NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
$2,500,000
▇▇▇▇▇▇▇▇▇.▇▇▇
6% CONVERTIBLE AND EXCHANGEABLE DEBENTURE
DUE SEPTEMBER 15, 2002
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of ▇▇▇▇▇▇▇▇▇.▇▇▇, a Nevada corporation, having a principal place of
business at ▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"COMPANY"), designated as its 6% Convertible and Exchangeable Debentures, due
September 15, 2002, in the aggregate principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000) (subject to increase in accordance with
Section 15 hereof) (the "DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to Cortlandt Investors
LLC or its registered assigns (the "HOLDER"), the principal sum of Two Million
Five Hundred Thousand Dollars ($2,500,000) (subject to increase in accordance
with Section 15 hereof), on September 15, 2002 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"MATURITY DATE") and to pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 6% per
annum, payable on each Conversion Date (as defined herein), on the Exchange Date
(as defined in the Purchase Agreement, which is defined in Section 6) and on the
Maturity Date in cash or shares of Common Stock (as defined in Section 6).
Subject to the terms and conditions herein, the decision whether to pay interest
hereunder in shares of Common Stock or cash shall be at the discretion of the
Company. Not less than ten Trading Days (as defined in Section 6) prior to each
Conversion Date, the Company shall provide the Holder with written notice of its
election to pay interest hereunder in cash or in shares of Common Stock pursuant
to the terms of Section 4(a)(i) (the Company may indicate in such notice that
the election contained in such notice shall continue for later periods until
revised). Failure to timely provide such written notice shall be deemed an
election by the Company to pay the interest on such Conversion Date in shares of
Common Stock pursuant to the terms of Section 4(a)(i). If interest is paid by
the Company in shares of its Common Stock, then the number of shares of Common
Stock issuable on account of such interest shall equal the cash amount of such
interest on such Conversion Date divided by the Conversion Price (as defined
below) on such date. Interest shall be calculated on the basis on a 360-day year
and shall accrue daily commencing on the Original Issue Date (as defined in
Section 6) until payment in full of the principal sum, together with all accrued
and unpaid interest and other amounts which may become due hereunder, has been
made. Interest hereunder will be paid to the Person (as defined in Section 6) in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of Debentures (the "DEBENTURE REGISTER"). All overdue
accrued and unpaid interest to be paid in cash hereunder shall entail a late fee
at the rate of 18% per annum (or such lower maximum amount of interest permitted
to be charged under applicable law) ("LATE FEE") (to accrue daily, from the date
such interest is due hereunder through and including the date of payment),
payable in cash. If such Late Fee is paid by the Company in shares of its Common
Stock, then the number of shares of Common Stock issuable on account of such
Late Fee shall equal the cash amount of such Late Fee on such Late Fee payment
date divided by the Conversion Price on such date.
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 6) and may be transferred or exchanged only in compliance
with the Purchase Agreement. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the Person (as defined in Section 6) in whose name this Debenture is duly
registered on the 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 is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of,
interest on or liquidated damages in respect of, any Debentures, free of
any claim of subordination, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) and such failure or breach shall not have
been remedied within five days after the date on which notice of such
failure or breach shall have been given;
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(ii) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit
any material breach of any of the Transaction Documents (as defined in
Section 6), and such failure or breach shall not have been remedied
within five days after the date on which notice of such failure or
breach shall have been given;
(iii) the Company or any of its subsidiaries shall
commence, or there shall be commenced against the Company or any such
subsidiary a case under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter
in effect relating to the Company or any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed for
a period of 60 days; or the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company or any
subsidiary thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company or any
subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary thereof shall call a
meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act expressly indicate
its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any subsidiary
thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations
under any other Debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount
exceeding $500,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable;
(v) the Common Stock shall not be eligible for quotation
on and quoted for trading on the OTC Bulletin Board ("OTC') or listed
for trading on the New York Stock Exchange, American Stock Exchange,
Nasdaq National Market or the Nasdaq SmallCap Market (each, a
"SUBSEQUENT MARKET") for an aggregate of five (5) Trading Days (which
need not be consecutive Trading Days);
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(vi) the Company shall be a party to any Change of Control
Transaction (as defined in Section 6), shall agree to sell or dispose
all or in excess of 33% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction), or shall redeem or repurchase more than a de minimis
number of shares of Common Stock or other equity securities of the
Company (other than redemptions of Underlying Shares (as defined in
Section 6));
(vii) an Underlying Shares Registration Statement (as
defined in Section 6) shall not have been declared effective by the
Commission (as defined in Section 6) on or prior to the 135th day after
the Original Issue Date;
(viii) if, during the Effectiveness Period (as defined in
the Registration Rights Agreement (as defined in Section 6)), the
effectiveness of the Underlying Shares Registration Statement lapses for
any reason or the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Underlying Shares Registration Statement, in either case, for more than
60 consecutive days or an aggregate of 120 days in any 360 day period
(provided, that the same event may not be used in consecutive 60 day
periods during any 360 period);
(ix) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holder
prior to the expiration of thirty days from the Event Date (as defined
in the Registration Rights Agreement) relating thereto (other than an
Event resulting from a failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to the
135th day after the Original Issue Date, which shall be covered by
Section 3(a)(vii));
(x) the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(b) or the
Company shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with requests
for conversions of any Debentures in accordance with the terms hereof;
(xi) the Company shall fail for any reason to deliver the
payment in cash pursuant to a Buy-In (as defined herein) within five
days after notice is deemed delivered hereunder.
(xii) GCAP shall fail to deliver executed GCAP Exchange
Documents (as defined in the Purchase Agreement) by the Exchange Date following
any exercise by a Holder of its Exchange Right (as defined in the Purchase
Agreement).
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the
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▇▇▇▇▇▇'s election, immediately due and payable in cash, PROVIDED HOWEVER, that
if the Company fails to pay the amounts due as a result of an Event of Default
by the seventh Trading Day following the declaration of an Event of Default in
cash, the Holder may request payment of such amounts in stock, determined by
reference to the Conversion Price then in effect. The number of shares of Common
Stock issuable in payment thereof shall be determined by dividing the aggregate
amount due to the Holder by the Conversion Price. The aggregate amount payable
upon an Event of Default shall be equal to the sum of (i) the Mandatory
Prepayment Amount (as defined in Section 6) plus (ii) the product of (A) the
number of Underlying Shares issued in respect of conversions hereunder not more
than thirty days prior to the date of a declaration of an Event of Default and
then held by the Holder and (B) the Closing Price (as defined in Section 6) on
the date prepayment is due or the date the full prepayment price is paid,
whichever is greater. Interest shall accrue on the prepayment amount hereunder
from the seventh day after such amount is due (being the date of an Event of
Default) through the date of prepayment in full thereof at the rate of 18% per
annum (or such lesser maximum amount that is permitted to be paid by applicable
law), to accrue daily from the date such payment is due hereunder through and
including the date of payment. All Debentures and Underlying Shares for which
the full prepayment price hereunder shall have been paid in accordance herewith
shall promptly be surrendered to or as directed by the Company. The Holder need
not provide and the Company hereby waives any presentment, demand, protest or
other notice of any kind, and the Holder may immediately and without expiration
of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by ▇▇▇▇▇▇ at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
SECTION 4. CONVERSION.
(a) (i) CONVERSION AT OPTION OF HOLDER. This Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any time and from time to time, after the Original Issue Date
(subject to the limitations on conversion set forth in Section 4(a)(iv) hereof).
The Holder shall effect conversions at its option by delivering to the Company
the form of conversion notice attached hereto as EXHIBIT A (a "CONVERSION
NOTICE"), specifying therein the principal amount of Debentures to be converted
and the date on which such conversion is to be effected, which date may not be
prior to the date such Conversion Notice is deemed to have been delivered
hereunder (a "CONVERSION DATE") and shall contain a schedule in the form of
SCHEDULE 1 to the Conversion Notice (as amended on each Conversion Date, the
"CONVERSION SCHEDULE") reflecting the remaining principal amount of this
Debenture and all accrued and unpaid interest thereon subsequent to the
conversion at issue. If no Conversion Date is specified in a Conversion Notice,
the Conversion Date shall be the date that such Conversion Notice is deemed
delivered hereunder. Subject to Section 4(b), each Conversion Notice, once
given, shall be irrevocable. To effect conversions hereunder, the Holder shall
not be required to physically surrender this Debenture to the Company unless the
aggregate principal amount of this Debenture is so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Debenture plus all accrued and unpaid interest thereon in an amount equal
to the applicable conversion, which shall be evidenced by entries set forth in
-5-
the Conversion Schedule. The Holder and the Company shall maintain records
showing the principal amount converted and the date of such conversions. In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The Holder and
any assignee, by acceptance of this Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of a portion of
this Debenture, the unpaid and unconverted principal amount of this Debenture
may be less than the amount stated on the face hereof.
(B) Notwithstanding anything to the contrary contained
herein, if on any Conversion Date:
(1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as
treasury stock, is insufficient to pay interest hereunder in shares of
Common Stock;
(2) after the Interest Effectiveness Date (as defined in
Section 6) such shares of Common Stock (x) are not registered for resale
pursuant to an effective Underlying Shares Registration Statement and
(y) may not be sold without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (as defined in Section 6);
(3) the Common Stock is not listed or quoted for trading
on the OTC or on a Subsequent Market;
(4) the Company has failed to timely satisfy its
conversion obligations hereunder; or
(5) the issuance of such shares of Common Stock would
result in a violation of Section 4(a)(ii),
then, at the option of the Holder, the Company, in lieu of
delivering shares of Common Stock pursuant to Section 4(a)(i)(A)(ii), shall
deliver, within three Trading Days of each applicable Conversion Date, an amount
in cash equal to the sum of (a) the outstanding principal amount of the
Debentures to be converted on such Conversion Date and (b) the product of (x)
the quotient obtained by dividing .06 by 360 and (y) the number of days for
which such principal amount was outstanding.
(ii) NUMBER OF UNDERLYING SHARES ISSUABLE UPON CONVERSION.
The number of shares of Common Stock issuable upon a conversion
hereunder shall be determined by adding the sum of (i) the quotient obtained by
dividing (x) the outstanding principal amount of this Debenture to be converted
and (y) the Conversion Price (as defined herein), and (ii) the amount equal to
(I) the product of (x) the outstanding principal amount of this Debenture to be
converted and (y) the product of (1) the quotient obtained by dividing .06 by
360 and (2) the number of days for which such principal amount was outstanding,
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divided by (II) the Conversion Price, PROVIDED, that if the Company shall have
elected to pay the interest due on a Conversion Date in cash pursuant to the
terms hereof, subsection (ii) shall not be used in the calculation of the number
of shares of Common Stock issuable upon a conversion hereunder.
(iii) CERTAIN CONVERSION RESTRICTIONS.
(A) A Holder may not convert Debentures or receive
shares of Common Stock as payment of interest hereunder to the extent such
conversion or receipt of such interest payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 4.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
interest on, the Debentures held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Company the
number of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the issuance of shares
of Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Debentures
that, without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 61 days prior notice to the Company. Other Holders
shall be unaffected by any such waiver.
(B) A Holder may not convert Debentures or receive
shares of Common Stock as payment of interest hereunder to the extent such
conversion or receipt of such interest payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
interest on, the Debentures held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Company the
number of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
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obligation to determine whether the restriction contained in this Section will
limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Debentures
that, without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 61 days prior notice to the Company. Other Holders
shall be unaffected by any such waiver.
(b) (i) Not later than three Trading Days after any Conversion
Date, the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by the Purchase Agreement) representing the number of shares of
Common Stock being acquired upon the conversion of Debentures and (ii) a bank
check in the amount of accrued and unpaid interest (if the Company has timely
elected or is required to pay accrued interest in cash). The Company shall, upon
request of the Holder, if available, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case of
any Conversion Notice such certificate or certificates are not delivered to or
as directed by the applicable Holder by the third Trading Day after a Conversion
Date, the Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the principal amount of Debentures tendered for
conversion.
(ii) If the Company fails to deliver to the Holder
such certificate or certificates pursuant to Section 4(b)(i) by the third
Trading Day after the Conversion Date, the Company shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, $3,000 for each Trading Day
after such third Trading Day until such certificates are delivered. Nothing
herein shall limit a ▇▇▇▇▇▇'s right to pursue actual damages or declare an Event
of Default pursuant to Section 3 herein for the Company's failure to deliver
certificates representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holders from seeking to enforce damages
pursuant to any other Section hereof or under applicable law. Further, if the
Company shall not have delivered any cash due in respect of conversions of
Debentures or as payment of interest thereon by the third Trading Day after the
Conversion Date, the Holder may, by notice to the Company, require the Company
to issue shares of Common Stock pursuant to Section 4(c), except that for such
purpose the Conversion Price applicable thereto shall be the lesser of the
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Conversion Price on the Conversion Date and the Conversion Price on the date of
such Holder demand. Any such shares will be subject to the provision of this
Section.
(iii) In addition to any other rights available to
the Holder, if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 4(b)(i) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder purchases (in an
open market transaction or otherwise) Common Stock to deliver in satisfaction of
a sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "BUY-IN"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue Debentures in
principal amount equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery requirements under
Section 4(b)(i). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.
(c) (i) The conversion price (the "CONVERSION PRICE") in effect
on any Conversion Date shall be the lesser of (1) $4.00 (the "INITIAL CONVERSION
PRICE"), and (2) 80% of the average of the lowest three Per Share Market Values
(which need not occur on consecutive Trading Days) during the thirty Trading
Days immediately preceding the applicable Conversion Date (which may include
Trading Days prior to the Original Issue Date), PROVIDED, that such thirty
Trading Day period shall, at the option of the Holder, be extended for the
number of Trading Days during such period in which (A) trading in the Common
Stock is suspended on the OTC or a Subsequent Market on which the Common Stock
is then listed, or (B) after the Effectiveness Date (as defined in the
Registration Rights Agreement), the Underlying Shares Registration Statement is
either not effective or the Prospectus included in the Underlying Shares
Registration Statement may not be used by the Holder for the resale of
Underlying Shares.
(ii) If the Company, at any time while any
Debentures are outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
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(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then the Initial
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any
Debentures are outstanding, shall issue rights, options or warrants to all
holders of Common Stock (and not to Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Per Share
Market Value at the record date mentioned below, then the Conversion Price shall
be multiplied by a fraction, of which the denominator shall be the number of
shares of the Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of the Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. However, upon
the expiration of any such right, option or warrant to purchase shares of the
Common Stock the issuance of which resulted in an adjustment in the Conversion
Price pursuant to this Section, if any such right, option or warrant shall
expire and shall not have been exercised, the Conversion Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Conversion Price made pursuant to the provisions of
this Section after the issuance of such rights or warrants) had the adjustment
of the Conversion Price made upon the issuance of such rights, options or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such rights, options or warrants actually exercised.
(iv) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while Debentures are outstanding, shall issue shares of Common Stock or
rights, warrants (including those issued under the Purchase Agreement), options
or other securities or debt that is convertible into or exchangeable for shares
of Common Stock ("COMMON STOCK EQUIVALENTS") entitling any Person to acquire
shares of Common Stock, at a price per share less than the Conversion Price (if
the holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
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warrants, options or rights issued in connection with such issuance, be entitled
to receive shares of Common Stock at a price less than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion
Price), then, at the option of the Holder, the Conversion Price shall be
replaced with the conversion, exchange or purchase price for such Common Stock
or Common Stock Equivalents (including any reset provisions thereof) for all
subsequent conversions of Debentures or such conversions as shall be indicated
by the Holder on its Conversion Notice. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalent subject to this Section
(including any issuances contemplated below in this Section), indicating therein
the applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. Notwithstanding the foregoing, the
Conversion Price will not be adjusted as set forth above in this Section
4(c)(iv) for issuances of Common Stock or Common Stock Equivalents by the
Company pursuant to a financing, Strategic Transaction (as defined in the
Purchase Agreement) or granting of stock options or warrants to employees,
officers or directors of the Company (or the issuance of Common Stock upon
exercise of such options or warrants) if such shares of Common Stock or Common
Stock Equivalents are offered and issued at a price per share that is above
$3.00 (subject to equitable adjustment for stock splits and reverse stock
splits), PROVIDED, that (i) such shares are not at any time entitled to any
reset, repricing, additional issuance or other purchase price adjustment or
other purchase price protection (whether contractually or through one or more
ancillary securities such as a repricing warrant or purchase right) that could
result in the issuance of Common Stock at a price per share of less than $3.00
(as adjusted for stock splits and reverse stock splits), and (ii) such shares
carry no registration rights and will not be registered prior to the second
anniversary of the issuance of such share; but will instead be adjusted by a
"weighted-average" formula in which event, at the option of the Holder the
Conversion Price for all subsequent conversions of Debentures or such
conversions as shall be indicated by the Holder on its Conversion Notice shall
be reduced to the price (calculated to the nearest cent) determined by
multiplying the Conversion Price in effect immediately prior to each such
issuance of Common Stock or Common Stock Equivalents by a fraction, the
numerator of which shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such Common
Stock or Common Stock Equivalents plus the number of additional shares of Common
Stock offered for subscription or purchase or issuable in connection with such
Common Stock Equivalents, and of which the denominator shall be the number of
shares of the Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such Common Stock or Common Stock Equivalents plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at Per Share Market Value on the date of
issuance of such Common Stock or Common Stock Equivalents. In no event, however,
shall the Company issue Common Stock or Common Stock Equivalents at a price per
share (including in the case of Common Stock Equivalents, which entitle to the
holder thereof to receive shares of Common Stock at a price at any time over the
life of such Common Stock Equivalent) that is less than $3.00 (subject to
equitable adjustment for stock splits and reverse stock splits) without the
prior written consent of the Holders.
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(v) If the Company, at any time while Debentures
are outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Conversion
Price at which Debentures shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Per Share Market Value
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holders shall have the
right thereafter to, at their option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) All calculations under this Section 4 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be. No adjustments in either the Conversion Price or the Initial Conversion
Price shall be required if such adjustment is less than $0.01, PROVIDED,
however, that any adjustments which by reason of this Section are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment.
(viii) Whenever either the Initial Conversion Price
or the Conversion Price is adjusted pursuant to any of Section 4(c)(ii) - (v),
the Company shall promptly mail to each Holder a notice setting forth the
Initial Conversion Price or Conversion Price (as applicable) after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
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(ix) If (A) the Company shall declare a dividend
(or any other distribution) on the Common Stock; (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock; (C)
the Company shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, PROVIDED, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
(x) In case of any (1) merger or consolidation of
the Company with or into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, a Holder shall have the right to (A) if permitted under
Section 3(b) hereof, exercise its rights of prepayment under Section 3(b) with
respect to such event, (B) convert its aggregate principal amount of Debentures
then outstanding into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of Debentures could have been converted immediately
prior to such merger, consolidation or sales would have been entitled, or (C) in
the case of a merger or consolidation, (x) require the surviving entity to issue
convertible debentures in an aggregate principal amount equal to the aggregate
principal amount of Debentures then held by such Holder, plus all accrued and
unpaid interest and other amounts owing thereon, which newly issued convertible
debentures shall have terms identical (including with respect to conversion) to
the terms of this Debenture and shall be entitled to all of the rights and
privileges of a Holder of Debentures set forth herein and the agreements
pursuant to which the Debentures were issued (including, without limitation, as
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such rights relate to the acquisition, transferability, registration and listing
of such shares of stock other securities issuable upon conversion thereof), and
(y) simultaneously with the issuance of such convertible debentures, shall have
the right to convert such instrument only into shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger or consolidation. In the case of clause (C),
the conversion price applicable for the newly issued convertible debentures
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Conversion Price in
effect immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale or consolidation shall include
such terms so as to continue to give the Holders the right to receive the
securities, cash and property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly apply to
successive such events.
(d) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the Holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(e) The issuance of certificates for shares of the Common Stock
on conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(f) Any and all notices or other communications or deliveries to
be provided by the Holders hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to the Company, at ▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Facsimile No.:
(▇▇▇)-▇▇▇-▇▇▇▇, attention ▇▇▇▇▇ ▇▇▇▇▇▇, or such other address or facsimile
number as the Company may specify for such purposes by notice to the Holders
delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail, postage
prepaid, addressed to each Holder at the facsimile telephone number or address
of such Holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of the
Holder. Any notice or other communication or deliveries hereunder shall be
-14-
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 6:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) four days
after deposit in the United States mail, (iv) the Business Day following the
date of mailing, if sent by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to be
given.
SECTION 5. OPTIONAL PREPAYMENT.
(a) Prior to 5:00 p.m. (New York City time) on January 15, 2000,
the Company shall have the right, exercisable from time to time upon five
Trading Days' prior written notice to the affected Holders (an "OPTIONAL
PREPAYMENT NOTICE"), to prepay all or any portion of the outstanding principal
amount of the Debentures for which Conversion Notices have not previously been
delivered. The prepayment price applicable to prepayments under this Section
5(a) shall equal the Prepayment Amount and shall be paid in cash on the seventh
Trading Day following the date that the Company first delivered the Optional
Prepayment Notice (the "OPTIONAL PREPAYMENT DATE"). Any such prepayment shall be
free of any claim of subordination. The Holders shall have the right to tender,
and the Company shall honor, Conversion Notices delivered prior to the
expiration of the fifth Trading Day after delivery of an Optional Prepayment
Notice for such Debentures.
(b) If any portion of the Prepayment Amount shall not be paid by
the Company by the expiration of the Optional Prepayment Date, the Company may
not again exercise any right of prepayment under this Section. In addition, the
Prepayment Amount shall be increased by 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to accrue daily from the
date such interest is due hereunder through and including the date of payment
(which amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the Prepayment Amount remains unpaid through the
expiration of the Optional Prepayment Date, the Holder subject to such
prepayment may elect by written notice to the Company to either (x) demand
conversion in accordance with the formula and the time period therefor set forth
in Section 4 of any portion of the principal amount of Debentures for which the
Prepayment Amount, plus accrued liquidated damages and accrued interest thereon,
has not been paid in full (the "UNPAID PREPAYMENT PRINCIPAL AMOUNT"), in which
event the applicable Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Optional Prepayment Date and the Per Share Market
Value as of the Holder's written demand for conversion, or (y) invalidate ab
initio such optional prepayment, notwithstanding anything herein contained to
the contrary. If the Holder elects option (x) above, the Company shall, within
three Trading Days after such election is deemed delivered hereunder, deliver to
the Holder the shares of Common Stock issuable upon conversion of the Unpaid
Prepayment Principal Amount subject to such conversion demand and otherwise
perform its obligations hereunder with respect thereto. If the Holder elects
option (y) above, the Company shall promptly, and in any event not later than
-15-
three Trading Days from receipt of notice of such election, return to the Holder
new Debentures for the full Unpaid Prepayment Principal Amount and shall no
longer have any prepayment rights under this Debenture.
SECTION 6. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday in the United States or a day on which
banking institutions in the State of New York or North Carolina are authorized
or required by law or other government action to close.
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or more of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"CLOSING PRICE" means on any particular date (a) the closing
sales price per share of Common Stock on such date on the Subsequent Market on
which the shares of Common Stock are then listed or quoted, or if there is no
such price on such date, then the closing sales price on the Subsequent Market
on the date nearest preceding such date, or (b) if the shares of Common Stock
are not then listed or quoted on a Subsequent Market, the closing sales price
for a share of Common Stock on the OTC, as reported by the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the shares of Common Stock are not then reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet" quotes for
the relevant conversion period, as determined in good faith by the Holder, or
(d) if the shares of Common Stock are not then publicly traded the fair market
value of a share of Common Stock as determined by an Appraiser selected in good
faith by the Holders of a majority in interest of the principal amount of
Debentures then outstanding.
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"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, $.001 par value per share,
of the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"INTEREST EFFECTIVENESS DATE" means the earlier to occur of (x)
the Effectiveness Date and (y) the date that an Underlying Shares Registration
Statement is declared effective by the Commission.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the
sum of (i) the greater of (A) 120% of the principal amount of Debentures to be
prepaid, plus all accrued and unpaid interest thereon, and (B) the principal
amount of Debentures to be prepaid, plus all accrued and unpaid interest
thereon, divided by the Conversion Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the Closing
Price on (x) the date the Mandatory Prepayment Amount is demanded or otherwise
due or (y) the date the Mandatory Prepayment Amount is paid in full, whichever
is greater, and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance
of the Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"PER SHARE MARKET VALUE" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the Subsequent
Market on which the shares of Common Stock are then listed or quoted, or if
there is no such price on such date, then the closing bid price on the
Subsequent Market on the date nearest preceding such date, or (b) if the shares
of Common Stock are not then listed or quoted on a Subsequent Market, the
closing bid price for a share of Common Stock on the OTC, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the shares of Common Stock are not then reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the Holder, or (d) if the shares of Common Stock are not then publicly traded
the fair market value of a share of Common Stock as determined by an Appraiser
selected in good faith by the Holders of a majority in interest of the principal
amount of Notes then outstanding.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
-17-
"PREPAYMENT AMOUNT" for any Debentures shall equal the sum of (i)
120% of the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"PURCHASE AGREEMENT" means the Convertible Debenture Purchase and
Exchange Agreement, dated as of the Original Issue Date, to which the Company
and the original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (a) a day on which the shares of Common Stock
are traded on a Subsequent Market on which the shares of Common Stock are then
listed or quoted, or (b) if the shares of Common Stock are not listed on a
Subsequent Market, a day on which the shares of Common Stock are traded on the
OTC, as reported by the OTC, or (c) if the shares of Common Stock are not quoted
on the OTC, a day on which the shares of Common Stock are quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); PROVIDED, that in the event that the shares of Common Stock
are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean any day except a Business Day.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Purchase Agreement.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance with the
terms hereof.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
SECTION 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Company. This Debenture ranks PARI PASSU with all other Debentures now or
hereafter issued under the terms set forth herein. As long as there are
Debentures outstanding, the Company shall not and shall cause it subsidiaries
not to, without the consent of the Holders, (i) amend its certificate of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of the Holders; (ii) repay, repurchase or offer to repay, repurchase or
otherwise acquire shares of its Common Stock or other equity securities other
than as to the Underlying Shares to the extent permitted or required under the
-18-
Transaction Documents; or (iii) enter into any agreement with respect to any of
the foregoing. The Company may only voluntarily prepay the outstanding principal
amount on the Debentures in accordance with Section 5 hereof.
SECTION 8. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
SECTION 9. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
SECTION 10. No indebtedness of the Company is senior to this Debenture
in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise. The Company will not and will not
permit any of its subsidiaries to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any indebtedness of any kind, on or with
respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom that is senior in any
respect to the Company's obligations under the Debentures.
SECTION 11. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
SECTION 12. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
-19-
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
SECTION 13. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
SECTION 14. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
SECTION 15. The then outstanding principal amount under this Debenture
is exchangeable by the Holder for convertible debentures of Global Capital
Partners, Inc. ("GCAP") in accordance with the terms of the Purchase Agreement
and that certain Securities Exchange Agreement, dated the Original Issue Date,
between the original Holder of this Debenture and GCAP. If the then outstanding
principal amount under this ▇▇▇▇▇▇▇▇▇ is surrendered for exchange as
contemplated by the preceding sentence, the outstanding principal amount of this
Debenture shall automatically increase to 120% upon such surrender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-20-
IN WITNESS WHEREOF, the Company has caused this Convertible and
Exchangeable Debenture to be duly executed by a duly authorized officer as of
the date first above indicated.
▇▇▇▇▇▇▇▇▇.▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
-21-
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert the attached Debenture into shares of
common stock, $.001 par value per share (the "Common Stock"), of ▇▇▇▇▇▇▇▇▇.▇▇▇
(the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
--------------------------------------------
Date to Effect Conversion
--------------------------------------------
Principal Amount of Debentures to be
Converted
--------------------------------------------
Number of shares of Common Stock to be Issued
Payment of Interest in Kind [ ] Yes [ ] No
If yes, $ _______ of Interest Accrued on
Account of Conversion at Issue
--------------------------------------------
Applicable Conversion Price
--------------------------------------------
Signature
--------------------------------------------
Name
--------------------------------------------
Address
SCHEDULE 1
CONVERSION SCHEDULE
6% Convertible Debentures, due in the aggregate principal amount of up to
$2,500,000 issued by ▇▇▇▇▇▇▇▇▇.▇▇▇ This Conversion Schedule reflects conversions
made under Section 4(a)(i) of the above referenced Debentures.
Dated: September 15, 2000
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Date of Conversion Amount of Aggregate
Conversion Principal
Amount
Remaining
Subsequent to
Conversion
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