Exhibit 99.2
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.
No. [ ] $1,000,000
XXXXXXX.XXX, INC.
FORM OF 6.75% CONVERTIBLE DEBENTURE
DUE APRIL 27, 2003
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of XxxXxxx.xxx, Inc., a Delaware corporation, having a principal
place of business at 0000 Xxxxxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
20190 (the "Company"), designated as its 6.75% Convertible Debentures, due April
27, 2003, in the aggregate principal amount of twelve million dollars
($12,000,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to [ ], or its
registered assigns (the "Holder"), the principal sum of One Million Dollars
($1,000,000), on April 27, 2003, 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 6.75% per annum,
payable in arrears on each Conversion Date (as defined herein) and, if the
Underlying Shares Registration Statement (as defined in Section 6) applicable to
this Debenture shall not have been declared effective by the Effectiveness Date
(as defined in the Registration Rights Agreement) on March 31, June 30,
September 30 and December 31 of each year, commencing the earlier of the first
Conversion Date and the first quarterly payment date following the Effectiveness
Date applicable (for purposes of payment of interest, each Conversion Date and
each quarterly date being an "Interest Payment 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 Interest Payment Date, the Company
shall provide
the Holder with written notice of its election to pay interest hereunder either
in cash or 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
notice shall be deemed an election by the Company not to pay such interest in
cash. Interest shall be calculated on the basis of a 360-day year and shall
accrue daily (but compound annually) commencing on the Original Issue Date (as
defined in Section 6) until payment (whether through conversion of all
outstanding principal amount hereunder or otherwise) 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)
(to accrue daily, from the date such interest is due hereunder through and
including the date of payment), payable in cash.
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 to another Person 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, by the fifth Business Day (as defined in
Section 6) following the date the same shall become due and payable
(whether on an Interest Payment Date or the Maturity Date, by
acceleration or otherwise);
(ii) the Company shall fail to observe or perform any
other material covenant, agreement or warranty contained in, or
otherwise commit any breach of, any Transaction Document (as defined in
Section 6) or any other Debenture (other than those
matters that are the specific subject of another Event of Default under
this Section), and such failure or breach shall not have been remedied
within fifteen Business 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 of 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 one million dollars ($1,000,000), 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 quoted for trading
on the Nasdaq National Market ("NASDAQ") or, if the Common Stock shall
hereafter become listed or quoted for trading on the Nasdaq SmallCap
Market, New York Stock Exchange, or American Stock Exchange (each, a
"Subsequent Market"), it shall fail to be quoted or listed for trading
on such Subsequent Market, for an aggregate of five Trading Days;
(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 50% 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 an aggregate of
more than $1,000,000 of shares of Common Stock (measured by reference
to the market price thereof) or other equity securities of the Company
(other than redemptions of Underlying Shares (as defined in
Section 6));
(vii) an Underlying Shares Registration Statement
shall not have been declared effective by the Commission (as defined in
Section 6) on or prior to the 180th day after the Original Issue Date;
(viii) if, during the Effectiveness Period (as
defined in the Registration Rights Agreement (as defined in Section
8)), 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 an Underlying Shares Registration Statement, in either
case, for an aggregate of twenty or more Trading Days (which need not
be consecutive Trading Days) in any twelve month 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
180th day after the Original Issue Date, which shall be covered by
Section 3(a)(viii));
(x) the Company shall fail for any reason to deliver
certificates to a Holder prior to the twelfth (12th) 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; or
(xi) the Company shall fail for any reason to deliver
the payment in cash pursuant to a Buy-In (as defined herein) within
seven Business Days after written notice for such Buy-In is provided.
(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
Holder's election immediately due and payable in cash. 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 within
thirty (30) days of the date of a declaration of an Event of Default and then
held by the Holder and (B) the closing sales price of the Common
Stock as reported by Bloomberg L.P. (or the successor to its function of
reporting share prices) 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 Business 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
Xxxxxx 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.
(A) This Debenture shall be convertible into shares of
Common Stock at the option of the Holder, in whole or in part (but subject to
the limitations on conversion set forth in Section 4(a)(iv)) at any time and
from time to time commencing the 90th day following Original Issue Date (the
"Conversion Commencement Date"). The maximum principal amount of Debentures
issued on the same Original Issue Date to a Holder that such Holder may convert
pursuant to this Section 4(a)(i) is limited in each 30 day period to 25% of the
principal amount of all Debentures issued on such Original Issued Date to such
Holder. All monthly periods shall be measured cumulatively, so that all
Debentures issued to a Holder on an Original Issue Date may be tendered for
conversion by such Holder commencing the 91st day after the Conversion
Commencement Date.
(B) The Holder shall effect conversions by surrendering to
the Company the principal amount of Debentures to be converted, together with a
completed conversion notice in the form attached as Exhibit A (a "Holder
Conversion Notice"). Each Holder Conversion Notice shall specify the date on
which such conversion is to be effected, which date may not be prior to the date
such Holder Conversion Notice is deemed to have been delivered hereunder (a
"Holder Conversion Date"). If no Holder Conversion Date is specified in a Holder
Conversion Notice, the Holder Conversion Date shall be the date that such Holder
Conversion Notice is deemed delivered hereunder. Subject to Section 4(b), each
Holder Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the Debenture(s)
tendered by the Holder with the Holder Conversion Notice, or if a conversion
hereunder cannot be effected in full for any reason, the Company shall honor
such conversion to the extent permissible hereunder and shall promptly deliver
to such Holder (in the manner and within the time set forth in Section 4(b)) a
new Debenture for such principal amount as has not been converted.
(ii) Conversion At Option of the Company.
(A) If the conditions set forth in this subsection are
satisfied, the Company may require the conversion of all or a portion of the
principal amount of the Debentures subject to an effective Underlying Shares
Registration Statement. The Company shall only have the right to require
conversions hereunder if (i) the closing sales price of the Common Stock as
reported by Bloomberg L.P. (or any successor to its function of reporting share
prices) exceeds (x) for the first 100 Trading Days following the Original Issue
Date, $12.15 (subject to equitable adjustment in the event of stock splits and
similar events), and (y) thereafter $10.00 (subject to equitable adjustment in
the event of stock splits and similar events), for 20 consecutive Trading Days
following the date on which an Underlying Shares Registration Statement shall
have first been declared effective by the Securities and Exchange Commission
(the "Effective Date"), (ii) the Underlying Shares Registration Statement shall
have been effective and the prospectus thereunder available to the Holders for
the resale of all Underlying Shares issuable upon such conversion during the
entire 20 Trading Day period and on the Company Conversion Date (as defined
below) or Underlying Shares may be sold by the Holder subject to such conversion
without volume limitation under Rule 144(k) promulgated under the Securities
Act, (iii) the Company has available sufficient unreserved and available shares
of Common Stock to fulfill its share delivery requirements upon such conversion,
(iv) the Common Stock is listed or quoted for trading on the NASDAQ or a
Subsequent Market during the entire twenty-five Trading Day calculation period
described above in this subsection, (v) such conversion would not result in a
violation of Section 4(a)(iv), and (vi) the Company shall not have been more
than three Trading Days late in delivering any conversion shares pursuant to
Section 4(b).
(B) The Company shall exercise its right to require
conversions under Section 4(a)(ii) by delivering to the Holder a completed
conversion notice in the form attached as Exhibit B (a "Company Conversion
Notice"). Each of a Company Conversion Notice and a Holder Conversion Notice are
sometimes referred to herein as a Conversion Notice. Each Company Conversion
Notice shall specify 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 Company Conversion Notice is deemed to have been delivered
hereunder (a "Company Conversion Date"). Each of a Company Conversion Date and a
Holder Conversion Date are referred to herein as a "Conversion Date". If no
Conversion Date is specified in a Company Conversion Notice, the Conversion Date
shall be the date that such Company Conversion Notice is deemed delivered
hereunder. Subject to the Holder's rights under Section 4(b), the conversion
subject to each Company Conversion Notice, once given, shall be irrevocable. Not
more than two Trading Days following receipt of the Company Conversion Notice,
the Holder shall deliver to the Company the principal amount of Debentures
subject to such Company Conversion Notice. If the Company is requiring
conversion of less than the full principal amount represented by the
Debenture(s) tendered by the Holder following a Company Conversion Notice, or if
a conversion hereunder cannot be effected in full for any reason, the Company
shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the time set forth in
Section 4(b)) a new Debenture for such principal amount as has not been
converted.
(iii) Automatic Conversion. Subject to the provisions in this
paragraph, the principal amount of Debentures for which conversion notices have
not previously been received or for which prepayment has not been made or
required hereunder shall be automatically converted on the third anniversary of
the Original Issue Date for the resale of all Underlying Shares issuable upon
such conversion, at the Conversion Price on such date. The conversion
contemplated by this paragraph shall not occur if (a) an Underlying Securities
Registration Statement is not then effective and the prospectus thereunder
available for use by the Holder for the resale of all Underlying Shares issuable
upon such conversion or the Holder is not permitted to resell Underlying Shares
without volume restrictions pursuant to Rule 144(k) promulgated under the
Securities Act; (b) there are not sufficient shares of Common Stock authorized
and reserved for issuance upon such conversion. Notwithstanding anything herein
to the contrary, the Automatic Conversion Date shall be extended (on a
day-for-day basis) for any Trading Days that the Holder is unable to resell
Underlying Shares due to (a) the Common Stock not being listed or quoted for
trading on the NASDAQ or a Subsequent Market, (b) the failure of an Underlying
Securities Registration Statement to be declared effective by the Commission or,
if so declared, to remain effective during the Effectiveness Period as to all
Underlying Shares, or (c) the suspension of the Holder's right to use the
prospectus thereunder to resell Underlying Shares. Notwithstanding anything to
the contrary contained herein, a conversion pursuant to this Section shall not
be subject to the provisions of Section 4(a)(iv).
(iv) Number of Underlying Shares Issuable Upon Conversion.
(A) 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 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 principal amount of this Debenture to be converted
and (y) the product of (1) the quotient obtained by dividing .0675 by 360 and
(2) the number of days for which such principal amount was outstanding, divided
by (II) the Conversion Price on the Conversion Date, provided, that (1) if the
Company shall have timely elected to pay the interest at issue in cash,
subsection (ii) shall not be used in the calculation of the number of shares of
Common Stock issuable upon such conversion, and (2) only such portion of the
accrued and outstanding amount of interest owing on the principal amount being
converted shall be calculated in subsection (ii), giving credit for previously
paid interest on such principal amount.
(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), as determined by counsel to the
Company pursuant to a written opinion letter, addressed to the Company's
transfer agent in the form and substance acceptable to the applicable Holder and
such
transfer agent; (3) the Common Stock is not listed or quoted for trading on
the NASDAQ or on a Subsequent Market; or (4) the issuance of such shares of
Common Stock would result in a violation of Sections 4(a)(iv), 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 ten Trading Days of
each applicable Conversion Date, an amount in cash equal to the product 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
.0675 by 360 and (y) the number of days for which such principal amount was
outstanding.
(v) 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 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.
(C) If the Common Stock is then listed for trading on the
NASDAQ or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company is precluded from
issuing at a Conversion Price or, with respect to the Warrants described below
in this sentence, an exercise price, that is less than the closing sales price
per share of the Common Stock on the Trading Day immediately preceding the first
closing of the transactions contemplated by the Purchase Agreement, subject to
equitable adjustment in the event of stock splits and similar events (such
price, the "Market Price"), in excess of 5,019,766 shares of Common Stock (the
"Issuable Maximum") upon conversion of the Debentures and as payment of interest
thereon and exercise of the Warrants (as defined in the Purchase Agreement). The
Issuable Maximum equals 19.999% of the number of shares of Common Stock
outstanding immediately prior to the first closing of transactions set forth in
the Purchase Agreement. Accordingly, if on any Conversion Date (A) the Common
Stock is listed for trading on the NASDAQ or the Nasdaq SmallCap Market and (B)
the Company shall not have previously obtained the vote of shareholders (the
"Shareholder Approval"), if any, as may be required by the applicable rules and
regulations of the Nasdaq Stock Market (or any successor entity) applicable to
approve the issuance of a number of shares of Common Stock in excess of the
Issuable Maximum at a price below the Market Price, then the Company shall issue
to the Holder requesting a conversion a number of shares of Common Stock equal
to the lesser of (x) the number of shares of Common Stock issuable upon such
conversion at the Conversion Price and (y) the Issuable Maximum less all shares
of Common Stock previously issued upon conversion of the Debentures and as
payment of interest thereon (but only those shares issued at a Conversion Price
less than the Market Price) and all shares of Common Stock previously issued
upon any exercise of Warrants (but only those shares issued at an exercise price
less than the Market Price). With respect to the principal amount of Debentures
tendered for conversion at issue for which a conversion in accordance with the
Conversion Price would, when aggregated with all shares of Common Stock
previously issued on account of conversions of Debentures and payment of
interest thereon and upon exercise of Warrants (at the exercise and Conversion
Price
described in the immediately preceding sentence) (the "Excess Principal"),
result in the issuance of a number of shares of Common Stock in excess of the
Issuable Maximum, the converting Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the first to occur of (x) the twenty-fifth day from the date that the
Commission approves or indicates that it has no further comments to the
Company's preliminary proxy statement, if any, prepared for delivery to the
shareholders of the Company in connection with the Shareholder Approval
contemplated hereby and (y) the 90th day after such request (such date the
"Approval Date"), or (2) pay cash to the converting Holder in an amount equal to
the Mandatory Prepayment Amount for the Excess Principal. If the converting
Holder shall have elected the first option pursuant to the immediately preceding
sentence and the Company shall have failed for any reason to obtain the
Shareholder Approval on or prior to the Approval Date, then within three days of
the Holder's demand therefore, which may be given at any time following the
Approval Date, the Company shall pay cash to the converting Holder in an amount
equal to the Mandatory Prepayment Amount for the Excess Principal. If the
Company fails to pay the Mandatory Prepayment Amount in full pursuant to this
Section within seven days of the date payable, the Company will pay interest
thereon at a rate of 18% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the converting Holder, accruing daily
from the Conversion Date until such amount, plus all such interest thereon, is
paid in full. In the event there is more than one holder of Debentures, the
Issuable Maximum applicable to each Debenture shall be determined pro rata by
reference to the percentage of the principal amount of all Debentures held by
such Holder, provided that if one or more Debentures shall have been prepaid or
converted without having been issued its pro rata allocated portion of the
Issuable Maximum such unissued shares shall be allocated pro rata to the
remaining Holders. It is understood and agreed that shares of Common Stock
delivered to and held by the Holder or one of its affiliates on account of
conversion hereunder may not cast votes on the matter of Shareholder Approval.
Xxxxxx delivered on account of conversion hereunder and not held by the Holder
or its affiliates may cast votes on the matter of Shareholder Approval. Any
Mandatory Prepayment Amount owing pursuant to this Section shall be due and
payable by the 20th day following the demand therefor.
(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 Section 3.1(b) of the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of
Debentures, (ii) Debentures in a principal amount equal to the principal amount
of Debentures not converted, and (iii) 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), provided, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
the principal amount of Debentures until Debentures are delivered for conversion
to the Company, or the Holder notifies the Company that such Debentures have
been lost, stolen or destroyed and provides a bond (or other adequate security)
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. 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, $5,000 for each Trading Day after such
third Trading Day until such certificates are delivered. Nothing herein shall
limit a Xxxxxx'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 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 at the prevailing market
price at the time of such purchase 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 of the Debentures on any
Conversion Date (the "Conversion Price") shall initially equal the Fixed
Conversion Price and, from and after the 90th day following the Original Issue
Date, shall equal the lower of the Fixed Conversion Price and the Variable
Conversion Price (each as defined in Section 6).
(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 (other than PIK dividend
preferred stock), (b) subdivide outstanding shares of Common Stock into a larger
number of shares, (c) combine (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 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, options or other securities or debt that are 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 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, the Conversion Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such shares of Common Stock or
such Common Stock Equivalents plus the number of shares of Common Stock which
the offering price for such shares of Common Stock or Common Stock Equivalents
would purchase at the Conversion Price, and the denominator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
such issuance plus the number of shares of Common Stock so issued or issuable,
provided, that for purposes hereof, all shares of Common Stock that are issuable
upon conversion, exercise or exchange of Common Stock Equivalents shall be
deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such shares of Common Stock
or Common Stock Equivalents are issued. However, upon the expiration of any
Common Stock Equivalents the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section, if any such Common Stock Equivalents
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 Common Stock Equivalents)
had the adjustment of the Conversion Price made upon the issuance of such Common
Stock Equivalents been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased upon the
exercise of such Common Stock Equivalents actually exercised. The foregoing
shall not apply to any (i) issuances of securities as consideration in a merger,
consolidation or acquisition of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or as consideration for the acquisition of a business, product
or license by the Company, (ii) the issuance of securities upon the exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, or (iii) the grant of options or warrants, or
the issuance of additional securities, under any duly authorized Company stock
option, restricted stock plan or stock purchase plan for the benefit of the
Company's employees.
(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 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.
(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, or (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 event that the
Holder shall have elected under clause (A) above and the Company shall not have
failed to pay the amounts due under Section 3(b) by the second Business Day
prior to the closing of such Change of Control Transaction, or shall have
indicated its intention to do so, then in the case of a merger or consolidation
at the closing thereof, (x) require the surviving entity to issue shares of
convertible preferred stock or convertible debentures with such aggregate stated
value or in such face amount, as the case may be, 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 shares of preferred stock or debentures shall
have terms identical (including with respect to conversion) to the terms of this
Debenture (except, in the case of preferred stock, as may be required to reflect
the differences between equity and debt) 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 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 preferred stock or 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 shares of convertible preferred
stock or 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) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common Stock
solely for the purpose of issuance upon conversion of the Debentures and payment
of interest on the Debentures, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(b)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Underlying Shares Registration Statement has
been declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.
(e) 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.
(f) 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.
(g) Any and all notices or other communications or deliveries
to be provided by the Holders 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
the Company, at 0000 Xxxxxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000,
Facsimile No.: (000) 000-0000, attention General Counsel, 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, with a copy to (other
than for Conversion Notices) to Xxxxx & Xxxxxxx L.L.P. (facsimile number (202)
637-5910), attention X. Xxxxx Xxxx, Esq.. 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
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. 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 (creation of a class of preferred stock that does not
otherwise alter the relative rights, preferences or terms of this Debenture or
otherwise breach other provisions of the Transaction Documents will not violate
this clause); or (ii) enter into any agreement with respect to the foregoing.
The Company may not prepay principal amount under the Debentures without the
consent of the Holders.
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 the Commonwealth of
Virginia 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 50% 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).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.001 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.
"Fixed Conversion Price" (A) initially equals $9.00; (B) from
the Effective Date through the 30th day thereafter the Fixed Conversion Price
shall equal the lesser of (1) $12.00 (subject to equitable adjustments for stock
splits and reverse stock splits occurring after the Original Issue Date) and (2)
125% of the average Per Share Market Values for the five Trading Days
immediately preceding the Effective Date; and (C) if on the 30th day following
the Effective Date, the closing sales price of the Common Stock as reported by
Bloomberg L.P. (or the successor to its function of reporting share prices) is
less than the then effective Fixed Conversion Price, the Fixed Conversion Price
shall thereafter equal the lower of (x) the Fixed Conversion Price in effect
prior to such time and (y) 110% of the average Per Share Market Values for the
five Trading Days immediately preceding such 30th day.
"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" 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 sales price of the Common Stock as reported
by Bloomberg L.P. (or the successor to its function of reporting share prices)
on (x) the date the Mandatory Prepayment Amount is demanded or otherwise becomes
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 principal amount. Notwithstanding the foregoing, if the
event giving rise to the obligation to pay any Mandatory Prepayment Amount shall
be a merger or business combination or sale that would constitute a Change of
Control Transaction, then (x) if the consideration to be received by the Holder
were it to participate in such transaction would result in a premium of 20% or
more above the outstanding Debenture principal amount and interest hereunder,
clause (A) in this definition shall be deleted for such purposes and (y) if the
consideration to be received by the Holder were it to participate in such
transaction would result in a premium of 10% to 19.99% above the outstanding
Debenture principal amount and interest hereunder, clause (A) in this definition
shall equal 110%.
"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 in the NASDAQ, 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.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Debenture Purchase
Agreement, dated April 26, 2000, 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 April 26, 2000, 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 in the
over-the-counter market, as reported by the NASDAQ, or (c) if the shares of
Common Stock are not quoted on the NASDAQ, 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.
"Variable Conversion Price" equals the lowest average price
for all periods derived by calculating the average of the Per Share Market
Values during the five Trading Days immediately prior to (and not including)
each 30 day period following the Original Issue Date. Accordingly, if the
average price for one 30 day period is lower than the average price calculated
for a subsequent 30 day period, then the price derived from the calculation of
the first (and lower derived period) shall prevail. The 30 day periods for this
purpose shall be consecutive and not rolling. If the closing sales price of the
Common Stock, as reported by Bloomberg L.P. (or the successor to its function of
reporting share prices) for any twenty-five consecutive Trading Day period
(measured on a rolling basis) following the Effective Date (provided an
Underlying Shares Registration Statement shall be effective at all times during
such period and the prospectus thereunder available for use by the Holder to
resell Underlying Shares) exceeds (x) for the first 100 Trading Days following
the Original Issue Date, $12.15 (subject to equitable adjustment in the event of
stock splits and similar events), and (y) thereafter $10.00 (subject to
equitable adjustment in the event of stock splits and similar events), there
will be no further adjustments to the Variable Conversion Price following such
period.
Section 7. 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 8. 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 9. No current indebtedness of the Company is, and no future
indebtedness of the Company will be, senior to this Debenture in right of
payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise other than Senior Indebtedness (as defined below),
indebtedness secured by purchase money security interests (which will be senior
as to the underlying asset covered thereby) and capital lease obligations (which
will be senior as to the property covered thereby).
(a) Subordination to Senior Indebtedness. The
indebtedness evidenced by this Debenture, and the payment of the principal
hereof, and any interest hereon, is wholly subordinated, junior and subject in
right of payment, to the extent and in the manner hereinafter provided, to the
prior payment of all Senior Indebtedness of the Company now outstanding or
hereinafter incurred. "Senior Indebtedness" means the principal of, and premium,
if any, and interest on (i) all indebtedness of the Company for monies borrowed
from banks, trust companies, insurance companies and other financial
institutions whose primary business is lending money, including commercial paper
and accounts receivable sold or assigned by the Company to such institutions,
(ii) principal of, and premium, if any, and interest on any indebtedness or
obligations of a wholly-owned subsidiary of the Company of the kinds described
in (i) above assumed or guaranteed in any manner by the Company.
(b) No Payment if Default in Senior Indebtedness. No
payment on account of principal of or interest on the Debenture shall be made,
and no Debenture shall be redeemed or purchased by the Company, if at the time
of such payment or purchase or immediately after giving effect thereto, (i)
there shall exist a payment default on any Senior Indebtedness or (ii) there
shall have occurred an event of default (other than a default in the payment of
amounts due thereon) with respect to any Senior Indebtedness, as defined in the
instrument under which the same is outstanding, permitting the holders thereof
to accelerate the maturity thereof, and such event of default shall not have
been cured or waived or shall not have ceased to exist (collectively, a
"Blockage Event"). In the event there should exist a "Blockage Event" at a time
when there shall be an obligation to prepay Debentures, then the holder of the
Senior Indebtedness to which such Blockage Event exists shall have 20 Business
Days to declare in default and accelerate all amounts owed under such Senior
Indebtedness. If after such 20 Business Day period such declaration and
acceleration shall not have taken place, then the Company shall be obligated to
pay all prepayment amounts due hereunder, without regard to the provisions of
this Section.
Section 10. 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 11. 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
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 12. 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.
Section 13. 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.
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SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Convertible
Debenture to be duly executed by a duly authorized officer as of the date first
above indicated.
XXXXXXX.XXX, INC.
By:
------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
EXHIBIT A
HOLDER CONVERSION NOTICE
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
the Common Stock (the "Common Stock") of XxxXxxx.xxx, Inc. (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 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
Applicable Conversion Price
Signature
Name
Address
EXHIBIT B
COMPANY CONVERSION NOTICE
(To be Executed by the Company
to Require Conversion of Debentures)
The undersigned authorized officer of the XxxXxxx.xxx, Inc. (the "Company")
hereby requires the conversion of the principal amount of the Company's
Debentures held by the registered holder addressee hereof of the Company's
Common Stock (the "Common Stock") pursuant to the conditions of the Dentures as
of the date written below. 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
Applicable Conversion Price
Signature
Name and Office
