ANNEX I(a)
TO
SECURITIES PURCHASE AGREEMENT
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 2000-01 US $600,000
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FINANCIAL INTRANET, INC.
8% CONVERTIBLE DEBENTURE DUE DECEMBER 31, 2000
THIS DEBENTURE is one of a duly authorized issue of up to $800,000 in
Debentures of FINANCIAL INTRANET, INC., a corporation organized and existing
under the laws of the State of Nevada (the "Company") designated as its 8%
Convertible Debentures. Such Debentures may be issued in series, each of which
may have a different maturity date, but which otherwise have substantially
similar terms.
FOR VALUE RECEIVED, the Company promises to pay to XXXXX LLC, the
registered holder hereof (the "Holder"), the principal sum of Six Hundred
Thousand and 00/100 Dollars (US $600,000) on December 31, 2000 (the "Maturity
Date") and to pay interest on the principal sum outstanding from time to time in
arrears (i) prior to the Maturity Date, quarterly, on the last day of March,
June, September and December of each year, (ii) upon conversion as provided
herein or (iii) on the Maturity Date, at the rate of 8% per annum accruing from
May 20, 2000, the date of initial issuance of this Debenture. Accrual of
interest shall commence on the first such business day to occur after the date
hereof and shall continue to accrue on a daily basis until payment in full of
the principal sum has been made or duly provided for.
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This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debentures are 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 or transfer or exchange.
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. 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 including legal opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. 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. The Holder of this Debenture is entitled, at its option, subject
to the following provisions of this Section 4, to convert all or a portion of
this Debenture into shares of Common Stock of the Company, $.001 par value per
share ("Common Stock") of the Company at any time until the Maturity Date, at a
conversion price for each share of Common Stock (the "Conversion Rate") equal to
the Current Market Price (as defined below) multiplied by seventy-five percent
(75%); provided that the principal amount being converted is the lower of (x) at
least US $10,000 (unless if at the time of such election to convert the
aggregate principal amount of all Debentures registered to the Holder is less
than Ten Thousand Dollars [US $10,000], then the whole amount thereof) or (y)
the maximum amount which the Holder can then convert pursuant to the terms of
Section 2(E) hereof .
B. For purposes of this Debenture, the following terms have the
meanings indicated below:
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(i) "Market Price of the Common Stock" means (x) the closing
bid price of the Common Stock for the period indicated in the relevant
provision, as reported by Bloomberg, LP or, if not so reported, as reported on
the over-the-counter market or (y) if the Common Stock is listed on a stock
exchange, the closing price on such exchange, as reported in The Wall Street
Journal.
(ii) "Current Market Price" means the average Market Price of
the Common Stock for the five (5) trading days ending on the trading day
immediately before the relevant Conversion Date (as defined below).
C. Conversion shall be effectuated by surrendering the
Debentures to be converted to the Company, accompanied by or preceded by
facsimile or other delivery to the Company of the form of conversion notice
attached hereto as Exhibit A, executed by the Holder of the Debenture evidencing
such Holder's intention to convert this Debenture or a specified portion hereof,
and accompanied, if required by the Company, by proper assignment hereof in
blank. Subject to the provisions of Section 2(E) hereof, interest accrued or
accruing from the date of issuance to the date of conversion shall, at the
option of the Company, be paid in cash or Common Stock upon conversion at the
Conversion Rate applicable to such conversion. No fractional shares of Common
Stock or scrip representing fractions of shares will be issued on conversion,
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"), substantially in the form annexed
hereto as Exhibit A, duly executed, to the Company, provided that the Holder
shall deliver to the Company's transfer agent or the Company the original
Debentures being converted within five (5) business days thereafter (and if not
so delivered with such time, the Conversion Date shall be the date on which the
later of the Notice of Conversion and the original Debentures being converted is
received by the Company). Facsimile delivery of the Notice of Conversion shall
be accepted by the Company at facsimile number (914) -242-4884; ATTN: Xxxxxxx
Xxxxxxxx, President. Certificates representing Common Stock upon conversion will
be delivered within three (3) business days from the date later of the Notice of
Conversion is delivered to the Company as contemplated in the first sentence of
this paragraph C or the original Debenture is delivered to the Company's
transfer agent or the Company.
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D. Notwithstanding any other provision hereof, or of any of
the other Transaction Agreements (as those terms are defined in the Securities
Purchase Agreement), in no event (except (i) with respect to an automatic
conversion, if any, of a Debenture as provided in the Debentures, (ii) as
specifically provided in this Debenture as an exception to this provision, or
(iii) 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
Debenture or shall the Company have the obligation, to convert all or any
portion of this Debenture (and the Company shall not have the right to pay
interest on this Debenture) to the extent that, after such conversion, 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), 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 9.99% of the outstanding shares of Common Stock
(after taking into account the shares to be issued to the Holder upon such
conversion or exercise). 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 (the "1934
Act"), 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(E)
as if such transferee or assignee were the original Holder hereof.
5. Any principal portion of Debentures, including accrued interest
associated therewith, not previously converted as of the Maturity Date, shall be
redeemed by the company in United States dollars at the Maturity Date. The
Redemption Price shall be equal to the greater of (i) 133% of the outstanding
principal and interest balance of the Debenture, or (ii) the "Economic Benefit"
of the principal and interest of the Debenture. "Economic Benefit" shall mean
the dollar value derived if the principal (and interest) which was converted on
the Maturity Date and sold on the Maturity Date at the Closing Bid Price of the
Common Stock on the Maturity Date.
6. Subject to the terms of the Securities Purchase Agreement, dated May
20, 2000 (the "Securities Purchase Agreement"), between the Company and the
Holder (or the Holder's predecessor in interest), 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.
7. 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.
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8. If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person 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 merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee 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 proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), 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 Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5 hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
9. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, 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
(the "Spin Off Securities") to be issued to security holders of the Company,
then 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.
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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 Base Price 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 the shares after the record date of
such split, the Base Price shall be deemed to be one-half of what it had been
calculated to be 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 the shares after the record date
of such reverse 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 the shares after the record date
of such dividend, the Base Price shall be deemed to be the amount of such Base
Price calculated immediately prior to such record date multiplied by a fraction,
of which the numerator is the number of shares (10) 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).
11. All payments contemplated hereby to be made "in cash" shall be made
in immediately available good funds in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts. 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.
12. 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.
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
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 following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal
or interest on this Debenture and same shall continue
for a period of three (3) days; or
b. Any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement,
the Registration Rights Agreement 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
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c. The Company fails to issue shares of Common Stock to
the Holder 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 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 or to cause
its Transfer Agent to transfer on any certificate or
any shares of Common Stock issued to the Holder upon
conversion of this Debenture as and when required by
this Debenture, the Agreement or the Registration
Rights Agreement and such legend removal is otherwise
lawful, and any such failure shall continue uncured
for five (5) business days.
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 the Securities Purchase Agreement or the
Registration Rights Agreement and such failure shall
continue uncured for a period of thirty (30) days
after written notice from the Holder of such failure
(other than a failure to cause the Registration
Statement to become effective no later than the
Required Effective Date, as defined and provided in
the Registration Rights Agreement, as to which no
such cure period shall apply); 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
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i. Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
($100,000) Dollars in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days
or in any event later than five (5) days prior to the
date of any proposed sale thereunder; or
j. 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
k. The Company shall have its Common Stock suspended or
delisted from an exchange or over-the-counter market
from trading for in excess of five (5) trading days.
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, 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.
15. 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.
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16. 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, the 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 16
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 16 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: May 20, 2000
FINANCIAL INTRANET, INC.
By:/s/Xxxxx Xxxxxx
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Xxxxx Xxxxxx
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(Print Name)
V.P.
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(Title)
9
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of
the principal amount of the above Debenture No. ___ into Shares of Common Stock
of FINANCIAL INTRANET, INC. (the "Company") according to the conditions hereof,
as of the date written below.
Conversion Date*
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Applicable Conversion Price
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Signature
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[Name]
Address:
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* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
by one of its officers thereunto duly authorized as of the date set forth below.
AMOUNT AND PURCHASE PRICE OF INITIAL DEBENTURES: $600,000
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SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing state-
ments are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 20 day of May, 2000.
Corporate Centre, West Bay Rd.
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Address Printed Name of Subscriber XXXXX LLC
XX XXX 000 05 SMB
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Grand Cayman, Cayman Is. BVI By: (illegible)
Telecopier No. (000)-000-0000 (Signature of Authorized Person)
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Printed Name and Title
Cayman Islands
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Jurisdiction of Incorporation
or Organization Navigator Management Ltd.
Director
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing ststements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
FINANCIAL INTRANET, INC.
By: Xxxxx Xxxxxx
Title: V.P.
Date: May 20, 2000