EXHIBIT 99.2
EXHIBIT A
TO
SECURITIES
PURCHASE
AGREEMENT
THIS CONVERTIBLE DEBENTURE AND THE SHARES ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE SECURITIES REPRESENTED
HEREBY MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE
AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO AND IN
COMPLIANCE WITH RULE 144 UNDER SUCH ACT.
CONVERTIBLE DEBENTURE
May 6, 1999 $8,500,000
FOR VALUE RECEIVED, GLOBAL MEDIA CORP., a corporation organized under
the laws of the State of Nevada (hereinafter called the "BORROWER" or the
"CORPORATION") hereby promises to pay to the order of RGC INTERNATIONAL
INVESTORS, LDC or registered assigns (the "HOLDER") the sum of Eight Million
Five Hundred Thousand Dollars ($8,500,000) on May 6, 2002 (the "AUTOMATIC
CONVERSION DATE") and to pay interest on the unpaid principal balance hereof at
the rate of five percent (5%) per annum from the date hereof (the "ISSUE DATE")
until the same becomes due and payable (which interest shall accrue on a daily
basis),whether at maturity or upon conversion, redemption, acceleration or
otherwise. Any amount of principal of or interest on this Debenture which, to
the extent not converted in accordance with the provisions hereof, is not paid
when due shall bear interest at the rate of fifteen percent (15%) per annum
("DEFAULT INTEREST") from the due date thereof until the same is paid. Interest
shall be calculated based on a 360-day year and shall commence accruing on the
Issue Date and, to the extent not converted in accordance with the provisions
hereof, shall be payable in arrears at such time as the outstanding principal
balance hereof with respect to which such interest has accrued becomes due and
payable hereunder. All payments of principal and interest (to the extent not
converted into shares of the Corporation's common stock, par value $0.001 per
share ("COMMON STOCK"), in accordance with the terms hereof) shall be made in,
and all references herein to monetary denominations shall refer to, lawful money
of the United States
of America. All payments shall be made at such address as Holder shall
hereafter give to the Borrower by written notice made in accordance with the
provisions of this Debenture. The Automatic Conversion Date is subject to
extension as provided in Article IV hereof. This Debenture is being issued
by the Borrower pursuant to the Securities Purchase Agreement, dated as of
May 6, 1999, between the Borrower and Holder (the "PURCHASE AGREEMENT").
Each capitalized term used, but not otherwise defined, herein shall have the
meaning ascribed thereto in the Purchase Agreement. For purposes hereof, the
term "DEBENTURES" shall be deemed to refer to this Debenture, all other
convertible debentures issued pursuant to the Purchase Agreement and all
convertible debentures issued in replacement hereof or thereof or otherwise
with respect hereto or thereto.
I. REDEMPTION
A. MANDATORY REDEMPTION. If any of the following events (each, a
"MANDATORY REDEMPTION EVENT") shall occur:
1. The Corporation fails to pay the principal hereof or interest
thereon when due on this Debenture, whether at maturity, upon mandatory
prepayment pursuant to Article I.B., upon acceleration or otherwise.
2. The Corporation (i) fails to issue shares of Common Stock to the
holders of the Debentures upon exercise by the holders of their conversion
rights in accordance with the terms of the Debentures (including upon
exercise of or otherwise pursuant to the Investment Options (as defined in
Article II.E below) (for a period of at least sixty (60) days if such failure
is solely as a result of the circumstances governed by the second paragraph
of Article II.F below and the Corporation is using its best efforts to
authorize a sufficient number of shares of Common Stock as soon as
practicable), (ii) fails to transfer or to cause its transfer agent to
transfer (electronically or in certificated form) any certificate for shares
of Common Stock issued to the holders upon conversion of or otherwise
pursuant to the Debentures (or upon exercise of or otherwise pursuant to the
Investment Options (as defined in Article II.E below)) as and when required
by the Debentures or the Registration Rights Agreement, dated as of May 6,
1999, by and among the Corporation and the other signatories thereto (the
"REGISTRATION RIGHTS AGREEMENT"), (iii) fails to remove any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on
any certificate or any shares of Common Stock issued to the holders of the
Debentures upon conversion of or otherwise pursuant to the Debentures (or
upon exercise of or otherwise pursuant to the Investment Options) as and when
required by the Debentures, the Purchase Agreement or the Registration Rights
Agreement, or (iv) fails to fulfill its obligations pursuant to Sections
4(c), 4(d), 4(e), 4(i), 4(j), or 5 of the Purchase Agreement (or makes any
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph), and any such failure shall continue
uncured (or any announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for ten (10) days after the
Corporation shall have been notified thereof in writing by any holder of the
Debentures;
3. The Corporation fails to obtain effectiveness with the Securities
and Exchange Commission (the "SEC") prior to November 6, 1999 of the
Registration Statement(s) (as defined in the Registration Rights Agreement,
the "REGISTRATION STATEMENT(S)") required to be filed pursuant to Section
2(a) of the Registration Rights Agreement, or fails to obtain the
effectiveness of any additional Registration Statement (required to be filed
pursuant to Section 3(b)of the Registration Rights Agreement) within sixty
(60) days after the Registration Trigger Date (as defined in the Registration
Rights Agreement), or any such Registration Statement, after its initial
effectiveness and during the Registration Period (as defined in the
Registration Rights Agreement), lapses in effect or sales of all of the
Registrable Securities (as defined in the Registration Rights Agreement, the
"REGISTRABLE SECURITIES") otherwise cannot be made thereunder (whether by
reason of the Corporation's failure to amend or supplement the prospectus
included therein in accordance with the Registration Rights Agreement, the
Corporation's failure to file and obtain effectiveness with the SEC of an
additional Registration Statement required pursuant to Section 3(b) of the
Registration Rights Agreement or otherwise) for more than thirty (30)
consecutive days or more than sixty (60) days in any twelve (12) month period
after such Registration Statement becomes effective;
4. The Corporation or any Significant Subsidiary (as defined in Rule
1-02(w) of Regulation S-X promulgated by the SEC) (a "SIGNIFICANT
SUBSIDIARY") of the Corporation shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or
trustee for it or for all or substantially all of its property or business;
or such a receiver or trustee shall otherwise be appointed;
5. Bankruptcy, insolvency, reorganization 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 Corporation or any
Significant Subsidiary of the Corporation;
6. The Corporation shall: (i) fail to maintain the listing of the
Common Stock on the Over-the-Counter Bulletin Board (the "OTC BB") and such
failure shall remain uncured for at least ten (10) days or (ii) following the
date on which listing or quotation of the Common Stock on the Nasdaq National
Market ("NASDAQ"), the New York Stock Exchange (the "NYSE") or the American
Stock Exchange ("AMEX") or, if the Corporation is not eligible for Nasdaq,
the NYSE or AMEX, the Nasdaq SmallCap Market (the "NASDAQ SMALLCAP") has been
secured by the Corporation, fail to maintain such listing on any of Nasdaq,
Nasdaq SmallCap, the NYSE or AMEX;
7. The sale, conveyance or disposition of all or substantially all
of the assets of the Corporation, the effectuation by the Corporation of a
transaction or series of related transactions in which more than 50% of the
voting power of the Corporation is disposed of, or the consolidation, merger
or other business combination of the Corporation with or into any other
individual, corporation, limited liability company, partnership, association,
trust or other entity or organization (each, a "PERSON") or Persons when the
Corporation is not the survivor; or
8. The Corporation breaches any covenant contained in Article III
hereof and such breach continues uncured for a period of ten (10) days after
written notice thereof to the Corporation from any holder of Debentures,
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs 1, 2, 3, 6, 7 or 8 at the option
of the holders of at least 50% of the then outstanding principal amount of
the Debentures exercisable by the delivery of written notice (the"MANDATORY
REDEMPTION NOTICE") to the Corporation of such Mandatory Redemption Event, or
upon the occurrence of any Mandatory Redemption Event specified in
subparagraphs 4 or 5, the then outstanding Debentures shall become
immediately redeemable and the Corporation shall purchase each holder's
outstanding Debentures for an amount equal to the greater of (i) the
Redemption Percentage (as defined below) multiplied by the sum of (a) the
then outstanding principal amount of the Debentures, plus (b) all accrued and
unpaid interest thereon for the period beginning on the Issue Date and ending
on the date of payment of the Mandatory Redemption Amount (the "MANDATORY
REDEMPTION DATE"), plus (c) Default Interest, if any, on the amounts referred
to in clauses (a) and/or (b), plus (d) all Conversion Default Payments (as
defined in Article II.F below), Delivery Default Payments (as defined in
Article II.D.3 below) and any other amounts owed to such holder pursuant to
Section 2(c) of the Registration Rights Agreement, and (ii) the "PARITY
VALUE" of the Debentures to be redeemed, where parity value means the product
of (a) the highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Debentures in accordance with the terms
hereof (without giving any effect to any limitations on conversions of
Debentures contained herein, and treating the Trading Day (as defined in
Article II.B.1) immediately preceding the Mandatory Redemption Date as the
"CONVERSION DATE" (as defined in Article II.B.1) for purposes of determining
the lowest applicable Conversion Price, unless the Mandatory Redemption Event
arises as a result of a breach in respect of a specific Conversion Date in
which case such Conversion Date shall be the Conversion Date), multiplied by
(b) the highest Closing Bid Price (as defined in Article II.B.1) for the
Common Stock during the period beginning on the date of first occurrence of
the Mandatory Redemption Event and ending one day prior to the Mandatory
Redemption Date (the greater of such amounts being referred to as the
"MANDATORY REDEMPTION AMOUNT"). The Mandatory Redemption Amount, together
with all other ancillary amounts payable hereunder, shall immediately become
due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, reasonable legal fees and expenses of collection, and Holder
shall be entitled to exercise all other rights and remedies available at law
or in equity. The "REDEMPTION PERCENTAGE" shall mean (i) 118% for purposes
of a Mandatory Redemption Event specified in subparagraph 7 and (ii) 120% for
all other purposes.
B. TRADING MARKET REDEMPTION. If and to the extent any Debentures
cease to be convertible by any holder as a result of the limitations
described in Article II.A.2 below (a "TRADING MARKET REDEMPTION EVENT"), and
the Corporation has not, prior to the date that such Trading Market
Redemption Event arises, either (i) obtained the Stockholder Approval (as
defined in Article II.A.2) or (ii) eliminated any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Corporation or any of its securities on the Corporation's ability to
issue shares of Common Stock in excess of the Maximum Share Amount (as
defined in Article II.A.2), then the Corporation shall be obligated to redeem
immediately all of the then outstanding principal amount of the Debentures
which ceases to be convertible as a result of the Maximum Share Amount, in
accordance with this Article I.B. An irrevocable redemption notice (the
"TRADING MARKET REDEMPTION NOTICE") shall be delivered promptly to the
holders of the Debentures in accordance with the terms hereof and shall state
(i) that the Maximum Share Amount (as defined in Article II.A.2) has been
issued upon conversion of the Debentures, (ii) that the Corporation is
obligated to redeem all of the outstanding Debentures and (iii) the Mandatory
Redemption Date, which shall be a date within five (5) business days of the
earlier of (a) the date of the Trading Market Redemption Notice or (b) the
date on which the holders of the Debentures notify the Corporation of the
occurrence of a Trading Market Redemption Event. On the Mandatory Redemption
Date, the Corporation shall make payment of the Mandatory Redemption Amount
(as defined in Article I.A above) in cash.
C. FAILURE TO PAY REDEMPTION AMOUNTS. In the case of a Mandatory
Redemption Event, if the Corporation fails to pay the Mandatory Redemption
Amount within five (5) business days of written notice that such amount is
due and payable, then (assuming there are sufficient authorized shares) in
addition to all other available remedies, Holder shall have the right at
anytime, so long as the Mandatory Redemption Event continues, to require the
Corporation, upon written notice, to issue as soon as practicable thereafter
(in accordance with and subject to the terms of Article II below, including
paragraph A.2 thereof), in lieu of the Mandatory Redemption Amount, the
number of shares of Common Stock of the Corporation equal to such applicable
redemption amount divided by any Conversion Price (as defined below), as
chosen in the sole discretion of Holder, in effect from the date of the
Mandatory Redemption Event until the date Holder elects to exercise its
rights pursuant to this Article I.C.
II. CONVERSION AT THE OPTION OF HOLDER
A. OPTIONAL CONVERSION
1. CONVERSION AMOUNT. Subject to Articled II.A.2 below, Holder
may, at its option at any time and from time to time, upon surrender of this
Debenture, convert all or any portion of this Debenture into Common Stock as
set forth below (an "OPTIONAL CONVERSION"). This Debenture shall be
convertible into such number of fully paid and nonassessable shares of Common
Stock as such Common Stock exists on the Issue Date, or any other shares of
capital stock or other securities of the Corporation into which such Common
Stock is thereafter changed or reclassified, as is determined by dividing (a)
the Conversion Amount (as defined below) by (b) the Conversion Price (as
defined in Article II.B below); PROVIDED, HOWEVER, that in no event (other
than pursuant to the Automatic Conversion (as defined in Article IV)) shall
Holder be
entitled to convert this Debenture (or exercise Investment Options in
connection with any such conversion) to the extent that the sum of (x) the
number of shares of Common Stock beneficially owned by Holder and its
affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of this
Debenture, the unexercised Investment Options or the unexercised or
unconverted portion of any other securities of the Corporation (including,
without limitation, the warrants issued by the Corporation pursuant to the
Purchase Agreement) subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (y) the number of shares
of Common Stock issuable upon the conversion of the portion of this Debenture
(and upon the exercise, if any, of Investment Options in connection
therewith) with respect to which the determination of this proviso is being
made, would result in beneficial ownership by Holder and Holder's affiliates
of more than 4.9% of the outstanding shares of Common Stock. For purposes of
the proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and Regulation 13D-G thereunder, except as otherwise
provided in clause (x) of such proviso. "CONVERSION AMOUNT" means (i) the
portion of the principal amount of this Debenture being converted, plus (ii)
all accrued and unpaid interest thereon for the period beginning on the Issue
Date and ending on the Conversion Date (as defined in Article II.B.1), plus
(iii) Default Interest, if any, on the amounts referred to in the immediately
preceding clauses (i) and/or (ii), plus (iv) any Conversion Default Payments
(as defined in Article II.F) and Delivery Default Payments (as defined in
Article II.D.3) payable with respect thereto, together with any other amounts
owed to Holder pursuant to Section 2(c) of the Registration Rights Agreement.
2. TRADING MARKET LIMITATION. Unless the Corporation either (i)
is permitted (or not prohibited) by the applicable rules and regulations of
the principal securities market on which the Common Stock is listed or traded
to issue shares of Common Stock upon conversion of or otherwise pursuant to
the Debentures and upon exercise of or otherwise pursuant to the Investment
Options in excess of the Maximum Share Amount (as defined below) or (ii) has
obtained stockholder approval of the issuance of shares of Common Stock upon
conversion of or otherwise pursuant to the Debentures and upon exercise of or
otherwise pursuant to the Investment Options in excess of the Maximum Share
Amount in accordance with applicable law and the rules and regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or any of its securities
(the "STOCKHOLDER APPROVAL"), in no event shall the total number of shares of
Common Stock issued upon conversion of or otherwise pursuant to the
Debentures and upon exercise of or otherwise pursuant to the Investment
Options (including any shares of Common Stock issued or issuable upon
conversion of or otherwise pursuant to the Series A Preferred Stock (as
defined in Article V) issued pursuant to Article V and upon exercise of or
otherwise pursuant to any Investment Options contained therein and any shares
of capital stock or rights to acquire shares of capital stock issued by the
Corporation which are aggregated or integrated with the Common Stock issued
or issuable upon conversion of or otherwise pursuant to the Debentures and
upon exercise of or otherwise pursuant to the Investment Options for purposes
of any such rule or regulation) exceed 4,106,831 (19.99% of the total shares
of Common Stock outstanding on the
Issue Date) (the "MAXIMUM SHARE AMOUNT"), subject to equitable adjustments
from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring
after the Issue Date. With respect to each Holder of Debentures, the Maximum
Share Amount shall refer to such Holder's pro rata share thereof determined
in accordance with Article ▇.▇ below. In the event that the sum of (x) the
aggregate number of shares of Common Stock actually issued upon conversion of
or otherwise pursuant to the Debentures and upon exercise of or otherwise
pursuant to the Investment Options (including any shares of Common Stock
issued upon exercise of or otherwise pursuant to the Warrants and any shares
of capital stock or rights to acquire shares of capital stock issued by the
Corporation which are aggregated or integrated with the Common Stock issued
upon conversion of or otherwise pursuant to the Debentures and upon exercise
of or otherwise pursuant to the Investment Options for purposes of any such
rule or regulation) plus (y) the aggregate number of shares of Common Stock
that remain issuable upon conversion of or otherwise pursuant to the then
outstanding Debentures at the then effective Conversion Price and upon
exercise of or otherwise pursuant to the Investment Options (including any
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants and any shares of capital stock or rights to acquire shares of
capital stock issued by the Corporation which are aggregated or integrated
with the Common Stock issuable upon conversion of or otherwise pursuant to
the Debentures and upon exercise of or otherwise pursuant to the Investment
Options for purposes of any such rule or regulation), represents at least one
hundred percent (100%) of the Maximum Share Amount (the "TRIGGERING EVENT"),
the Corporation will use its best efforts to seek and obtain Stockholder
Approval (or obtain such other relief as will allow conversions hereunder in
excess of the Maximum Share Amount) as soon as practicable following the
Triggering Event.
B. CONVERSION PRICE
1. CALCULATION OF CONVERSION PRICE. Subject to subparagraph 2
below, the "CONVERSION PRICE " shall be the lesser of the Variable Conversion
Price (as defined herein) and the Fixed Conversion Price (as defined herein).
The Conversion Price shall be subject to adjustments pursuant to the
provisions of Article II.C below. "VARIABLE CONVERSION PRICE" shall mean the
product of (x) the Applicable Percentage (as defined below) and (y) the
Market Price (as defined below). "MARKET PRICE" shall mean the lowest
average of the Closing Bid Prices for any seven (7) consecutive Trading Day
period (the "MARKET PRICE DAYS") during the thirty-five (35) consecutive
Trading Day period ending one (1) Trading Day prior to the date (the
"CONVERSION DATE") the Notice of Conversion (as defined in Article II.D) is
sent by a holder to the Corporation via facsimile (the "PRICING PERIOD").
The Market Price Days shall be designated by the converting holder (from
among the days comprising the Pricing Period) in the Notice of Conversion.
"FIXED CONVERSION PRICE" shall mean $8.125; PROVIDED, HOWEVER, that if the
Common Stock is not listed on Nasdaq or, if the Corporation is not eligible
for Nasdaq, the Nasdaq SmallCap on November 6, 1999, the Fixed Conversion
Price shall mean the lesser of $8.125 and 110% of the average of the Closing
Bid Prices for the ten (10) consecutive Trading Days ending November 6, 1999.
"APPLICABLE PERCENTAGE" shall mean 100%; PROVIDED,
HOWEVER, that if the Common Stock is not listed on Nasdaq or, if the
Corporation is not eligible for Nasdaq, the Nasdaq SmallCap prior to November
6, 1999, or, if so listed on or prior to that date, the Common Stock is at
any time thereafter delisted from Nasdaq or the Nasdaq SmallCap (other than
delisting, for no more than two (2) Trading Days, solely in connection with
the simultaneous listing of the Common Stock on the NYSE or AMEX), the
Applicable Percentage shall mean 80%. "CLOSING BID PRICE" means, for any
security as of any date, the closing bid price on the OTC BB as reported by
Bloomberg Financial Markets or an equivalent reliable reporting service
mutually acceptable to and hereafter designated by the holders of a majority
in interest of the Debentures and the Corporation ("BLOOMBERG") or, if the
OTC BB is not the principal trading market for such security, the closing bid
price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg, or, if no
closing bid price of such security is available in any of the foregoing
manners, the average of the bid prices of any market makers for such security
that are listed in the "pink sheets" by the National Quotation Bureau, Inc.
If the Closing Bid Price cannot be calculated for such security on such date
in the manner provided above, the Closing Bid Price shall be the fair market
value as mutually determined by the Corporation and the holders of a majority
in interest of the Debentures being converted for which the calculation of
the Closing Bid Price is required in order to determine the Conversion Price
of such Debentures. "TRADING DAY" shall mean any day on which the Common
Stock is traded for any period on OTC BB, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
2. CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS. Notwithstanding
anything contained in subparagraph 1 of this Paragraph B to the contrary, in
the event the Corporation (a) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Corporation is the surviving or continuing corporation and its capital
stock is unchanged) or sell or transfer all or substantially all of the
assets of the Corporation or (b) any person, group or entity (including the
Corporation) publicly announces a tender offer to purchase 50% or more of the
Corporation's Common Stock then outstanding (or any other takeover scheme)
(the date of the announcement referred to in clause (a) or (b) is hereinafter
referred to as the "ANNOUNCEMENT DATE"), then the Conversion Price shall,
effective on the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal, for each such
date, to the lower of (x) the Conversion Price which would have been
applicable for an Optional Conversion occurring on the Announcement Date and
(y) the Conversion Price that would otherwise be in effect on such date.
From and after the Adjusted Conversion Price Termination Date, the Conversion
Price shall be determined as set forth in subparagraph 1 of this Article
II.B. For purposes hereof, "ADJUSTED CONVERSION PRICE TERMINATION DATE"
shall mean, with respect to any proposed transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this
subparagraph 2 has been made, the date upon which the Corporation (in the
case of clause (a) above) or the person, group or entity (in the case of
clause (b) above) consummates or publicly announces the termination or
abandonment of the proposed transaction or tender offer (or takeover scheme)
which caused this subparagraph 2 to become operative.
C. ADJUSTMENTS TO CONVERSION PRICE. The Conversion Price shall be
subject to adjustment from time to time as follows:
1. ADJUSTMENT TO CONVERSION PRICE DUE TO STOCK SPLIT, STOCK
DIVIDEND, ETC. If at any time when this Debenture is outstanding, the number
of outstanding shares of Common Stock is increased or decreased by a stock
split, stock dividend, combination, reclassification rights offering below
the Trading Price (as defined below) to all holders of Common Stock or other
similar event, which event shall have taken place during the reference period
for determination of the Conversion Price for any Optional Conversion or
Automatic Conversion, then the Conversion Price shall be calculated giving
appropriate effect to the stock split, stock dividend, combination,
reclassification or other similar event. In such event, the Corporation
shall notify the Transfer Agent of such change on or before the effective
date thereof. "TRADING PRICE," which shall be measured as of the record date
in respect of the rights offering, means (i) the average of the last reported
sale prices for the shares of Common Stock on the OTC BB as reported by
Bloomberg, as applicable, for the five Trading Days immediately preceding
such date, or (ii) if the OTC BB is not the principal trading market for the
shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as
reported by Bloomberg, or (iii) if market value cannot be calculated as of
such date on any of the foregoing bases, the Trading Price shall be the fair
market value as reasonably determined in good faith by (x) the Board of
Directors of the Corporation or, (y) at the option of the holders of a
majority of the then outstanding principal amount of the Debentures, by an
independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the Corporation.
2. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time
when this Debenture is outstanding and prior to the conversion of all
Debentures, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of
which shares of Common Stock of the Corporation shall be changed into the
same or a different number of shares of another class or classes of stock or
securities of the Corporation or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation,
then Holder shall thereafter have the right to receive upon conversion of
this Debenture (and upon exercise of the Investment Options), upon the basis
and upon the terms and conditions specified herein and in lieu of the shares
of Common Stock immediately theretofore issuable upon conversion (and upon
exercise of the Investment Options), such stock, securities or assets which
Holder would have been entitled to receive in such transaction had this
Debenture been converted (and had the Investment Options been exercised) in
full immediately prior to such transaction (without regard to any limitations
on conversion contained herein), and in any such case appropriate provisions
shall be made with respect to the rights and interests of Holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and of the number of shares of Common
Stock issuable upon conversion of this Debenture (and upon exercise of the
Investment Options)) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities or assets
thereafter deliverable upon the conversion of this Debenture (and upon
exercise of the Investment Options). The Corporation shall not effect any
transaction described in this subparagraph 2 unless (i) it first gives, to
the extent practical, thirty (30) days' prior written notice (but in any
event at least fifteen (15) business days prior written notice) of the record
date of the special meeting of stockholders to approve, or if there is no
such record date, the consummation of, such merger, consolidation, exchange
of shares, recapitalization, reorganization or other similar event or sale of
assets (during which time Holder shall be entitled to convert this Debenture
(and exercise the Investment Options)), which notice shall be given
concurrently with the first public announcement of such transaction, and (ii)
the resulting successor or acquiring entity (if not the Corporation) assumes
by written instrument the obligations of the Corporation hereunder (including
under this subparagraph 2). The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share exchanges.
3. ADJUSTMENT DUE TO DISTRIBUTION. Subject to Article III.A, if the
Corporation shall declare or make any distribution of its assets (or rights
to acquire its assets) to holders of Common Stock as a dividend, stock
repurchase, by way of return of capital or otherwise (including any dividend
or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "DISTRIBUTION"), then Holder shall be entitled, upon any
conversion of this Debenture (and upon any exercise of Investment Options)
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been
payable to Holder with respect to the shares of Common Stock issuable upon
such conversion (or upon such exercise of Investment Options) had Holder been
the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
4. PURCHASE RIGHTS. Subject to Article III.A, if at any time when
this Debenture is outstanding the Corporation issues any convertible
securities or rights to purchase stock, warrants, securities or other
property (the "PURCHASE RIGHTS") pro rata to the record holders of any class
of Common Stock, then Holder will been titled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which
Holder could have acquired if Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Debenture (including upon
exercise of the Investment Options) (without regard to any limitations on
conversion contained herein and based upon the Conversion Price as would then
be in effect) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
5. ADJUSTMENT FOR RESTRICTED PERIODS. In the event that (a) the
Corporation fails to obtain effectiveness with the SEC of any Registration
Statement required to be filed pursuant to the Registration Rights
Agreement on or prior to the date on which such Registration Statement is
required to become effective pursuant to the terms of the Registration Rights
Agreement, or (b) any such Registration Statement, after its initial
effectiveness and during the Registration Period (as defined in the
Registration Rights Agreement), lapses in effect, or sales of all of the
Registrable Securities (as defined in the Registration Rights Agreement)
otherwise cannot be made thereunder, whether by reason of the Corporation's
failure or inability to amend or supplement the prospectus (the "PROSPECTUS")
included therein in accordance with the Registration Rights Agreement or
otherwise (including without, limitation, during an Allowed Delay (as defined
in Section 3(f) of the Registration Rights Agreement), then, at the election
of Holder, the Pricing Period shall be comprised of (x) in the case of an
event described in clause (a), the thirty-five (35) Trading Days preceding
the date on which such Registration Statement is required to become effective
pursuant to the terms of the Registration Rights Agreement, plus all Trading
Days through and including the third (3rd) Trading Day following the actual
date of effectiveness of the Registration Statement and (y) in the case of an
event described in clause (b), the thirty-five (35) Trading Days preceding
the date on which Holder is first notified that sales may not be made under
the Registration Statement, plus all Trading Days through and including the
third (3rd) Trading Day following the date on which Holder is first notified
that such sales may again be made under the Registration Statement. If
Holder determines that sales may not be made pursuant to the Registration
Statement (whether by reason of the Corporation's failure or inability to
amend or supplement the Prospectus or otherwise) it shall so notify the
Corporation in writing and, unless the Corporation provides such holder with
a written opinion of the Corporation's counsel to the contrary, such
determination shall be binding for purposes of this paragraph.
D. MECHANICS OF CONVERSION. In order to convert this Debenture into
shares of Common Stock, Holder shall: (1) submit a copy of the fully executed
notice of conversion in the form attached hereto as Exhibit A ("NOTICE OF
CONVERSION") to the Corporation by facsimile dispatched prior to Midnight,
New York City time (the "CONVERSION NOTICE DEADLINE"), on the date specified
therein as the Conversion Date (as defined in Article II.D.5) (or by other
means resulting in, or reasonably expected to result in, written notice to
the Corporation on the date specified therein as the Conversion Date) to the
office of the Corporation or its designated Transfer Agent for the
Debentures, which notice shall specify the principal amount of this Debenture
to be converted, the applicable Conversion Price and a calculation of the
number of shares of Common Stock issuable upon such conversion (including the
number of shares issuable upon exercise of the Investment Options, if any);
and (2) subject to Article II.D.1 below, surrender this Debenture along with
a copy of the Notice of Conversion to the office of the Corporation as soon
as practicable thereafter. In the case of a dispute as to the calculation of
the Conversion Price, the Corporation shall promptly issue that number of
shares of Common Stock as is not disputed in accordance with subparagraph (3)
below. The Corporation shall submit the disputed calculations to its outside
accountant via facsimile within two (2) business days of receipt of the
Notice of Conversion. The accountant shall audit the calculations and notify
the Corporation and Holder of the results no later than 48 hours from the
time it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive absent manifest error.
1. SURRENDER OF DEBENTURE UPON CONVERSION. Notwithstanding
anything to the contrary set forth herein, upon conversion of this Debenture
in accordance with the terms hereof, Holder shall not be required to
physically surrender this Debenture to the Corporation unless the entire
unpaid principal amount of this Debenture is so converted. Holder and the
Corporation shall maintain records showing the principal amount so converted
and the dates of such conversions or shall use such other method, reasonably
satisfactory to Holder and the Corporation, so as not to require physical
surrender of this Debenture upon each such conversion. In the event of any
dispute or discrepancy, such records of the Corporation shall be controlling
and determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Debenture is converted as aforesaid, Holder
may not transfer this Debenture unless Holder first physically surrenders
this Debenture to the Corporation, whereupon the Corporation will forthwith
issue and deliver upon the order of Holder a new Debenture of like tenor,
registered as Holder may request, representing in the aggregate the remaining
unpaid principal amount of this Debenture. 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.
2. LOST OR STOLEN DEBENTURES. Upon receipt by the Corporation of
evidence of the loss, theft, destruction or mutilation of this Debenture, and
(in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of this
Debenture, if mutilated, the Corporation shall execute and deliver a new
Debenture of like tenor and date.
3. DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the submission
of a Notice of Conversion, the Corporation shall, within two (2) business
days after the Conversion Date (the "DELIVERY PERIOD"), issue and deliver (or
cause its Transfer Agent to so issue and deliver) in accordance with the
terms hereof and the Purchase Agreement (including, without limitation, in
accordance with the requirements of Section 2(g) of the Purchase Agreement)
to or upon the order of Holder that number of shares of Common Stock for the
portion of this Debenture converted (and, if applicable, the number of shares
of Common Stock issuable upon exercise of Investment Options in connection
therewith) as shall be determined in accordance herewith. In addition to any
other remedies available to Holder, including actual damages and/or equitable
relief, the Corporation shall pay to Holder $2,000 per day in cash for each
day beyond a two (2) business day grace period following the Delivery Period
that the Corporation fails to deliver Common Stock (a "DELIVERY DEFAULT")
issuable upon conversion of this Debenture (or exercise of Investment
Options) until such time as the Corporation has delivered all such Common
Stock (the "DELIVERY DEFAULT PAYMENTS"). Such Delivery Default Payments
shall be paid to Holder by the fifth (5th) day of the month following the
month in which they have accrued or, at the option of Holder (by written
notice to the Corporation by the first day of the month following the month
in which they have accrued), shall be convertible into Common Stock in
accordance with the terms of this Article II.
So long as the Common Stock issuable upon conversion to the holder
is either registered under the 1933 Act or such shares may be sold under
Rule 144 promulgated under the 1933 Act without restriction as to the number
of shares as of a particular date that can then be immediately sold, in lieu
of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Corporation's Transfer Agent is participating
in the Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon written request of Holder and its compliance with the
provisions contained in Article II.A and in this Article II.D, the
Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to Holder
by crediting the account of Holder's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for
delivery and penalties described in the immediately preceding paragraph shall
apply to the electronic transmittals described herein.
4. NO FRACTIONAL SHARES. If any conversion of this Debenture
would result in a fractional share of Common Stock or the right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded
and the number of shares of Common Stock issuable upon conversion of this
Debenture shall be the next higher number of shares.
5. CONVERSION DATE. The "CONVERSION DATE" shall be the date
specified in the Notice of Conversion, provided that the Notice of Conversion
is submitted by facsimile (or by other means resulting in, or reasonably
expected to result in, written notice) to the Corporation or its Transfer
Agent before Midnight, New York City time, on the date so specified,
otherwise the Conversion Date shall be the first business day after the date
so specified on which the Notice of Conversion is actually received by the
Corporation or its Transfer Agent. The person or persons entitled to receive
the shares of Common Stock issuable upon conversion of this Debenture (or
exercise of Investment Options) shall be treated for all purposes as the
record holder or holders of such securities as of the Conversion Date and all
rights with respect to this Debenture (or portion thereof) surrendered shall
forthwith terminate except the right to receive the shares of Common Stock or
other securities or property issuable on such conversion (or exercise) and
except that the holders preferential rights as a Holder of this Debenture
shall survive to the extent the Corporation fails to deliver such securities.
E. INVESTMENT OPTIONS. On any Conversion Date relating to a conversion
of this Debenture by Holder, the Holder shall have the option to purchase one
additional share of Common Stock for every share of Common Stock issuable as
a result of such conversion at an exercise price equal to the applicable
Conversion Price (the option to purchase such additional shares shall be
referred to herein as the "INVESTMENT OPTIONS"). Holder (i) shall indicate
on the Notice of Conversion in respect of such Conversion Date that it is
exercising its Investment Option with respect to such conversion and shall
specify the number of shares of Common Stock with respect to which the
Investment Option is being so exercised, and (ii) shall pay to the
Corporation, in immediately available funds, on or within one (1) business
day following the Conversion Date, the aggregate purchase price for the
shares of Common Stock issuable as a result of the exercise of such
Investment Options. The provisions of paragraphs A, D.3 (so long
as the holder has delivered to the Corporation the aggregate purchase price
due in connection with the exercise of the Investment Options) and F of this
Article II shall apply to any exercise by the Holder of Investment Options.
F. RESERVATION OF SHARES. A number of shares of the authorized but
unissued Common Stock sufficient to provide for the conversion in full of the
Debentures outstanding (based on the lesser of the Variable Conversion Price
in effect from time to time and the Fixed Conversion Price in effect from
time to time) and the exercise in full of the Investment Options shall at all
times be reserved by the Corporation, free from preemptive rights, for such
conversion or exercise. As of the Issue Date, 4,184,615 authorized and
unissued shares of Common Stock have been duly reserved for issuance upon
conversion of the Debentures and upon exercise of the Investment Options (the
"RESERVED AMOUNT"). The Reserved Amount shall be increased from time to time
in accordance with the Corporation's obligations pursuant to Section 4(h) of
the Purchase Agreement. In addition, if the Corporation shall issue any
securities or make any change in its capital structure which would change the
number of shares of Common Stock into which the Debentures shall be
convertible and for which the Investment Options shall be exercisable, the
Corporation shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
Debentures and exercise of the Investment Options.
If at any time Holder submits a Notice of Conversion, and the
Corporation does not have sufficient authorized but unissued shares of Common
Stock duly reserved and available for issuance to effect such conversion in
accordance with the provisions of this Article II (including any Investment
Options exercised in connection therewith) (a "CONVERSION DEFAULT"), subject
to Article ▇.▇, the Corporation shall issue to Holder all of the shares of
Common Stock which are available to effect such conversion. The portion of
the principal amount of this Debenture (or the number of shares of Common
Stock underlying the Investment Options) included in the Notice of Conversion
which exceeds the amount which is then convertible (or exercisable) into
available shares of Common Stock (the "EXCESS AMOUNT") shall, notwithstanding
anything to the contrary contained herein, not be convertible (or
exercisable) into Common Stock in accordance with the terms hereof until (and
at Holder's option at any time after) the date additional shares of Common
Stock are authorized and duly reserved by the Corporation to permit such
conversion (or exercise), at which time the Conversion Price in respect
thereof shall be the lesser of (i) the Conversion Price on the Conversion
Default Date (as defined below) and (ii) the Conversion Price on the
Conversion Date elected by Holder in respect thereof. The Corporation shall
use its best efforts to effect an increase in the authorized number of shares
of Common Stock as soon as possible following the earlier of (x) such time
that Holder notifies the Corporation or that the Corporation otherwise
becomes aware that there are or likely will be insufficient authorized and
unissued shares to allow full conversion hereof and (y) a Conversion Default.
In addition, the Corporation shall pay to Holder payments ("CONVERSION
DEFAULT PAYMENTS") for a Conversion Default in the amount of (a) .24,
multiplied by (b) the Conversion Default Amount (as defined below),
multiplied by (c)(N/365), where N = the number of days from the day Holder
submits a
Notice of Conversion giving rise to a Conversion Default (the "CONVERSION
DEFAULT DATE") to the date (the "AUTHORIZATION DATE") that the Corporation
authorizes a sufficient number of shares of Common Stock to effect conversion
of the Debentures. "CONVERSION DEFAULT AMOUNT" means the then outstanding
principal amount of all Debentures held by Holder plus the aggregate accrued
interest thereon as of the first day of the Conversion Default. The
Corporation shall send notice to Holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion Default Payment
for each calendar month shall be paid in cash or shall be convertible into
Common Stock at the applicable Conversion Price, at the Corporation's option,
as follows:
1. In the event Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) day of the month following
the month in which it has accrued.
2. In the event the Holder elects to take such payment in Common
Stock, Holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of Conversion) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article II (so long as there is then a
sufficient number of authorized shares of Common Stock).
Holder's election shall be made in writing to the Corporation at
any time prior to 9:00 p.m, New York City time, on the third (3rd) day of the
month following the month in which Conversion Default payments have accrued.
If no election is made, Holder shall be deemed to have elected to receive
cash. Nothing herein shall limit Holder's right to pursue actual damages (to
the extent in excess of the Conversion Default Payments) for the
Corporation's failure to maintain a sufficient number of authorized shares of
Common Stock, and Holder shall have the right to pursue all remedies
available at law or in equity (including a decree of specific performance
and/or injunctive relief).
G. NOTICE OF CONVERSION PRICE ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to this
Article II, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at
any time of Holder, furnish or cause to be furnished to Holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of this Debenture.
III. CERTAIN COVENANTS
A. DISTRIBUTIONS ON CAPITAL STOCK. So long as the Corporation shall
have any obligation under this Debenture, the Corporation shall not, without
the Holder's written consent (a) pay, declare or set apart for such payment,
any dividend or other distribution (whether in cash, property or other
securities) on shares of capital stock or (b) directly or indirectly through
any subsidiary make any other payment or distribution in respect of its
capital stock.
B. RESTRICTION ON STOCK REPURCHASES. So long as the Corporation
shall have any obligation under this Debenture, the Corporation shall not,
without the Holder's written consent redeem, repurchase or otherwise acquire
(whether for cash or in exchange for property or other securities or
otherwise) in any one transaction or series of related transactions any
shares of capital stock of the Corporation or any warrants, rights or options
to purchase or acquire any such shares.
C. BORROWINGS. So long as the Corporation shall have any obligation
under this Debenture, the Corporation shall not, without the written consent
of the holders of a majority of the then outstanding principal amount of the
Debentures, create, incur, assume or suffer to exist any liability for
borrowed money, except (a) borrowings in existence or committed on the date
hereof and of which the Corporation has informed Holder in writing prior to
the date hereof, (b) indebtedness to trade creditors incurred in the ordinary
course of business, (c) borrowings, the proceeds of which shall be used to
repay this Debenture.
D. SALE OF ASSETS. So long as the Corporation shall have any
obligation under this Debenture, the Corporation shall not, without the
written consent of the holders of a majority of the then outstanding
principal amount of the Debentures, sell, lease or otherwise dispose of any
of its assets outside the ordinary course of business. Any consent to the
disposition of any assets may be conditioned on a specified use of the
proceeds of disposition.
E. ADVANCES AND LOANS. So long as the Corporation shall have any
obligation under this Debenture, the Corporation shall not, without the
written consent of the holders of a majority of the then outstanding
principal amount of the Debentures, lend money, give credit or make advances
to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of
the Corporation, except loans, credits or advances (a) in existence or
committed on the date hereof and which the Corporation has informed Holder in
writing prior to the date hereof, and (b) made in the ordinary course of
business.
F. CONTINGENT LIABILITIES. So long as the Corporation shall have any
obligation under this Debenture, the Corporation shall not, without the
written consent of the holders of a majority of the then outstanding
principal amount of the Debentures, assume, guarantee, endorse, contingently
agree to purchase or otherwise become liable upon the obligation of any
person, firm, partnership, joint venture or corporation, except by the
endorsement of negotiable instruments for deposit or collection and except
assumptions, guarantees, endorsements and
contingencies (a) in existence or committed on the date hereof and which the
Corporation has informed Holder in writing prior to the date here of, and (b)
similar transactions in the ordinary course of business.
IV. AUTOMATIC CONVERSION
Subject to the limitations on conversion set forth in Article
II.A.2 and so long as (i) all of the shares of Common Stock issuable upon
conversion of or otherwise pursuant to all of the then outstanding Debentures
are then (x) authorized and reserved for issuance, (y) registered for re-sale
under the Securities Act by the holder of the Debentures (or may otherwise be
able to be resold publicly without registration or restriction) and (z)
eligible to be traded on the OTC BB, the Nasdaq, the NYSE, the AMEX or the
Nasdaq SmallCap and (ii) there is not then a continuing Mandatory Redemption
Event or Trading Market Redemption Event, the entire principal amount of the
Debentures then outstanding (together with any accrued and unpaid interest
thereon, Default Interest, Conversion Default Payments, Delivery Default
Payments and all other amounts due and payable by the Corporation pursuant to
Section 2(c) of the Registration Rights Agreement) on the Automatic
Conversion Date, automatically shall be converted into shares of Common Stock
on such date at the then effective Conversion Price in accordance with, and
subject to, the provisions of Article II hereof (including the right to
exercise the Investment Options in accordance with Article II.E) (the
"AUTOMATIC CONVERSION"). The Automatic Conversion Date shall be delayed by
one (1) Trading Day for each Trading Day occurring prior thereto and prior to
the full conversion of the Debentures that (i) any Registration Statement
required to be filed and to be effective pursuant to the Registration Rights
Agreement is not effective or sales of all of the Registrable Securities
otherwise cannot be made thereunder during the Registration Period (whether
by reason of the Corporation's failure to properly supplement or amend the
prospectus included therein in accordance with the terms of the Registration
Rights Agreement or otherwise), (ii) any Mandatory Redemption Event or
Trading Market Redemption Event exists, without regard to whether any cure
periods shall have run or (iii) the Corporation is in breach of any of its
obligations pursuant to Section 4(h) of the Purchase Agreement. The
Automatic Conversion Date shall be the Conversion Date for purposes of
determining the Conversion Price and the time within which certificates
representing the Common Stock must be delivered to the holder.
V. CONVERSION BY THE CORPORATION
So long as (i) (a) all of the shares of Corporation's Series A
Convertible Preferred Stock (the "SERIES A PREFERRED STOCK") are authorized
and reserved for issuance, (b) all approvals of the Corporation's board of
directors and stockholders necessary for the issuance of the Series A
Preferred Stock have been obtained, (c) the Certificate of Designations,
Preferences and Rights
of Series A Convertible Preferred Stock of the Corporation in the form
attached as EXHIBIT B to the Purchase Agreement (the "CERTIFICATE OF
DESIGNATIONS") has been accepted for filing by the Secretary of State of the
State of Nevada and (d) the Holder has received an opinion of counsel to the
Corporation, in form, substance and scope satisfactory to the Holder, as to
the foregoing and such other matters which the Holder may reasonably request;
(ii) shares of Common Stock issuable upon conversion of all outstanding
shares of Series A Preferred Stock are then (x) authorized and reserved for
issuance and (y) eligible to be traded on the OTC BB, Nasdaq, the NYSE, the
AMEX or Nasdaq SmallCap and (iii) there is not then a continuing Mandatory
Redemption Event or Trading Market Redemption Event, then, at any time after
the Issue Date, so long as the requirements set forth in clauses (i), (ii)
and (iii) above have been met, the Corporation shall have the right,
exercisable on not less than two (2) Trading Days prior written notice (the
"CORPORATION CONVERSION NOTICE") to the Holder (which notice may not be sent
to the Holder until the Corporation is permitted to convert this Debenture
pursuant to this Article V), to convert the entire outstanding principal
amount of this Note into shares of Series A Preferred Stock in accordance
with this Article V. The number of shares of Series A Preferred Stock
issuable upon conversion pursuant to this Article V shall be determined by
dividing the Preferred Stock Conversion Amount (as defined below) by the
Stated Value (as defined in the Certificate of Designations) of the Series A
Preferred Stock. The "PREFERRED STOCK CONVERSION AMOUNT" means (i) the entire
outstanding principal amount of this Debenture, plus (ii) Default Interest,
if any, on the amount referred to in the immediately preceding clause, plus
(iii) any Conversion Default Payments and Delivery Default Payments payable
with respect thereto, together with any other amounts owed to Holder pursuant
to Section 2(c) of the Registration Rights Agreement. Any conversion under
this Article V shall be effected as of the date the Holder receives, at its
registered addresses appearing on the books and records of the Corporation,
the proper number of shares of Series A Preferred Stock as determined in the
preceding sentence (the "CORPORATION CONVERSION NOTICE"). As of the
Corporation Conversion Date the Holder shall cease to be a Holder of this
Debenture and shall become a holder of Series A Preferred Stock. As soon as
practicable after receipt by the Holder of such proper number of shares of
Series A Preferred Stock, the Holder shall forfeit this Debenture to the
office of the Corporation.
VI. MISCELLANEOUS
A. FAILURE OF INDULGENCE NOT WAIVER. No failure or delay on the part
of Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.
B. NOTICES. Any notices required or permitted to be given under the
terms of this Debenture shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, and shall be effective five days
after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by courier or by facsimile, in each case
addressed to a party. The addresses for such communications shall be:
If to the Corporation:
Global Media Corp.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Holder, to the address set forth immediately below Holder's name
on the signature pages to the Purchase Agreement or such other address as is
communicated to the Corporation by notice by Holder in accordance with the
terms hereof.
With copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
C. AMENDMENT PROVISION. The Debentures may be amended only by an
instrument in writing signed by the Corporation and the holders of a majority
of the then outstanding principal amount of the Debentures.
D. ASSIGNABILITY. This Debenture shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of
Holder and its successors and assigns. In the event Holder shall sell or
otherwise transfer any portion of this Debenture, each transferee shall be
allocated a pro rata portion of such transferor's Maximum Share Amount and
Reserved Amount. Any portion of the Maximum Share Amount or Reserved Amount
which remains
allocated to any person or entity which does not hold any Debentures shall be
allocated to the remaining holders of Debentures, pro rata based on the total
principal amount of Debentures then held by such holders.
E. COST OF COLLECTION. If default is made in the payment of this
Debenture, the Corporation shall pay Holder costs of collection, including
reasonable attorneys' fees.
F. GOVERNING LAW. This Debenture shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). The Corporation and Holder irrevocably
consent to the jurisdiction of the United States federal courts and state
courts located in Delaware in any suit or proceeding based on or arising
under this Debenture, the agreements entered into in connection herewith or
the transactions contemplated hereby or thereby and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. The Corporation and Holder irrevocably waive the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The
Corporation and Holder further agree that service of process upon a party
mailed by first class mail shall be deemed in every respect effective service
of process upon the party in any such suit or proceeding. Nothing herein
shall affect Holder's right to serve process in any other manner permitted by
law. The Corporation and Holder agree that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on such judgment or in any other lawful manner.
G. DENOMINATIONS. At the request of Holder, upon surrender of this
Debenture, the Corporation shall promptly issue new Debentures in the
aggregate outstanding principal amount hereof, in the form hereof, in such
denominations of at least $25,000 as Holder shall request.
H. PAYMENT OF CASH; DEFAULTS. Whenever the Corporation is required to
make any cash payment to Holder under this Debenture (as a Conversion Default
Payment or otherwise but not including payments of principal and interest
hereunder), such cash payment shall be made to Holder within five Trading
Days after delivery by Holder of a notice specifying that Holder elects to
receive such payment in cash and the method (e.g., by check, wire transfer)in
which such payment should be made and appropriate delivery instructions,
including any necessary wire transfer instructions. If such payment is not
delivered within such five (5)Trading Day period, Holder shall thereafter be
entitled to interest on the unpaid amount at a per annum rate equal to the
lower of 24% and the highest interest rate permitted by applicable law until
such amount is paid in full to Holder.
I. STATUS AS DEBENTUREHOLDER. Upon submission of a Notice of
Conversion by Holder, the principal amount of this Debenture and the interest
thereon covered thereby (other than any portion of this Debenture, if any,
which cannot be converted because the conversion thereof would exceed such
holder's allocated portion of the Maximum Share Amount or Reserved Amount)
shall be deemed converted into shares of Common Stock as of the Conversion
Date and Holder's rights as a holder of this Debenture shall cease and
terminate,
excepting only the right to receive certificates for such shares of Common
Stock and to any remedies provided herein or otherwise available at law or in
equity to such holder because of a failure by the Corporation to comply with
the terms of this Debenture. Notwithstanding the foregoing, if Holder has
not received certificates for all shares of Common Stock prior to the tenth
business day after the expiration of the Delivery Period with respect to a
conversion for any reason, then (unless Holder otherwise elects to retain its
status as a holder of Common Stock by so notifying the Corporation) the
portion of the principal amount and interest thereon subject to such
conversion shall be deemed outstanding under this Debenture and the
Corporation shall, as soon as practicable, return this Debenture to Holder.
In all cases, Holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive Conversion Default
Payments pursuant to Article II.F to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the right
to have the Conversion Price with respect to subsequent conversions
determined in accordance with Article II.F) for the Corporation's failure to
convert this Debenture.
J. PRO RATA ALLOCATIONS. The Maximum Share Amount and the Reserved
Amount (including any increases thereto) shall be allocated by the
Corporation pro rata among the holders of the Debentures based on the total
principal amount of Debentures originally issued to each holder. Each
increase to the Maximum Share Amount and the Reserved Amount shall be
allocated pro rata among the holders of the Debentures based on the total
principal amount of Debentures held by each holder at the time of the
increase in the Maximum Share Amount or Reserved Amount. In the event a
holder shall sell or otherwise transfer any of such holder's shares of the
Debentures, each transferee shall be allocated a pro rata portion of such
transferor's Maximum Share Amount and Reserved Amount. Any portion of the
Maximum Share Amount or Reserved Amount which remains allocated to any person
or entity which does not hold any the Debentures shall be allocated to the
remaining holders of shares of the Debentures, pro rata based on the total
principal amount of Debentures held by such holders.
K. REMEDIES CUMULATIVE. The remedies provided in this Debenture shall
be cumulative and in addition to all other remedies available under this
Debenture, at law or in equity (including a decree of specific performance
and/or other injunctive relief), no remedy contained herein shall be deemed a
waiver of compliance giving rise to such remedy and nothing herein shall
limit Holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Debenture. The Corporation
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to Holder and that the remedy at law for any such breach may
be inadequate. The Corporation therefore agrees, in the event of any such
breach or threatened breach, Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without
the necessity of showing economic loss and without any bond or other security
being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Borrower has caused this Debenture to be
signed in its name by its duly authorized officer as of the date first above
written.
GLOBAL MEDIA CORP.
By:
------------------------------------
L. ▇▇▇▇▇ ▇▇▇▇▇▇
Chief Financial Officer
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debentures)
The undersigned hereby irrevocably elects to convert $________
principal amount of the Debenture (defined below) plus $________ of accrued
interest and other payments thereon into shares of common stock, par value
$0.001 per share ("COMMON STOCK"), of Global Media Corp., a Nevada
corporation (the "CORPORATION"), according to the conditions of the
convertible debentures of the Corporation dated as of May __, 1999 (the
"DEBENTURES"), as of the date written below. If securities 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. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any. A copy of each Debenture is attached
hereto (or evidence of loss, theft or destruction thereof).
The undersigned hereby irrevocably elects to exercise its
Investment Option to purchase _______________ shares of Common Stock of the
Corporation (up to the number of shares of Common Stock issuable pursuant to
the conversion of the Debenture) at the Applicable Conversion Price set forth
below and shall make payment of $__________ for such shares by wire transfer
of such amount to the Corporation simultaneously upon transfer of the shares
of Common Stock by the Corporation.
So long as the Common Stock issuable pursuant to this Notice of
Conversion is either registered under the Act (as defined below) or may be
sold under Rule 144 promulgated under the Act without restriction as to the
number of shares as of a particular date that can then be immediately sold,
the Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or
its nominee with DTC through its Deposit Withdrawal Agent Commission system
("DWAC TRANSFER").
Name of DTC Prime Broker:
-------------------------------------------
Account Number:
-----------------------------------------------------
In lieu of receiving shares of Common Stock issuable pursuant to
this Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Corporation issue a certificate or certificates for the
number of shares of Common Stock set forth below (which numbers are based on
the Holder's calculation attached hereto) in the name(s) specified
immediately below or, if additional space is necessary, on an attachment
hereto:
Name:
---------------------------------------------------------------
Address:
------------------------------------------------------------
The undersigned represents and warrants that all offers and sales
by the undersigned of the securities issuable to the undersigned upon
conversion of the Debentures and exercise of the Investment Options shall be
made pursuant to registration of the securities under the Securities Act of
1933, as amended (the "ACT"), or pursuant to an exemption from registration
under the Act.
Date of Conversion:
----------------------------
Market Price Days:
----------------------------
Applicable Conversion Price:
---------------------
Number of Shares of Common Stock to be Issued
Pursuant to (i) Conversion of the Debentures:
-----------------
(ii) exercise of Investment Options:
------------
Signature:
----------------------------------------
Name:
----------------------------------------
Address:
-------------------------------------
AGREED and ACKNOWLEDGED:
GLOBAL MEDIA CORP.
By:
-----------------------------------
Name and Title:
-----------------------
*Subject to Article II.D of the Debenture(s), the Corporation is not required
to issue shares of Common Stock until the original Debenture(s) (or evidence
of loss, theft or destruction thereof) to be converted are received by the
Corporation or its Transfer Agent and, in the case of shares issuable upon
exercise of Investment Options, it has received payment for such shares. The
Corporation shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of the original
Debenture(s) to be converted, and shall make payments pursuant to the
Debentures for the number of business days such issuance and delivery is late
(subject to the applicable grace period set forth in the Debenture(s)).