of which are hereby expressly waived.

 

  

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Upon the occurrence and during the continuance of an Event of Default hereunder, Payee may, at its option, declare all indebtedness secured hereby immediately due and payable without demand or notice of any kind and the same thereupon shall immediately become and be due and payable without demand or notice.  Payee shall have and may exercise from time to time any and all rights and remedies of a secured party under the Uniform Commercial Code and any and all other rights and remedies available to it under any other applicable law, including the right to foreclose the security interest granted by this Note upon any and all collateral securing this Note.  After a default occurs and upon request or demand of Payee, Maker shall, at Maker's expense, assemble the collateral and make it available to the Payee.  Maker shall promptly pay all: (a) costs of Payee of collection of any and all of the indebtedness and enforcement of rights hereunder following an Event of Default, including reasonable attorneys’ fees, paralegal fees, legal expenses and court costs, including such fees, expenses and costs incurred in bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals and any anticipated post-judgment collection services; and (b) reasonable expenses of any necessary repairs to any realty or other property to which any of the collateral may be affixed or be a part other than arising as a result of Payee's negligence or willful misconduct.  Expenses of retaking, holding, preparing for sale, selling, or the like, shall include reasonable costs and attorneys’ fees incurred by Payee to the full extent provided in the preceding sentence.

The failure to exercise the option to accelerate the maturity of this Note or any other right, remedy or recourse available to the Payee upon the occurrence of an Event of Default hereunder shall not constitute a waiver of the right of the Payee to exercise the same at that time or at any subsequent time with respect to such Event of Default or any other Event of Default.  The rights, remedies and recourses of the Payee, as provided in this Note, shall be cumulative and concurrent and may be pursued separately, successively or together.  The acceptance by the Payee of any payment under this Note which is less than the payment in full of all amounts due and payable at the time of such payment shall not (i) constitute a waiver of or impair, reduce, release or extinguish any right, remedy or recourse of the Payee, or nullify any prior exercise of any such right, remedy of recourse, or (ii) impair, reduce, release or extinguish the obligations of any party liable under this Note.

6.   NOTICE BY THE MAKER.  The Maker shall notify the Payee in writing within five (5) days after the occurrence of any Event of Default of which the Maker acquires knowledge.

 

7.   REPRESENTATIONS OF MAKER  The Maker represents that the Maker is in compliance with all laws, the financials provided by Maker to Payee are true and correct, all taxes owed by Maker are paid currently and that there exists no litigation or governmental investigation or proceedings that Maker (or the corporate officer of Maker signing below) is aware of.

 

Company will not pay any officer salaries until after Closing of the Proposed Transaction. Upon Closing of the Proposed Transaction, Company shall elect a Board of Directors who shall decide Compensation of officers and other issues normally handles by a corporate Board of Directors

 

8.   REMEDIES.  Upon the occurrence of an Event of Default hereunder (unless all Events of Default have been cured or waived by the Payee), the Payee may, at its option, (i) by written notice to the Maker, declare the entire unpaid principal balance of this Note, immediately due and payable regardless of any prior forbearance, and (ii) exercise any and all rights and remedies available to it under applicable law, including, without limitation, the right to collect from the Maker all sums due under this Note. The Maker shall pay all reasonable costs and expenses incurred by or on behalf of the Payee in connection with the Payee’s exercise of any or all of its rights and remedies under this Note, including, without limitation, reasonable attorneys’ fees. Upon the occurrence of an Event of Default, interest shall accrue dating back to the original date of this note at 12% per annum.

 

  

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9.   WAIVER.  The rights and remedies of the Payee under this Note shall be cumulative and not alternative.  No waiver by the Payee of any right or remedy under this Note shall be effective unless in a writing signed by the Payee.  Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver of such right, power or privilege and no single or partial exercise of any such right, power or privilege by the Payee will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law, (a) no claim or right of the Payee arising out of this Note can be discharged by the Payee, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing, signed by the Payee; (b) no waiver that may be given by the Payee will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on the Maker will be deemed to be a waiver of any obligation of the Maker or of the right of the Payee to take further action without notice or demand as provided in this Note. The Maker hereby waives presentment, demand, protest and notice of dishonor and protest.

 

10.   NOTICES.  Any notices, consents or other communication required to be sent or given hereunder by any of the parties shall in every case be in writing and shall be deemed properly served if (a) delivered personally, (b) sent by registered or certified mail, in all such cases with first class postage prepaid, return receipt requested, (c) delivered by a nationally recognized overnight courier service, or (d) sent by facsimile transmission to the parties at the addresses set forth in the introductory paragraph of this Note or at such other addresses as may be furnished in writing.

 

11.   SEVERABILITY.  If any provision in this Note is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Note will remain in full force and effect. Any provision of this Note held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

12.   GOVERNING LAW.  This Note will be governed by the laws of the State of Florida without regard to conflicts of laws principles

 

13.   PARTIES IN INTEREST.  This Note shall bind the Maker and its successors and assigns. This Note shall not be assigned or transferred by the Payee without the express prior written consent of the Maker, except by will or, in default thereof, by operation of law, and such consent may not be unreasonably withheld by Maker.

 

14.   SECTION HEADINGS, CONSTRUCTION.  The headings of Sections in this Note are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Note unless otherwise specified.  All words used in this Note will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the words “hereof” and “hereunder” and similar references refer to this Note in its entirety and not to any specific section or subsection hereof.

 

  

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15.   FIRST AMENDED SHAREHOLDER AGREEMENT.  The First Amended Shareholder Agreement shall remain in place only as it pertains to the original shareholders who are signors of the agreement. Upon Closing of the Proposed Transaction, the Shareholder Agreement shall be deemed Void by all of the Parties.

 

16.   DOCUMENTARY STAMPS .  Maker agrees to pay all documentary stamps associated with this Note. Maker shall provide Payee with evidence that Documentary Stamps were paid.

 

IN WITNESS WHEREOF, the Maker has executed and delivered this Note as of the date first stated above.

 

	
INTERNAL FIXATION SYSTEMS:

	
_______________________

	
Signature

	
By: Stephen Dresnick

	
Title: President

	
PAYEE:

_______________________

_______________________

Signature

_______________________

(Social Security Number)

 

 

6fs1a2ex4ii_internalfix.htm

Exhibit 4.2

Below is a list of the individuals who have signed the note in exhibit 4.2 along with the date of the note and the amount.

	
First Name

	
Last Name

	
Date Issued

	 	
Amount

	 
	
Gilbert

	
Beauperthuy

	
11/22/2010

	 	$	30,000	 
	
Henry

	
Amundson

	
12/14/2010

	 	$	5,000	 
	
Mark

	
Bromson

	
12/13/2010

	 	$	100,000	 
	
Frank

	
Butaric

	
12/15/2010

	 	$	2,000	 
	
Alberto

	
Cattabriga

	
11/30/2010

	 	$	20,000	 
	
Richard

	
Cole

	
11/15/2010

	 	$	50,000	 
	
Armando

	
Cortina

	
11/18/2010

	 	$	5,000	 
	
Carlos

	
Cruz

	
11/15/2010

	 	$	1,000	 
	
Alfred

	
Damus

	
11/10/2010

	 	$	10,000	 
	
Robert

	
Dunne

	
12/10/2010

	 	$	50,000	 
	
Glen

	
Falk

	
11/18/2010

	 	$	5,000	 
	
Lawrence

	
May

	
11/22/2010

	 	$	60,000	 
	
Williams

	
Mills

	
12/1/2010

	 	$	5,000	 
	
Quinn

	
Hugh

	
12/5/2010

	 	$	75,000	 
	
Ricardo

	
Rivera

	
12/3/2010

	 	$	5,000	 
	
Allen

	
Selner

	
11/22/2010

	 	$	40,000	 
	
Scott

	
Solomon

	
12/3/2010

	 	$	2,500	 
	
Norman

	
Waas

	
11/12/2010

	 	$	2,500	 
	
Norman

	
Williams

	
11/24/2010

	 	$	5,000	 
	
Kenneth

	
West

	
12/7/2010

	 	$	25,000	 
	  	  	  	 	 	 	 
	  	  	
TOTAL

	 	$	498,000	 

 

  

  

  

 

THIS DEBENTURE AND ANY SHARES ISSUABLE UPON CONVERSION OF THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

 

No. __                                                                  US $_______

INTERNAL FIXATION SYSTEMS , INC.

5% CONVERTIBLE  DEBENTURE DUE DECEMBER 1, 2014

 

THIS DEBENTURE is one of a duly authorized issue of debentures of INTERNAL FIXATION SYSTEMS , INC., a corporation duly organized and existing under the laws of the State of Florida (the “Company”) designated as its 5% Convertible  Debenture Due December 1, 2014 (the “Debentures”).

FOR VALUE RECEIVED, the Company promises to pay to the registered holder hereof (the “Holder”), the principal sum described above, on such date as the Debenture is required or permitted to be repaid as provided hereunder (the “Maturity Date”), and to pay interest, in arrears on the principal sum outstanding from time to time in arrears, on a semi-annual basis June 30 and December 31 of each year, commencing June 2011, at the rate of 5% per annum accruing from the date of initial issuance.  Accrual of interest shall commence on the first such business day to occur after the date hereof until payment in full of the principal sum, together with all accrued and unpaid interest, has been made or duly provided for.  The principal of, and interest on, this Debenture are payable at the option of the Holder in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, at the address last appearing on the Debenture Register of the Company as designated in writing by the Holder from time to time.  The Company will pay the principal of and interest upon this Debenture on the Maturity Date, less any amounts required by law to be deducted, to the registered holder of this Debenture as of the tenth day prior to the Maturity Date and addressed to such holder as the last address appearing on the Debenture Register.  The forwarding of such check shall constitute a payment of principal and interest hereunder and shall satisfy and discharge the liability for principal and interest on this Debenture to the extent of the sum represented by such check plus any amounts so deducted.

This Debenture is subject to the following additional provisions:

1.           The Debentures are issuable in denominations of Ten Thousand Dollars (US $10,000) and integral multiples thereof, except that the Company may at its discretion issue one or more Debentures in different denominations.  This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder.  No service charge will be made for such registration or transfer or exchange.

 

  

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2.           The Company shall be entitled to withhold from all payments of principal of, and interest on, this Debenture any amounts required to be withheld under the applicable provisions of the United States income tax laws or other applicable laws at the time of such payments, and Holder shall execute and deliver all required documentation in connection therewith.

3.           This Debenture has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (the “Act”), and other applicable state and foreign securities laws.  In the event of any proposed transfer of this Debenture, the Company may require, prior to issuance of a new Debenture in the name of such other person, that it receive reasonable transfer documentation including opinions that the issuance of the Debenture in such other name does not and will not cause a violation of the Act or any applicable state or foreign securities laws.   Prior to due presentment for transfer of this Debenture, the Company and any agent of the Company may treat the person in whose name this Debenture is duly registered on the Company’s Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

4.           A.           The Holder is entitled, at its option, to convert at any time the principal amount of this Debenture or a part thereof in excess of $5,000 into shares of Common Stock of the Company at a conversion price for each share of Common Stock equal to a fifteen percent (15%) discount from the volume weighted average daily price for the Common Stock, as reported by Bloomberg L.P., for the ten (10) trading days prior to conversion (the “Conversion Price”). In the event Holder desires to convert the principal amount of this Debenture or a part thereof into shares of Common Stock of the Company prior to the Company’s public listing on a securities market, the Conversion Price shall be fixed at $2 per share.  Conversion shall be effectuated by surrendering the Debentures to be converted to the Company with the form of conversion notice attached hereto as Exhibit A, executed by the Holder of the Debenture evidencing the Holder’s intention to convert this Debenture or a specified portion (as above provided) hereof, and accompanied, if required by the Company, by proper assignment hereof in blank.  Interest (and penalties) accrued or accruing from the date of issuance to the date of conversion shall be paid in cash upon conversion.  No fraction of Shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.  The date on which notice of conversion is given (the “Conversion Date”) shall be deemed to be the date on which the Holder has delivered this Debenture, with the conversion notice duly executed, to the Company or the date set forth in a notice of conversion delivered by facsimile if the Holder delivers the Debenture to the Company within three (3) business days following the Conversion Date stated in that conversion notice.  Facsimile delivery of the conversion notice shall be accepted by the Company at telephone number; Attention: Laura Cattabriga).  Certificates representing Common Stock upon conversion will be delivered within ten (10) business days from the date the notice of conversion with the original Debenture is delivered to the Company.

 

  

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B.           If on any day after the date of this Debenture the Company completes an offering yielding the Company $1 million or more in gross proceeds, or if the Company sells a minimum of $2 million of this debenture, then the Company shall have the right to cause the Holder to convert the entire principal amount of this Debenture in accordance with the terms of Section 4A by delivering to the Holder a notice stating that the Company is exercising its right under this Section 4B. The date given in that notice will, for purposes of Section 4A, constitute the Conversion Date. No later than five (5) days after delivery of that notice, the Holder shall deliver this Debenture to the Company.

C.           The Holder may not convert the Debenture to the extent such conversion would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder) in excess of 4.99% of the then-issued and outstanding share of Company’s common stock during any sixty (60) day period. The Holder has the authority to determine whether the restriction imposed by this section limits a particular conversion. The provisions of this section may be waived by Holder upon not less than sixty (60) days’ prior notice to the Company.

5.           Any time after the first anniversary of the date of this Debenture, the Company may redeem this Debenture for an amount equal to the principal amount plus accrued and unpaid interest.

6.           A.           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 and all other Debentures now or hereafter issued of similar terms are direct obligations of the Company.

B.           During the continuance of any Event of Default, as defined in section 12 hereof, the Company will not declare or pay dividends on, or make any sinking fund payment, redemption or repurchase with respect to, any shares of its capital stock.

7.           No recourse shall be had for the payment of the principal of, or the interest on, this Debenture, or for any claim based hereon, or otherwise in respect hereof, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

8.           If the Company merges or consolidates with another corporation or sells or transfers all or substantially all of its assets to another person and the holders of the Common Stock are entitled to receive stock, securities or property in respect of or in exchange for Common Stock, then as a condition of such merger, consolidation, sale or transfer, the Company and any such successor, purchaser or transferee agree that the Debenture may thereafter be converted on the terms and subject to the conditions set forth above into the kind and amount of stock, securities or property receivable upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common Stock into which this Debenture might have been converted immediately before such merger, consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may be practicable.  In the event of any proposed merger, consolidation or sale or transfer of all or substantially all of the assets of the Company (a “Sale”), the Holder hereof shall have the right to convert by delivering a Notice of Conversion to the Company within fifteen (15) days of receipt of notice of such Sale from the Company.  In the event the Holder hereof shall elect not to convert, the Company may prepay all outstanding principal and accrued interest on this Debenture, less all amounts required by law to be deducted, upon which tender of payment following such notice, the right of conversion shall terminate.

 

  

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9.           The current conversion price shall be adjusted from time to time as follows:

(a)           Except as hereinafter provided, in case the Company shall at any time issue or sell any shares of Common Stock (including shares now or hereafter held in the Company's treasury but excluding (i) any shares of Common Stock issuable upon exercise of options heretofore granted or to be granted to officers, directors, and key employees, (ii) any shares of Common Stock issued by resolution of the Company’s board of directors for services performed, and (iii) shares of Common Stock issued by resolution of the Company’s board of directors in connection with the Company’s acquisition, whether by merger, asset purchase, or otherwise, of assets of an unaffiliated person or entity) for a consideration per share less than the conversion price in effect immediately prior to the issuance or sale of such shares, or without consideration, the current conversion price shall be reduced to a price determined by dividing (i) an amount equal to (a) the total number of shares of Common Stock outstanding immediately prior to such issuance or sale multiplied by the current conversion price, plus (b) the consideration, if any, received by the Company upon such issuance or sale, by (ii) the total number of shares of Common Stock outstanding immediately after the issuance or sale of such shares.  For the purposes of any computation to be made in accordance with the provisions of this subsection (a), the following provisions shall be applicable:

(1)           In case of the issuance or sale of shares of Common Stock for cash, the consideration received by the Company therefor shall be deemed to be the net cash proceeds received by the Company for such shares after deducting any and all commissions or other expenses paid or incurred by the Company for any underwriting of, or otherwise in connection with, the issuance and sale of such shares.

(2)           In case of the issuance or sale (otherwise than upon conversion or exchange of obligations or shares of stock of the Company) of shares of Common Stock for a consideration other than cash, the amount of such consideration received by the Company for such shares shall be deemed to be the value of such consideration less the value attributable to "good will" or similar intangible assets, as determined by the Board of Directors of the Company, with the approval of the Company's regularly employed independent auditors.

(3)           In case of the issuance of additional shares of Common Stock as a dividend, the aggregate number of shares of Common Stock issued in payment of such dividend shall be deemed to have been issued and to be outstanding on the day next succeeding the record date for the determination of stockholders entitled to such dividend and shall be deemed to have been issued without consideration. In the event of a declaration of a dividend by the Company without the fixing of a record date for the determination of stockholders entitled thereto, the first business day during which the stock transfer books of the Company shall be closed for the purpose of such determination shall be deemed to be the record date.

 

  

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(4)           The number of shares of Common Stock at any time outstanding (i) shall not include any shares then held in the Company's treasury, (ii) shall not include any of the common shares which may be issued upon the exercise of options heretofore granted or to be granted to officers, directors, and key employees, but (iii) shall include the aggregate number of shares deliverable in respect of the options, rights and convertible and exchangeable securities referred to in the next succeeding subsection (b) at all times while such options, rights and securities remain outstanding and unexercised, unconverted or unexchangeable, as the case may be.

(5)           No reduction in the conversion price is required unless that reduction would reduce the conversion price by $0.50 or more, except that any reduction that by reason of this Section 9(a)(5) is not required to be made will be carried forward and taken into account in any subsequent reduction that, together with that carried-forward reduction and any other carried-forward reduction, would reduce the conversion price by $0.50 or more.

(b)           In case the Company shall at any time issue options (other than the options to officers, directors, and key employees) or rights to subscribe for shares of Common Stock (including shares now or hereafter held in the Company's treasury), or issue any other securities convertible into or exchangeable for shares of Common Stock, for a consideration per share less than the conversion price in effect immediately prior to the issuance of such options or rights or convertible or exchangeable securities, or without consideration, the current conversion price shall be reduced to a price determined by making a computation in accordance with the provisions of subsection (a) of this Section, provided, that

(i)           the aggregate number of shares of Common Stock deliverable under such options or rights shall be considered to have been delivered at the time such options or rights were issued, and for a consideration equal to the minimum purchase price per share of Common Stock provided for in any such options or rights, plus the consideration, if any, received by the Company for such options or rights;

(ii)           the aggregate maximum number of shares of Common Stock deliverable upon conversion of or exchange for any such securities shall be considered to have been delivered at the time of issuance of such securities, and for a consideration equal to the consideration received by the Company for such securities, after deducting therefrom any or all commissions, or other expenses paid or incurred by the Company for any underwriting of, or otherwise in connection with the issuance and sale of such securities, plus the consideration, if any, to be received by the Company upon exchange or conversion thereof; and

(iii)           on the expiration of such options or rights, or the termination of such right to convert or exchange, the conversion price shall forthwith be readjusted to such conversion price as would have obtained had the adjustment made upon the issuance of such options, rights or convertible or exchangeable securities been made upon the basis of the delivery of only the number of shares of Common Stock actually delivered upon the exercise of such options or rights or upon conversion or exchange of such securities.

 

  

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(c)           In case the Company shall at any time subdivide or combine the outstanding shares of the class of Common Stock issuable upon conversion of the Debentures, the conversion price shall forthwith be proportionately decreased in the case of subdivision or increased in the case of the combination.

(d)           Whenever the conversion price is adjusted as herein provided, the Company shall (i) forthwith deliver to the Holder a statement signed by the President or a Vice President of the Company and by its Treasurer or an Assistant Treasurer showing in detail the facts requiring such adjustment and the conversion price after such adjustment.

10.           The Holder of the Debenture, by acceptance hereof, agrees that this Debenture is being acquired for investment and that the Holder will not offer, sell or otherwise dispose of this Debenture or the Shares of Common Stock issuable upon conversion thereof except under circumstances which will not result in a violation of the Act or any applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities.

11.           This Debenture shall be governed by and construed in accordance with the laws of the State of Florida.  Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the County of Broward or the state courts of the State of Florida sitting in the County of Broward in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions.

12.           The following shall constitute an “Event of Default”:

	
  

	
a.

	
The Company shall default in the payment of principal or interest on this Debenture and such default shall remain unremedied for ten (10) business days after the Company has been notified of the default in writing by a Holder; or

	
  

	
b.

	
The Company fails to issue shares of Common Stock to the Holder or to cause its Transfer Agent to issue shares of Common Stock upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Debenture and any such failure shall continue uncured for ten (10) business days after the Company has been notified of such failure in writing by Holder.

  

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c.

	
The Company shall fail to perform or observe, in any material respect, any other covenant, term, provision, condition, agreement or obligation of the Company under this Debenture and such failure shall continue uncured for a period of thirty (30) days after written notice from the Holder of such failure; or

	
  

	
d.

	
The Company shall (1) make an assignment for the benefit of creditors or commence proceedings for its dissolution or (2) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; or

	
  

	
e.

	
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or

	
  

	
f.

	
Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company and shall not be dismissed within sixty (60) days thereafter; or

	
  

	
g.

	
Any money judgment, writ or warrant of attachment, or similar process in excess of Five Hundred Thousand ($500,000) Dollars in the aggregate shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

	
  

	
h.

	
Bankruptcy, reorganization, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company and, if instituted against the Company, shall not be dismissed within ninety (90) days after such institution or the Company shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations of, or default in answering a petition filed in any such proceeding.

Then, or at any time thereafter, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Debenture immediately due and payable, without presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law.

13.           Nothing contained in this Debenture shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or receive notice as a shareholder in respect of any meeting of shareholders or any rights whatsoever as a shareholder of the Company, unless and to the extent converted in accordance with the terms hereof.

 

  

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized.

Dated: __________, 2010

      

	 	INTERNAL FIXATION SYSTEMS, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	Name:	Stephen Dresnick	 
	 	Title 	President and CEO	 
	 	 	 	 

	 	HOLDER	 
	 	 	 	 
	 	
By: 

	/s/ 	 
	 	Name: 	 	 
	 	 	 	 
	 	 	 	 

 

 

  

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EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert the Debenture)

 

The undersigned hereby irrevocably elects to convert $ ________________ of the principal amount of the above Debenture No. ___ into shares of Common Stock of INTERNAL FIXATION SYSTEMS , INC. (the “Company”) according to the conditions hereof, as of the date written below.  In converting the Debenture No. ______________, the undersigned hereby confirms and acknowledges that the shares of Common Stock are being acquired solely for the account of the undersigned and not a nominee for any other party, and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock, except under circumstances that will not result in a violation of the Securities Act of 1933, as amended.

Conversion Date*:                                           

Applicable Conversion Price:                                                      

Signature:                                           

Printed Name:                                                      

Address:                                           

 

* If this notice of conversion is delivered to the Company by facsimile, the Holder must deliver the original Debenture to the Company by the third business date following the Conversion Date.

  

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