THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR AN EXEMPTION FROM REGISTRATION,
UNDER SAID ACT.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ INC.
8.0% DEBENTURE
SERIES 1999A
$500,000 Dallas, Texas
January 28, 1999
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ INC., a Delaware corporation (the "Company"),
the principal office of which is located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, for value received hereby promises to pay to BCG PARTNERSHIP, LTD., or
its registered assigns, the sum of Five Hundred Thousand and 00/100ths Dollars
($500,000), or such lesser amount as shall then equal the outstanding principal
amount hereof and any unpaid accrued interest thereon, as set forth below, on
January 27, 2004. Payment of all amounts due hereunder shall be made by
registered or certified mail to the registered address of the Holder, or at such
other address as Holder may, from time to time, designate in writing to the
Company.
This Debenture is issued in connection with the transactions described
in Section 1.1 of that certain Common Stock and Debenture Purchase Agreement of
even date herewith by and among the Company and the Purchasers described
therein, as the same may from time to time be amended, modified or supplemented
(the "Purchase Agreement"). The Holder of this Debenture is subject to certain
restrictions set forth in the Purchase Agreement and shall be entitled to
certain rights and privileges set forth in the Purchase Agreement. This
Debenture is one of the Debentures referred to as the "Debentures" in the
Purchase Agreement.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Debenture is subject, and to which
the Holder hereof, by the acceptance of this Debenture, agrees:
1. DEFINITIONS. As used in this Debenture, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Anniversary Year" shall mean that period of time
commencing on January 28th of each year and terminating on January 27 of the
following year.
(b) "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Debenture.
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(c) "Holder," when the context refers to a holder of this
Debenture, shall mean any person who shall at the time be the registered holder
of this Debenture.
(d) "First Level Qualified Public Offering" shall mean the
closing of an initial public offering of the common stock of the Company
pursuant to which the Company shall raise at least Twenty Million Dollars
($20,000,000) after commissions and underwriting discounts.
(e) "Second Level Qualified Public Offering" shall mean the
closing of an initial public offering of the common stock of the Company
pursuant to which the Company shall raise at least Thirty Million Dollars
($30,000,000) after commissions and underwriting discounts.
(f) "Sale of Assets" shall mean the sale of all or
substantially all of the assets of the Company.
2. INTEREST.
(a) INTEREST RATE. The unpaid principal balance of this
Debenture shall bear interest at a rate equal to 8.0% per annum from the date
hereof until paid in full.
(b) PAYMENT OF PRINCIPAL AND INTEREST. Accrued interest shall
not be payable during the first two Anniversary Years hereof unless otherwise
determined by the Board of Directors of the Company. At the end of the second
Anniversary Year the accrued amount of interest not paid shall be added to the
principal amount of this Debenture (collectively, the "Revised Principal
Amount") and interest thereafter should be calculated on the Revised Principal
Amount or so much of the unpaid principal balance of this Debenture then
outstanding. During the third Anniversary Year hereof the Company shall pay
interest only on a quarterly basis such amounts to be due and payable on March
31, 2001, June 30, 2001, September 30, 2001, and December 31, 2001,
respectively. During the fourth and fifth Anniversary Years quarterly payments
of principal and interest shall be due and payable. The amount of the principal
payment due for each such quarterly payment, unless earlier paid, shall be 12.5%
of the principal amount of this Debenture outstanding as of the end of the
second Anniversary Year, or if higher, the Revised Principal Amount.
3. VOLUNTARY PAYMENT. Upon five (5) days' prior written notice to the
Holder, the Company may prepay the principal sum of this Debenture, at any time,
in whole or in part, plus unpaid accrued interest to the date of payment.
4. MANDATORY PAYMENTS.
(a) UPON LIQUIDATION OF THE COMPANY. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
or a Sale of Assets, prior and in preference to any distribution of any of the
assets or surplus funds of the Company to the holders of capital stock of the
Company by reason of their ownership thereof, all outstanding
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principal and unpaid accrued interest on this Debenture shall be immediately
due and payable. If the assets and funds of the Company are insufficient to
permit payment in full of all of the then outstanding Debentures issued
pursuant to the Purchase Agreement, then the entire assets and funds of the
Company legally available for distribution shall be distributed ratably among
the holders of such Debentures in proportion to the principal amounts thereof
outstanding at the time of payment.
(b) UPON EVENT OF DEFAULT. Within 30 days of the Holder
obtaining actual knowledge of the occurrence of an Event of Default (as
hereinafter defined), the Holder may demand the prepayment of all or any portion
of this Debenture by submission of written notice of prepayment to the Company.
Following the receipt of such notice, the Company shall prepay the portion of
this Debenture requested to be prepaid as soon as reasonably practicable, but in
any event within 30 days of date of such notice. An Event of Default for
purposes of this Section 4(b) shall mean: (i) the failure to pay interest or
principal on any scheduled payment date; (ii) the occurrence of any material
breach of any representation, warranty or covenant by the Company under the
Purchase Agreement, if such breach is not cured within 30 days of the receipt by
the Company of written notice thereof; or (iii) the filing of any petition,
whether voluntary or involuntary, seeking the reorganization or liquidation of
the Company under any provision of the Federal Bankruptcy Code or any other
federal or state reorganization, insolvency or debtor relief law; or (iv) the
appointment of any receiver, liquidator or trustee for the Company or any of its
properties by a court order and which appointment is not vacated within 30 days;
or (v) the Company is adjudicated insolvent or the Company shall make an
assignment for the benefit of any of its creditors, admit in writing an
inability to pay debts when they become due in the ordinary course of its
business, or consent to the appointment of a receiver, trustee or liquidator for
the Company or all or any part of the property of the Company.
(c) UPON QUALIFIED PUBLIC OFFERING. If, at any time, the
Company proposes to make a First Level Qualified Public Offering, then at the
closing of the First Level Qualified Public Offering, fifty percent (50%) of the
principal amount of this Debenture, plus the unpaid accured interest thereon,
shall be prepaid. If, at any time, the Company proposes to make a Second Level
Qualified Public Offering, then at the closing of the Second Level Qualified
Public Offering, all of the principal amount of this Debenture, plus the unpaid
accrued interest thereon, shall be prepaid.
(d) LIMITATION. If, the Company lacks sufficient funds to pay
lawfully all of the Debentures which the Company is, at any such time, obligated
to pay in accordance with this Section 4, then holders of all the then
outstanding Debentures issued pursuant to the Purchase Agreement shall share
ratably in any funds legally available for payment of such Debentures according
to the respective amounts which would be payable with respect to the face amount
of the Debentures owned by them if all such Debentures were paid in full.
5. ASSIGNMENT. Subject to the restrictions on transfer described in
Section 7 below, the rights of the Company and the Holder shall be binding upon
and benefit the permitted successors, assigns, heirs, administrators and
transferees of the parties.
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6. WAIVER AND AMENDMENT. Any provision of this Debenture may be
amended, waived or modified upon the written consent of the Company and the
holders of all then outstanding Debentures issued pursuant to the Purchase
Agreement.
7. AGREEMENT NOT TO ATTACH. The Holder, by its acceptance of this
Debenture, agrees that in the Event of Default as described in subsection
4(b)(i) or (ii) hereof, and whether or not the Holder shall have obtained an
judgment thereon, unless the Company shall also be in default pursuant to
subsections 4(b)(iii), (iv) or (v) hereof, Holder shall not seek, or cause any
third party to seek, an attachment on or possession of any of the Company's
intellectual property, including but not limited to any of the Company's
technology, patents, trademarks, copyright or any goodwill associated with any
of the foregoing.
8. TRANSFER OF THIS DEBENTURE. This Debenture may not be transferred or
assigned without the prior written consent of holders of at least seventy-five
percent (75%) of the face amount of all the then outstanding Debentures issued
pursuant to the Purchase Agreement, except that the Holder may transfer or
assign this Debenture to an affiliate of the initial Holder of this Debenture
without requiring such consent. With respect to any proposed offer, sale or
other disposition of this Debenture, the Holder will give prior written notice
to the Company and each of the other holders of the then outstanding Debentures
issued pursuant to the Purchase Agreement, describing briefly the manner
thereof, together with a written opinion of the Holder's counsel, addressed to
the Company, to the effect that such offer, sale or other distribution may be
effected without registration or qualification (under any federal or state law
then in effect). Promptly upon receiving such written notice and reasonably
satisfactory opinion, the Company, as promptly as practicable, shall notify the
Holder that the Holder may sell or otherwise dispose of this Debenture, in
accordance with the terms of the notice delivered to the Company and subject to
the above consent requirement from other holders of Debentures. If a
determination has been made pursuant to this Section 7 that the opinion of
counsel for the Holder is not reasonably satisfactory to the Company, the
Company shall so notify the Holder promptly after such determination has been
made. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
9. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or, if mailed, by registered or certified mail,
postage prepaid, at the respective addresses of the parties as set forth herein.
Any party hereto by notice so given may change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the manner set forth above
and shall be deemed to have been received when delivered.
10. PAYMENTS DUE ON SATURDAY, SUNDAY OR LEGAL HOLIDAYS. If an interest
payment date for this Debenture, or a date fixed for payment or prepayment of
all or a portion of this Debenture shall be a Saturday, Sunday or, in Dallas,
Texas, a legal holiday or a day on which banking institutions are authorized or
required by law or executive order to close or remain
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closed, then any such payment need not be made on such date but may be made
on the next succeeding day which is not a Saturday, Sunday, or in such city,
a legal holiday or a day on which banking institutions are closed, with the
same force and effect as if made on such required payment date.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, excluding that body of law
relating to conflict of laws.
12. HEADINGS; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
13. USURY SAVINGS CLAUSE. Regardless of any provision contained herein,
or in any document executed in connection herewith, the Holder shall never be
entitled to receive, collect, or apply, as interest on the indebtedness
evidenced hereby, any amount in excess of the maximum rate permitted by law. If
the Holder ever receives, collects, or applies, as interest, any such excess,
such amount which would be excessive interest shall be deemed a partial
prepayment of principal and treated hereunder as such; and if, the principal
hereof is paid in full, any remaining excess shall be refunded to the Company.
In determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum rate permitted by law, the Company and the
Holder shall, to the maximum extent permitted under applicable law: (a)
characterize any nonprincipal payment as an expense, fee, or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
prorate, allocate, and spread, the total amount of interest throughout the
entire contemplated term hereof, provided, that if the principal balance hereof
is paid and performed in full prior to the end of the full contemplated term
hereof. However, if the interest received for the actual period of existence
thereof exceeds the maximum rate permitted by law, the Holder shall either apply
or refund to the Company the amount of such excess as herein provided, and in
such event, the Holder shall not be subject to any penalties provided by any
laws for contracting for, charging, or receiving interest in excess of the
maximum rate permitted by law.
IN WITNESS WHEREOF, the Company has caused this Debenture to be issued
this 28th day of January, 1999.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ INC.
By: /s/ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Its: President - Secretary
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Name of Holder: BCG Partnership, Ltd.
Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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