EXHIBIT 4.2
___________ , 200_ $_________
XXXXXXXX.XXX, INC.
12% SUBORDINATED CONVERTIBLE DEBENTURE
Xxxxxxxx.xxx, Inc., a Nevada corporation (the "Company") , for value
received, promises to pay to ______________________ (the "Purchaser"), or
registered assigns, the principal sum of __________________ Thousand Dollars
($___________), on ___________, and to pay simple interest on the principal sum
hereof, subject to the provisions of Section 6 hereof, at the rate of twelve
percent (12%) per annum. During the term hereof interest shall be payable
quarterly in arrears on each _____ 1, _____ 1, ______ 1, and _____ 1,
commencing with _______ 1, 2001. The principal hereof, and the interest hereon,
shall be payable by mail to the registered address of the owner hereof.
The following is a statement of the rights of the holder of this Debenture
and the terms and conditions to which this Debenture is subject, to which the
holder hereof, by the acceptance of this Debenture, assents:
1. Definitions. As used in this Debenture, the following terms, unless the
context otherwise requires, have the following meanings:
1.1 "Company" includes any corporation which shall succeed to or assume the
obligations of the Company under this Debenture.
1.2 "Common Stock" when used with reference to shares of the Company means
all shares, now or hereafter authorized, of the class of the Common Stock of the
Company presently authorized and shares of any other class into which those
shares may hereafter be changed.
1.3 "Debentureholder", "holder of this Debenture", "holder", or similar
terms, when the context refers to a holder of this Debenture, shall mean any
person who shall at the time be the registered holder of this Debenture.
1.4 "Subsidiary" shall mean a corporation of which at least 50% of the
voting securities having ordinary voting power to elect a majority of the
directors not dependent upon a default is owned directly or indirectly by the
Company or by one or more of its other subsidiaries or by the Company in
conjunction with one or more of its other subsidiaries.
2. Transferability Restrictions. This Debenture and each certificate
representing the Common Stock issued on the conversion of this Debenture are
subject to the following restrictions. The holder of this Debenture may
transfer this Debenture and any shares of Common Stock issued upon the
conversion hereof to any person or entity provided such transfer will not
violate the Securities Act of 1933, as amended (the "Act"), and such transfer is
permissible under the terms of this Agreement. Any transfer permitted by the
preceding sentence shall not be effected until the transferor has first given
written notice to the Company describing briefly the manner of any such proposed
transfer and until: (a) the Company has received from the transferor's counsel
an opinion, satisfactory to counsel for the Company, that such transfer can be
made without compliance with the registration provisions of the Act or
applicable state securities laws; or (b) the Company and the transferor shall
have complied with Rule 144 promulgated under the Act; or (c) a registration
statement with respect to the securities being transferred is filed by the
Company and declared effective by the Securities and Exchange Commission or
steps necessary to perfect an exemption from registration are completed.
3. Conversion. Subject to the requirement that no conversion hereof may be
made if it would result in the violation of any applicable law or the Company
being in violation of any applicable law, the holder of this Debenture may elect
at any time during the term hereof, by notice to the Company, to convert this
Debenture, in whole or in part, into fully-paid shares of Common Stock. The
price at which shares of Common Stock shall be delivered upon conversion (the
"Conversion Price") shall be _____________ Cents ($_____) per share.
4. Issuance of Shares of Common Stock on Conversion. As soon as practicable
after full or partial conversion of this Debenture, the Company at its expense
will cause to be issued in the name of and delivered to the holder of this
Debenture (a) a certificate or certificates for the number of shares of Common
Stock to which that holder shall be entitled on such conversion, together with
any other securities and property to which the holder is entitled on such
conversion under the terms of this Debenture, and (b) if any principal amount of
this Debenture remains unpaid after such conversion, a new Debenture,
substantially in the form of this Debenture, dated the date to which interest
has been paid on the Debenture surrendered for conversion, in an aggregate
principal amount equal to such unpaid principal amount, and specifying the
portion of such unpaid principal amount, if any, which may be converted into
shares of Common Stock. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date that this Debenture shall
have been surrendered for conversion, accompanied by written notice of
conversion, so that the rights of the holder of this Debenture as a Debenture
holder with respect to the principal amount of the Debenture so converted shall
cease at such time and the person or persons entitled to receive the shares of
Common Stock upon conversion of this Debenture shall be treated for all purposes
as having become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the Conversion Price in effect at such
time; provided, however, that no such surrender on any date when the stock
transfer books of the Company shall be closed shall be effective to constitute
the person or persons entitled to receive the shares of Common Stock upon such
conversion as the record holder or holders of such shares of Common Stock on
such date, but such surrender shall be effective to constitute the person or
persons entitled to receive such shares of Common Stock the record holder or
holders thereof for all purposes at the close of business on the next succeeding
day on which such stock transfer books are open and such conversion shall be at
the Conversion Price in effect on the date that this Debenture shall have been
surrendered for conversion. If the last day for the exercise of the conversion
rights shall be a Sunday or shall be in Vancouver, British Columbia, a legal
holiday or a day on which banking institutions are authorized by law to close,
then such conversion right may be exercised on the next succeeding day not in
Vancouver, British Columbia, a legal holiday or a day on which banking
institutions are authorized by law to close. The Company shall pay all interest
on this Debenture or portion thereof surrendered for conversion accrued to the
date of surrender and any and all taxes in respect of the certificates for the
shares of Common Stock issued upon any conversion of this Debenture. No
fractional shares will be issued on conversion of this Debenture. If on any
conversion of this Debenture a fraction of a share of Common Stock results, the
Company will pay the cash value of that fractional share of Common Stock,
calculated on the basis of the market price of the Common Stock (or book value,
if the Common Stock is not publicly traded) as of the close of business on the
date that this Debenture shall have been surrendered for conversion.
5. Adjustments to Conversion Price.
5.1 Stock Dividends, Subdivisions and Distributions.
If at any time prior to the maturity, or earlier prepayment or conversion,
hereof the Company shall declare any dividend, or make any other distribution,
on or in respect of any stock of the Company of any class, which dividend is
payable or paid in Common Stock or other securities of the Company, or if the
Company shall at any time prior to the maturity, or earlier prepayment or
conversion, hereof subdivide its outstanding shares of Common Stock, the
Conversion Price shall, concurrently with the effectiveness of such declaration,
distribution or subdivision, be proportionately decreased.
5.2 Adiustments for Combinations or Consolidation of Common Stock. In the
event that prior to the maturity, or prepayment or conversion, hereof the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the applicable Conversion Price in Section 3 shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
5.3 No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company but will at all times in good
faith assist in the carrying out of all the provisions of this Section 5 and in
the taking of all such action as may be necessary or appropriate in order to
protect against dilution or impairment of the rights set forth in Section 5 of
the holder of this Debenture.
5.4 Certificate as to Adjustments. Upon the occurrence of each adjustment
of the Conversion Price pursuant to this Section 5, the Company at its expense
shall promptly compute such adjustment in accordance with the terms hereof and
furnish to the holder of this Debenture a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company shall, upon the written request at any time of the holder of this
Debenture, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and (ii) the Conversion Price formula at the
time in effect.
5.5 Common Stock Reserved. The Company shall reserve and keep available out
of its authorized but unissued Common Stock such number of shares of Common
Stock as shall from time to time be sufficient to effect conversion of this
Debenture.
5.6 Reclassification, Exchanae and Substitution. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of this Debenture (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the Company, or such successor or purchasing corporation, as the case
may be, shall execute with the holder of this Debenture a supplemental agreement
providing that the holder hereof shall have the right thereafter to convert this
Debenture into the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, change, sale or conveyance by a
holder of the number of shares of Common Stock into which such Debenture might
have been converted immediately prior to such reclassification, change, sale or
conveyance. Such supplemental agreement shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 5.
5.7 No Change Necessary. The form of this Debenture need not be changed
because of any adjustment in the Conversion Price formula in Section 3. A
Debenture issued after any adjustment on any partial conversion or upon
replacement may continue to express the same Conversion Price as is stated in
this Debenture as initially issued, and the Conversion Price formula shall be
considered to have been so changed as of the close of business on the date or
dates of adjustment.
6. Subordination. The indebtedness evidenced by this Debenture is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all the Company's Senior
Indebtedness (as defined in paragraph 6.3).
6.1 Rights of Debentureholders. Upon any receivership, insolvency,
assignment for the benefit of creditors, bankruptcy, reorganization, sale of all
or substantially all of the assets dissolution, liquidation, or any other
marshalling of the assets and liabilities of the Company or in the event this
Debenture shall be declared due and payable upon the occurrence of any event of
default (as specified in Section 9), (i) no amount shall be paid by the Company
in respect of the principal of or interest on this Debenture at the time
outstanding, unless and until the principal of and interest on the Senior
Indebtedness then outstanding shall be paid in full, except for any securities
or other property receivable by the holder of this Debenture pursuant to any
decree, order or judgment in any such proceeding, and (ii) no claim or proof of
claim shall be filed with the Company by or on behalf of the holder of this
Debenture which shall assert any right to receive any payment in respect of the
principal of and interest on this Debenture except subject to the payment in
full of the principal of and interest on all of the Senior Indebtedness then
outstanding.
6.2 Default in Senior Indebtedness. In the event of an event of default in
the payment of any principal, premium, sinking fund or interest with respect to
any Senior Indebtedness, as defined herein, or in the instrument under which it
is outstanding, permitting the holder to accelerate the maturity thereof, then,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist, or that Senior Indebtedness shall have been paid in full,
no payment shall be made in respect of the principal of or interest on this
Debenture, although interest otherwise payable shall continue to accrue hereon.
6.3 "Senior Indebtedness" shall mean the principal of (and premium, if
any) and unpaid interest on, (i) indebtedness of the Company, or with respect to
which the Company is a guarantor, whether outstanding on the date hereof or
hereafter created, to banks or other domestic or international lending
institutions or investors, which is for money borrowed by the Company or a
subsidiary of the Company, whether or not secured, and which is not subordinated
to other debt of the Company, and (ii) any deferrals, renewals or extensions of
any such indebtedness or any debentures, notes or other evidences of
indebtedness issued in exchange for such Senior Indebtedness.
6.4 Subrogation. Subject to the payment in full of all Senior Indebtedness
at the time outstanding, the holder of this Debenture shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until the principal of, premium, if any, and interest on this Debenture shall be
paid in full. No such payments or distributions applicable to Senior
Indebtedness shall, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the holder of this Debenture be deemed a payment by
the Company to or on account of this Debenture.
6.5 Obligations of the Company. The provisions of this Section 6 are for
the purpose of defining the rights of the holder of this Debenture on the one
hand and the holders of Senior Indebtedness, on the other hand, and nothing
contained in this Section 6, or elsewhere in this Debenture, is intended to or
shall (a) impair, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the holder of this Debenture, the obligation of the
Company, which is unconditional and absolute, to pay to the holder of this
Debenture the principal of, premium, if any, and interest on this Debenture, as
and when the same shall become due and payable in accordance with the terms of
this Debenture or (b) affect the rights of the holders of this Debenture
relative to creditors of the Company other than the holders of Senior
Indebtedness.
7. Prepayment. The Company may, at its own option, prepay this Debenture in
whole, or in part, without premium, at any time, by payment to the holder of
this Debenture of an amount equal to the principal amount of this Debenture, or
portion thereof to be prepaid, plus accrued interest on the outstanding
principal amount to be prepaid to the date of payment.
7.1 Notice. Notice of prepayment shall be given by mail not less than 15
days prior to the date fixed for the redemption to the registered holder of this
Debenture at the address appearing on the registry books of the Company.
7.2 Partial Prepayment. In case of the prepayment of only part of this
Debenture, the notice shall specify the portion of the face amount being
prepaid. Upon payment of the portion prepaid, this Debenture shall be cancelled
and a new Debenture issued for the unpaid balance.
7.3 Interest. If this Debenture or part thereof shall be called for
prepayment and notice of prepayment shall be given as aforesaid, interest shall
cease to accrue from and after the prepayment date on this Debenture or the part
thereof so called for prepayment (unless default shall be made in the payment of
the prepayment price) .
8. Exchange and Transfer. On surrender of this Debenture for exchange,
properly endorsed on a form of assignment which will be provided by the Company,
and subject to the provisions of this Debenture regarding compliance with the
Act, the Company at its expense will issue to or on the order of the holder of
this Debenture a new Debenture or Debentures of like tenor, in the name of that
holder or as that holder (on payment by that holder of any applicable transfer
taxes) may direct.
9. Events of Default. If any of the following events shall occur herein
(individually referred to as an "Event of Default"), the holder of this
Debenture may declare the entire unpaid principal and accrued interest on the
Debenture immediately due and payable, by a notice in writing to the Company:
9.1 Default in the payment of any installment of interest on this Debenture
when it becomes payable and continuation of such default for a period of 10
days; or
9.2 Default in the payment of the principal of the Debenture when the same
shall have become due and payable, whether at maturity or at a date fixed for
prepayment by declaration or otherwise; or
9.3 If the Company shall default in the performance of or compliance with
any material non-monetary term contained herein and, following such written
notice by the holder of this Debenture, the Company shall have not commenced and
continued to take reasonable curative action to remedy such default; or
9.4 If any representation or warranty made in writing by or on behalf of the
Company herein shall prove to have been false or incorrect in any material
respect on the date as of which made; or
9.5 If, within 60 days after the commencement of an action against the
Company or any Subsidiary seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such action shall not have been dismissed or
all orders or proceedings thereunder affecting the operations or the business of
the Company stayed, or if the stay of any such order or proceedings shall
thereafter be set aside, or if, within 60 days after the appointment without the
consent or
acquiescence of the Company or such Subsidiary of any trustee, receiver or
liquidator of the Company or any Subsidiary or of all or any substantial part of
the properties of the Company or any Subsidiary, such appointment shall not have
been vacated; or
9.6 The entry of an order, judgment or decree by a court of competent
jurisdiction, without the consent of the Company, adjudging the Company a
bankrupt or insolvent, or appointing a receiver of the Company or of the whole
or any substantial part of its properties, or approving a petition filed against
the Company seeking reorganization, arrangement or winding-up of the Company
under the federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state thereof or any other country or
jurisdiction; or
9.7 The institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it or the filing by it of a petition or answer or
consent seeking reorganization or release under the Federal Bankruptcy Act, or
any other applicable federal or state law, or similar law of any other country,
or the consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee, or other similar official, of the
Company, or of any substantial part of its property or the properties of its
Subsidiaries, or the making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay its debts generally as
they become due or the taking of corporate action by the Company in furtherance
of any such action.
10. Registration. The Company shall keep at its principal office a register
in which the Company shall provide for the registration of this Debenture and of
Debentures issued in exchange herefor and upon the transfer hereof. Upon
compliance with all provisions of this Debenture, the holder of this Debenture
may, at its option and either in person or by duly authorized attorney,
surrender the same for registration of transfer at the office of the Company
and, without expense to the holder (other than transfer taxes, if any), receive
in exchange therefor a printed Debenture or Debentures, each in the principal
amount of $10,000 or any integral multiple thereof, for the same aggregate
unpaid principal amount as the Debenture or Debentures so surrendered for
transfer or exchange and each payable to such person or persons as may be
designated by such holder. Every Debenture presented or surrendered for
registration of transfer shall be duly endorsed, or shall be accompanied by a
written instrument of transfer duly executed by the holder of such Xxxxxxxxx or
his attorney duly authorized in writing. Every Debenture so made and delivered
in exchange for this Debenture shall in all other respects be in the same form
and have the same terms as this Debenture. No transfer or exchange of any
Debenture shall be valid unless made in such manner at such office. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Debenture and, in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of this
Debenture, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Debenture, a new Debenture of like tenor and unpaid
principal amount and dated as of the date from which unpaid interest has then
accrued on the Debenture so lost, stolen, destroyed or mutilated. The Company
may deem and treat the person in whose name this Debenture shall be registered
as the absolute owner of such Debenture for the purpose of receiving payment of
principal and interest and for all other purposes and the Company shall not be
affected by any notice to the contrary.
11. Negotiability. Subject to the provisions of this Debenture with respect
to restrictions on transferability, title to this Debenture may be transferred
by endorsement and delivery in the same manner as a negotiable instrument
transferable by endorsement and delivery.
12. Modification. This Debenture and any of its terms may be changed,
waived, or terminated only by a written instrument signed by the party against
which enforcement of that change, waiver, or termination is sought.
13. Governing Law. This Debenture shall be governed by and construed and
enforced in accordance with the laws of the State of Nevada.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed in its
name by its duly authorized officer under its corporate seal, attested by its
duly authorized officer, as of the date first written above.
XXXXXXXX.XXX, INC.
_____________________
Attest:
_____________________
Secretary
