EXHIBIT 4.3
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ANNEX I TO
SECURITIES PURCHASE AGREEMENT
[PROTOTYPE FOR EACH ISSUANCE]
FORM OF DEBENTURE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No._________________________ US $ ___________
▇▇▇▇▇ TECHNOLOGIES, INC.
5% SENIOR SUBORDINATED CONVERTIBLE DEBENTURE DUE ___________________
THIS DEBENTURE is one of a duly authorized issue of up to $ 100,000.00
in Debentures of ▇▇▇▇▇ TECHNOLOGIES, INC, a corporation organized and existing
under the laws of the State of Utah (the "Company") designated as its 5% Senior
Subordinated Convertible Debentures.
FOR VALUE RECEIVED, the Company promises to pay to Professional Traders
Fund, the registered holder hereof (the "Holder"), the principal sum of and
00/100 Dollars (US $ ) on ____________________ (the "Maturity Date") and to pay
interest on the principal sum outstanding from time to time in arrears at the
rate of 5% per annum, accruing from , , the date of initial issuance of this
Debenture (the "Issue Date"), on the date (each, an "Interest Payment Date")
which is the earlier of (i) a Conversion Date (as defined below). (as defined
below) or (ii) the Maturity Date, as the case may be. Accrual of interest shall
commence on the first such business day to occur after the Issue Date and shall
continue to accrue on a daily basis until payment in full of the principal sum
has been made or duly provided for. Additional provisions regarding the payment
of interest are provided in Section 4(D) below (the terms of which shall govern
as if this sentence were not included in this Debenture).
This Debenture is being issued pursuant to the terms of the Securities
Purchase Agreement, dated _____________ , 2004 (the "Securities Purchase
Agreement"), to which the Company and the Holder (or the Holder's predecessor in
interest) are parties. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Securities Purchase Agreement.
This Debenture is subject to the following additional provisions:
1. The Debentures will initially be issued in denominations determined
by the Company, but are exchangeable for an equal aggregate principal amount of
Debentures of different denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
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2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws and the terms of the Securities
Purchase Agreement . In the event of any proposed transfer of this Debenture,
the Company may require, prior to issuance of a new Debenture in the name of
such other person, that it receive reasonable transfer documentation that is
sufficient to evidence that such proposed transfer complies with the Act and
other applicable state and foreign securities laws and the terms of the
Securities Purchase Agreement. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. (i) At any time on or after the Issue Date and prior to the time
this Debenture is paid in full in accordance with its terms (including without
limitation after the Maturity Date and after the occurrence of an Event of
Default, as defined below), the Holder of this Debenture is entitled, at its
option, subject to the following provisions of this Section 4, to convert this
Debenture at any time into shares of Common Stock, $0.01 par value ("Common
Stock"), of the Company of the Company at the Conversion Price (as defined
below).
(ii) The term "Conversion Price" means US $2.00.
(iii) Notwithstanding any other provision of this Debenture to the
contrary, if, on the Maturity Date there is an Unconverted Debenture (as defined
below), the Company shall have the option to pay the principal and accrued
interest (through the actual date of payment) of Unconverted Debenture (the
"Maturity Amount") either (i) in cash (and such cash shall be applied first to
interest and then to principal) or (ii) to the extent not paid in cash as
provided in clause (i), by delivering to the Holder such number of Conversion
Shares equal to such unpaid Maturity Amount divided by the Conversion Price then
in effect (such Conversion Shares, the "Maturity Date Shares"). The option to
pay any or all of the Maturity Amount by the issuance of Maturity Date Shares
shall be subject to the following conditions: (x) the Registration Statement
covering such shares must be effective at the time the Maturity Date Shares are
issued and (y) the issuance of the Maturity Date Shares shall not exceed the
amount contemplated by Section 4(C) hereof.
B. Conversion shall be effectuated by faxing a Notice of Conversion (as
defined below) to the Company as provided in this paragraph. The Notice of
Conversion shall be executed by the Holder of this Debenture and shall evidence
such Holder's intention to convert this Debenture or a specified portion hereof
in the form annexed hereto as Exhibit A. If paid in Common Stock as contemplated
hereby, interest accrued or accruing from the Issue Date to the relevant
Interest Payment Date shall be paid in Common Stock at the Conversion Price
applicable as of such Interest Payment Date. No fractional shares of Common
Stock or scrip representing fractions of shares will be issued on conversion,
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but the number of shares issuable shall be rounded to the nearest whole share.
The date on which notice of conversion is given (the "Conversion Date") shall be
deemed to be the date on which the Holder faxes or otherwise delivers the
conversion notice ("Notice of Conversion") to the Company so that it is received
by the Company on or before such specified date, provided that, if such
conversion would convert the entire remaining principal of this Debenture, the
Holder shall deliver to the Company the original Debentures being converted no
later than five (5) business days thereafter. Facsimile delivery of the Notice
of Conversion shall be accepted by the Company at facsimile number (801)
377-3314; Attn: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇. Certificates representing Common Stock upon
conversion ("Conversion Certificates") will be delivered to the Holder at the
address specified in the Notice of Conversion (which may be the Holder's address
for notices as contemplated by the Securities Purchase Agreement or a different
address), via express courier, by electronic transfer or otherwise, within three
(3) business days (such third business day, the "Delivery Date") after the date
on which the Notice of Conversion is delivered to the Company as contemplated in
this paragraph B, and, if interest is paid by Common Stock, the Interest Payment
Date. The Holder shall be deemed to be the holder of the shares issuable to it
in accordance with the provisions of this Section 4(B) on the Conversion Date.
C. Notwithstanding any other provision hereof or of any of the other
Transaction Agreements, in no event (except (i) as specifically provided herein
as an exception to this provision, or (ii) while there is outstanding a tender
offer for any or all of the shares of the Company's Common Stock) shall the
Holder be entitled to convert any portion of this Debenture, or shall the
Company have the obligation to convert such Debenture (and the Company shall not
have the right to pay interest hereon in shares of Common Stock) to the extent
that, after such conversion or issuance of stock in payment of interest, the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or other convertible securities or of the unexercised portion of
warrants or other rights to purchase Common Stock), and (2) the number of shares
of Common Stock issuable upon the conversion of the Debentures with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Holder upon such conversion). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, except as otherwise provided in clause (1) of such sentence. The
Holder, by its acceptance of this Debenture, further agrees that if the Holder
transfers or assigns any of the Debentures to a party who or which would not be
considered such an affiliate, such assignment shall be made subject to the
transferee's or assignee's specific agreement to be bound by the provisions of
this Section 4(C) as if such transferee or assignee were the original Holder
hereof. Nothing herein shall preclude the Holder from disposing of a sufficient
number of other shares of Common Stock beneficially owned by the Holder so as to
thereafter permit the continued conversion of this Debenture.
D. (i) Subject to the terms of Section 4(C) and to the other terms of
this Section 4(D), interest on the principal amount of this Debenture converted
pursuant to a Notice of Conversion shall be due and payable, at the option of
the Company, in cash or Common Stock on the Interest Payment Date.
(ii) If the interest is to be paid in cash, the Company shall make
such payment within three (3) business days of the Interest Payment Date. If the
interest is not paid by such third business day, the interest must be paid in
Common Stock in accordance with the provisions of Section 4(D)(i) hereof, unless
the Holder consents otherwise in each specific instance.
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(iii) Notwithstanding the foregoing, the Company's right to issue
shares in payment of such interest is applicable if, and only if, there is then
in effect a current Registration Statement covering the shares to be issued to
the Holder in payment of such interest.
(iv) The number of shares of Common Stock to be issued in payment
of such interest shall be determined by dividing the dollar amount of the
interest to be so paid by the Conversion Price on the relevant Interest Payment
Date. Such Common Stock shall be delivered to the Holder, or per Holder's
instructions, on the Delivery Date for the related Conversion Certificates
pursuant to Section 4(B) hereof.
(iv) If the Company elects to have the interest paid in cash, the
Company shall make such payment within three (3) business days of the Interest
Payment Date. If such payment is not made in cash by such date, it shall be
deemed that, subject to the provisions of Section 4(C) hereof, the Company has
elected to pay the interest in stock, if, but only if, the Registration
Statement covering the shares being issued is effective on the date such shares
are issued.
5. Subject to the terms of the Securities Purchase Agreement, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
7. All payments contemplated hereby to be made "in cash" shall be made
in immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). All payments of cash and each
delivery of shares of Common Stock issuable to the Holder as contemplated hereby
shall be made to the Holder at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time; except that the Holder can designate, by notice to the Company, a
different delivery address for any one or more specific payments or deliveries.
8. If, for as long as this Debenture remains outstanding, the Company
enters into a merger or consolidation with another corporation or other entity
(other than where the Company is the surviving entity) or a sale or transfer of
all or substantially all of the assets of the Company to another person
(collectively, a "Change of Control"), then the Company must give fifteen days
written notice to the Holder of the Change of Control, whereupon the Holder may
elect by written notice to the Company that the Debenture is immediately due and
payable, and the Maturity Date shall be accelerated accordingly, without
presentment, demand, protest or other notice of any kinds, all of which are
hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law (the "Election").
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If the Holder does not make the Election, then the Company will
require, in the agreements reflecting such Change of Control, that the surviving
entity expressly assume the obligations of the Company hereunder.
Notwithstanding the foregoing, if the Company enters into a Change of Control
and the holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such Change of Control, the Company and any such successor, purchaser or
transferee will agree that the Debenture may thereafter be converted on the
terms and subject to the conditions set forth above into the kind and amount of
stock, securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable. In the event of any such proposed Change of
Control, (i) the Holder hereof shall have the right to convert by delivering a
Notice of Conversion to the Company within fifteen (15) days of receipt of
notice of such Change of Control from the Company, except that Section 4(C)
shall not apply to such conversion.
9. If, at any time while any portion of this Debenture remains
outstanding, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes of all or of a part of its assets in a
transaction (the "Spin Off") in which the Company, in addition to or in lieu of
any other compensation received and retained by the Company for such business,
operations or assets, causes securities of another entity (the "Spin Off
Securities") to be issued to security holders of the Company, the Company shall
cause (i) to be reserved Spin Off Securities equal to the number thereof which
would have been issued to the Holder had all of the Holder's Debentures
outstanding on the record date (the "Record Date") for determining the amount
and number of Spin Off Securities to be issued to security holders of the
Company (the "Outstanding Debentures") been converted as of the close of
business on the trading day immediately before the Record Date (the "Reserved
Spin Off Shares"), and (ii) to be issued to the Holder on the conversion of all
or any of the Outstanding Debentures, such amount of the Reserved Spin Off
Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction,
of which (I) the numerator is the principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.
10. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Conversion Price and any other amounts calculated as
contemplated hereby or by any of the other Transaction Agreements shall be
equitably adjusted to reflect such action. By way of illustration, and not in
limitation, of the foregoing, (i) if the Company effectuates a 2:1 split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues shares after the record date of such split, the Conversion Price shall be
deemed to be one-half of what it had been immediately prior to such split; (ii)
if the Company effectuates a 1:10 reverse split of its Common Stock, thereafter,
with respect to any conversion for which the Company issues shares after the
record date of such reverse split, the Conversion Price shall be deemed to be
ten times what it had been calculated to be immediately prior to such split; and
(iii) if the Company declares a stock dividend of one share of Common Stock for
every 10 shares outstanding, thereafter, with respect to any conversion for
which the Company issues shares after the record date of such dividend, the
Conversion Price shall be deemed to be such amount multiplied by a fraction, of
which the numerator is the number of shares (10 in the example) for which a
dividend share will be issued and the denominator is such number of shares plus
the dividend share(s) issuable or issued thereon (11 in the example).
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11. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
12. The Holder acknowledges and agrees that the Debenture and all
principal and interest due thereunder is and shall be subordinated to any and
all secured debt issued by the Company on or after the Closing Date ("Secured
Debt") to any other lender (the "Secured Lender") and the Holder shall execute
such subordination agreements and other documentation as the Company or any
Secured Lender may reasonably require to effect such subordination in favor of
any particular Secured Lender provided (i) that the Company shall pay the
Holder's reasonable costs in respect in respect of the preparation and execution
of such subordination agreement, and (ii) no such Subordination Agreement shall
affect any conversion rights hereunder.
13. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
exclusive jurisdiction of the federal courts whose districts encompass any part
of the City of New York or the state courts of the State of New York sitting in
the City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing of any
such proceeding in such jurisdictions. To the extent determined by such court,
the Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Holder in enforcement of or protection of any of
its rights under any of this Debenture.
14. The Company and the Holder hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out of or in connection with
this Debenture.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest
on this Debenture, any Redemption Amount due hereunder or any
other amount due, and, in any such instance, the same shall
continue for a period of five (5) business days; or
b. Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement or any of the other
Transaction Agreements or in any certificate or financial or other
written statements heretofore or hereafter furnished by the
Company in connection with the execution and delivery of this
Debenture or the Securities Purchase Agreement shall be false or
misleading in any material respect at the time made; or
c. Subject to the terms of the Securities Purchase Agreement, the
Company fails to authorize or to cause its Transfer Agent to issue
shares of Common Stock upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of
this Debenture, fails to transfer or to cause its Transfer Agent
to transfer any certificate for shares of Common Stock issued to
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the Holder upon conversion of this Debenture and when required by
this Debenture or the Registration Rights Agreement, and such
transfer is otherwise lawful, or fails to remove any restrictive
legend on any certificate or fails to cause its Transfer Agent to
remove such restricted legend, in each case where such removal is
lawful, as and when required by this Debenture, the Agreement or
the Registration Rights Agreement, and any such failure shall
continue uncured for ten (10) business days; or
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement
or obligation of any Debenture in this series and such failure
shall continue uncured for a period of thirty (30) days after
written notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under any of the Transaction Agreements
and such failure shall continue uncured for a period of thirty
(30) days after written notice from the Holder of such failure; or
f. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution;
or (3) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its
property or business; or
g. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within sixty (60)
days after such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any
such proceeding; or
j. The Company shall have its Common Stock suspended from trading on,
or delisted from, the Principal Trading Market for in excess of
ten (10) trading days; or
k. Any event defined in another provision of this Debenture as an
Event of Default shall have occurred.
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If an Event of Default shall have occurred, then, or at any time
thereafter, and in each and every such case, unless such Event of Default shall
have been waived in writing by the Holder (which waiver shall not be deemed to
be a waiver of any subsequent default) at the option of the Holder and in the
Holder's sole discretion, the Holder may consider this Debenture immediately due
and payable (and the Maturity Date shall be accelerated accordingly), without
presentment, demand, protest or notice of any kinds, all of which are hereby
expressly waived, anything herein or in any note or other instruments contained
to the contrary notwithstanding, and the Holder may immediately enforce any and
all of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or act of the Company
or the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section or
otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section shall control every other provision
of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: ___________________, 20___
▇▇▇▇▇ Technolgies, Inc.
By:____________________________________
---------------------------------------
(Print Name)
_______________________________________
(Title)
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EXHIBIT A
NOTICE OF CONVERSION
OF
5% SENIOR SUBORDINATED CONVERTIBLE DEBENTURE DUE __________________
(To be Executed by the Registered Holder in Order to Convert the Debenture)
FROM: ("Holder")
---------------------------------------------------------------
DATE: (the "Conversion Date")
---------------------------------------------------
RE: Conversion of $___________ principal amount (the "Converted Debenture")
of the 5% Senior Subordinated Convertible Debenture Due
____________________ (the "Debenture") of ▇▇▇▇▇ Technologies, Inc. (the
"Company") into _______________ shares (the "Conversion Shares") of
Common Stock (defined below)
CONVERSION DATE: __________________________________
The captioned Holder hereby gives notice to the Company, pursuant to
the Debenture of ▇▇▇▇▇ TECHNOLOGIES, INC. that the Holder elects to convert the
Converted Debenture into fully paid and non-assessable shares of Common Stock,
$0.01 par value (the "Common Stock"), of the Company as of the Conversion Date
specified above. Said conversion shall be based on the following Conversion
Price
$__________, representing the original Conversion Price (as
defined in the Debenture)
$__________, representing the original Conversion Price (as
defined in the Debenture), adjusted in accordance with the
provisions of the Debenture.
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Based on this Conversion Price, the number of Conversion Shares
indicated above should be issued in the following name(s):
Name and Record Address Conversion Shares
-------------------------------------- ----------------
-------------------------------------- ----------------
-------------------------------------- ----------------
It is the intention of the Holder to comply with the provisions of
Section 4(C) of the Debenture regarding certain limits on the Holder's right to
convert thereunder. Based on the analysis on the attached Worksheet Schedule,
the Holder believe this conversion complies with the provisions of said Section
4(C). Nonetheless, to the extent that, pursuant to the conversion effected
hereby, the Holder would have more shares than permitted under said Section,
this notice should be amended and revised, ab initio, to refer to the conversion
which would result in the issuance of shares consistent with such provision. Any
conversion above such amount is hereby deemed void and revoked.
As contemplated by the Debenture and the Securities Purchase Agreement,
this Notice of Conversion is being sent by facsimile to the telecopier number
and officer indicated above.
If this Notice of Conversion represents the full conversion of the
outstanding balance of the Converted Debenture, the Holder either (1) has
previously surrendered the Converted Debenture, duly endorsed, to the Company or
(2) will surrender (or cause to be surrendered) the Converted Debenture, duly
endorsed, to the Company at the address indicated above by express courier
within five (5) business days after delivery or facsimile transmission of this
Notice of Conversion.
The certificates representing the Conversion Shares should be
transmitted by the Company to the Holder via express courier or by electronic
transfer within the time contemplated by the Debenture and Securities Purchase
Agreement after receipt of this Notice of Conversion (by facsimile transmission
or otherwise) to:
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As contemplated by the Debenture, the Company should also pay all
accrued but unpaid interest on the Converted Debenture to the Holder.
-- If the Company elects to pay such interest in
Common Stock, as contemplated by and subject to the provisions
of the Debenture, such shares should be issued in the name of
the Holder and delivered in the same manner as, and together
with, the Conversion Shares.
-- If the Company elects or is required to pay the
interest paid in cash, such payment should be made by wire
transfer as follows:
-----------------------------------
(Print name of Holder)
By: _______________________________
(Signature of Authorized Person)
-----------------------------------
(Printed Name and Title)
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NOTICE OF CONVERSION
WORKSHEET SCHEDULE
1. Current Common Stock holdings of Holder and Affiliates _______
2. Shares to be issued on current conversion(s) and other exercise(s) _______
3. Other shares to be issued on other current conversion(s) and
other current exercise(s) _______
4. Other shares eligible to be acquired within next 60 days
without restriction _______
5. Total [sum of Lines 1 through 4] _______
6. Outstanding shares of Common Stock* _______
7. Adjustments to Outstanding
a. Shares known to Holder as previously issued
to Holder or others but not included in Line 6 _______
b. Shares to be issued per Line(s) 2 and 3 _______
c. Total Adjustments [Lines 7a and 7b] _______
8. Total Adjusted Outstanding [Lines 6 plus 76c] _______
9. Holder's Percentage [Line 5 divided by Line 8] ______%
[Note: Line 9 not to be above 4.99%]
* Based on latest SEC filing by Company or information provided by executive
officer of Company, counsel to Company or transfer agent
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
▇▇▇▇▇ TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions. In consideration of good and valuable
consideration, the receipt of which is hereby acknowledged by ▇▇▇▇▇
TECHNOLOGIES, INC., a Utah corporation (the "Company"), Professional Traders
Fund ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or registered assigns (the
"Holder") is hereby granted the right to purchase at any time until 5:00 P.M.,
New York City time, on ___ day of May, 2007 (the "Expiration Date"), Fifty
Thousand (50,000) fully paid and nonassessable shares of the Company's Common
Stock, $0.01 par value per share (the "Common Stock"), at an initial exercise
price per share (the "Exercise Price") of $3.50 per share, subject to further
adjustment as set forth herein.
2. Exercise of Warrants.
(a) This Warrant is exercisable in whole or in part at any time
and from time to time. Such exercise shall be effectuated by submitting to the
Company (either by delivery to the Company or by facsimile transmission as
provided in Section 8 hereof) a completed and duly executed Notice of Exercise
(substantially in the form attached to this Warrant) as provided in this
paragraph. The date such Notice of Exercise is faxed to the Company shall be the
"Exercise Date," provided that the Holder of this Warrant tenders this Warrant
Certificate to the Company within five (5) business days thereafter. The Notice
of Exercise shall be executed by the Holder of this Warrant and shall indicate
the number of shares then being purchased pursuant to such exercise. Upon
surrender of this Warrant Certificate, together with appropriate payment of the
Exercise Price for the shares of Common Stock purchased, the Holder shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased.
(b) The Exercise Price per share of Common Stock for the shares
then being exercised shall be payable in cash or by certified or official bank
check.
(c) The Holder shall be deemed to be the holder of the shares
issuable to it in accordance with the provisions of this Section 2 on the
Exercise Date.
3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
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5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution and Other Adjustments.
6.1 Adjustment Mechanism. The Company covenants and agrees that, except
for the sale of Debentures and Warrants to the Other Lenders, and, the period
(the "New Transaction Period") from the Initial Closing Date of the Securities
Purchase Agreement and until 60 days after the Effective Date of the
Registration Statement, any subsequent or further offer or sale of Common Stock
or securities convertible into and/or other rights exercisable for the issuance
of Common Stock (collectively, "New Common Stock") to or with any third party
will constitute a "New Transaction". Notwithstanding anything to the contrary in
this Section 6, a New Transaction shall not include that certain transaction in
which the Company may raise an additional approximately $3,500,000.00, or more,
involving some or none of the Other Lenders within the transaction period.
In the event there is a New Transaction:
(A) the number of Warrants shall be adjusted to equal the higher of (1)
the number of Warrant Shares originally provided in the Warrants or (2) the
number of warrants under the terms of the New Transaction multiplied by the
lesser of(I) the number 1, if the exercise price of the warrants under the terms
of the New Transaction ("the New Transaction Warrant Price") is less than or
equal to the existing Warrant Price and (II) the quotient of the existing
Warrant Price divided by the New Transaction Warrant Price, if the the New
Transaction Warrant Price exceeds the existing Warrant Price; and
(B) the Exercise Price on the Warrants shall be adjusted to equal the
lower of (1) the then existing Warrant Price or (2) the New Transaction Warrant
Price.
If an adjustment of the Exercise Price is required pursuant to
this Section 6, the Holder shall be entitled to purchase such
number of additional shares of Common Stock as will cause (i)
the total number of shares of Common Stock Holder is entitled
to purchase pursuant to this Warrant, multiplied by (ii) the
adjusted Exercise Price per share, to equal (iii) the dollar
amount of the total number of shares of Common Stock Holder is
entitled to purchase before adjustment multiplied by the total
Exercise Price immediately before adjustment.
6.2 Capital Adjustments. If, at any time while any portion of this
Warrant remains outstanding, the Company effectuates a stock split or reverse
stock split of its Common Stock or issues a dividend on its Common Stock
consisting of shares of Common Stock, the Exercise Price and any other amounts
calculated as contemplated hereby or by any of the other Transaction Agreements
shall be equitably adjusted to reflect such action. By way of illustration, and
not in limitation, of the foregoing, (i) if the Company effectuates a 2:1 split
of its Common Stock, thereafter, with respect to any conversion for which the
Company issues shares after the record date of such split, the Exercise Price
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shall be deemed to be one-half of what it had been immediately prior to such
split; (ii) if the Company effectuates a 1:10 reverse split of its Common Stock,
thereafter, with respect to any conversion for which the Company issues shares
after the record date of such reverse split, the Exercise Price shall be deemed
to be ten times what it had been calculated to be immediately prior to such
split; and (iii) if the Company declares a stock dividend of one share of Common
Stock for every 10 shares outstanding, thereafter, with respect to any
conversion for which the Company issues shares after the record date of such
dividend, the Exercise Price shall be deemed to be such amount multiplied by a
fraction, of which the numerator is the number of shares (10 in the example) for
which a dividend share will be issued and the denominator is such number of
shares plus the dividend share(s) issuable or issued thereon (11 in the
example).
In case of any stock split or reverse stock split, stock dividend,
reclassification of the Common Stock, recapitalization, merger or consolidation,
or like capital adjustment affecting the Common Stock of the Company prior to
the exercise of this Warrant or its applicable portion, the provisions of this
Section 6 shall be applied as if such capital adjustment event had occurred
immediately prior to the exercise date of this Warrant and the original Exercise
Price had been fairly allocated to the stock resulting from such capital
adjustment; and in other respects the provisions of this Section shall be
applied in a fair, equitable and reasonable manner so as to give effect, as
nearly as may be, to the purposes hereof.
6.3 Spin Off. If, for any reason, prior to the exercise of this Warrant
in full, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
to be issued to security holders of the Company, then the Company shall notify
the Holder at least thirty (30) days prior to the record date with respect to
such Spin-Off.
7. Transfer to Comply with the Securities Act; Registration Rights.
7.1 Transfer. This Warrant has not been registered under the Securities
Act of 1933, as amended, (the "Act") and has been issued to the Holder for
investment and not with a view to the distribution of either the Warrant or the
Warrant Shares. Except for transfers to officers, employees and affiliates of
the Holder, neither this Warrant nor any of the Warrant Shares or any other
security issued or issuable upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of an effective registration
statement under the Act relating to such security or an opinion of counsel
satisfactory to the Company that registration is not required under the Act.
Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. (a) Reference is made to the Registration
Rights Agreement. The Company's obligations under the Registration Rights
Agreement and the other terms and conditions thereof with respect to the Warrant
Shares, including, but not necessarily limited to, the Company's commitment to
file a registration statement including the Warrant Shares, to have the
registration of the Warrant Shares completed and effective, and to maintain such
registration, are incorporated herein by reference.
(b) In addition to the registration rights referred to in the preceding
provisions of Section 7.2(a), effective after the expiration of the
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effectiveness of the Registration Statement as contemplated by the Registration
Rights Agreement, the Holder shall have piggy-back registration rights with
respect to the Warrant Shares then held by the Holder or then subject to
issuance upon exercise of this Warrant (collectively, the "Remaining Warrant
Shares"), subject to the conditions set forth below. If, at any time after the
Registration Statement has ceased to be effective, the Company participates
(whether voluntarily or by reason of an obligation to a third party) in the
registration of any shares of the Company's stock (other than a registration on
Form S-8 or on Form S-4), the Company shall give written notice thereof to the
Holder and the Holder shall have the right, exercisable within ten (10) business
days after receipt of such notice, to demand inclusion of all or a portion of
the Holder's Remaining Warrant Shares in such registration statement. If the
Holder exercises such election, the Remaining Warrant Shares so designated shall
be included in the registration statement at no cost or expense to the Holder
(other than any costs or commissions which would be borne by the Holder under
the terms of the Registration Rights Agreement); provided, however, that if
there is a managing underwriter of the offering of shares referred to in the
registration statement and such managing underwriter advises the Company in
writing that the number of shares proposed to be included in the offering will
have an adverse effect on its ability to successfully conclude the offering and,
as a result, the number of shares to be included in the offering is to be
reduced, the number of Remaining Warrant Shares of the Holder which were to be
included in the registration (before such reduction) will be reduced pro rata
with the number of shares included for all other parties whose shares are being
registered. The Holder's rights under this Section 7 shall expire at such time
as the Holder can sell all of the Remaining Warrant Shares under Rule 144
without volume or other restrictions or limit.
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
sent by facsimile transmission or sent by couriercertified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission, or
by courier, if mailed, four days after the date of deposit in the United States
mails, as follows:
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(i) if to the Company, to:
▇▇▇▇▇ Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn:
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (801)
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇)▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇)▇▇▇-▇▇▇▇
(ii) if to the Holder, to:
Professional Traders Fund
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Telephone No.: (973)
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, Esqs.
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Any party may give notice in accordance with this Section to the other
parties designate to another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant contains the full understanding of the parties with respect
to the subject matter hereof and thereof and there are no representations,
warranties, agreements or understandings other than expressly contained herein
and therein.
10. Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of New York for contracts to be wholly performed in
such State and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of New York, New
York County in connection with any dispute arising under this Warrant and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions.
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11. Jury Trial Waiver. The Company and the Holder hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter arising out or in
connection with this Warrant.
12. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
13. Descriptive Headings. Descriptive headings of the several Sections
of this Warrant are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
_____ day of May 2004.
▇▇▇▇▇ TECHNOLOGIES, INC.
By:
------------------------------------
Name: ________________________________
Title: _______________________________
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NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of , , to purchase shares of the
------------------------ ------- ---------------------
Common Stock, $0.01 par value, of ▇▇▇▇▇ TECHNOLOGIES, INC., and tenders
herewith payment in accordance with Section 1 of said Common Stock Purchase
Warrant.
CASH: $ = (Exercise Price x Exercise Shares)
-------------------
Payment is being made by:
enclosed check
wire transfer
other
Please deliver the stock certificate to:
Dated:
[Name of Holder]
By:
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