Exhibit 10.5.1
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS,
AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY .
No.1 $100,000
DIGITAL DESCRIPTOR SYSTEMS, INC.
12% SECURED CONVERTIBLE DEBENTURE
DUE DECEMBER 28, 2001
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of Digital Descriptor Systems, Inc., a Delaware corporation, having a
principal place of business at 000 Xxxxxxx Xxxxxxx, Xxxxxxxx Xxxxx, XX 00000
(the "Company"), designated as its 12% Secured Convertible Debentures, due
December 28, 2001, in the aggregate principal amount of Six Hundred Thousand
Dollars ($600,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to AJW Partners, LLC or
its registered assigns (the "Holder"), the principal sum of $100,000, on
December 28, 2001 or such earlier date as the Debentures are required or
permitted to be repaid as provided hereunder (the "Maturity Date") and to pay
interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of 12% per annum, payable on a
quarterly basis on March 31, June 30, September 30 and December 31 of each year
while such Debentures are outstanding commencing on December 31, 2000 and on
each Conversion Date (as defined herein) ( each an "Interest Payment Date") for
such principal amount, commencing on the earlier to occur of a Conversion Date
for such principal amount and March 31, 2001, in cash or shares of Common Stock
(as defined in Section 6). Subject to the terms and conditions herein, the
Holder may elect to receive interest hereunder in shares of Common Stock or
cash. If interest is paid by the Company in shares of its Common Stock, then the
number of shares of Common Stock issuable on account of such interest shall
equal the cash amount of such interest on such Interest Payment Date divided by
the Conversion Price (as defined below) on such date.
Interest shall be calculated on the basis on a 360-day year and shall accrue
daily commencing on the Original Issue Date (as defined in Section 6) until
payment in full of the principal sum, together with all accrued and unpaid
interest and other amounts which may become due hereunder, has been made.
Interest hereunder will be paid to the Person (as defined in Section 6) in whose
name this Debenture is registered on the records of the Company regarding
registration and transfers of Debentures (the "Debenture Register"). All overdue
accrued and unpaid interest to be paid in cash hereunder shall entail a late fee
at the rate of 15% per annum ("Late Fee") (or such lower maximum amount of
interest permitted to be charged under applicable law) which will accrue daily,
from the date such interest is due hereunder through and including the date of
payment, payable in cash or, at the option of the Holder, in shares of Common
Stock. If such Late Fee is paid by the Company in shares of its Common Stock,
then the number of shares of Common Stock issuable on account of such Late F ee
shall equal the cash amount of such Late Fee on such Late Fee payment date
divided by the Conversion Price on such date.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 6) and may be transferred or exchanged only in compliance
with the Purchase Agreement. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the Person ( as defined in Section 6) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary .
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means anyone of
the following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of,
interest (including any Late Fees) on or liquidated damages in respect
of, any Debentures, free of any claim of subordination, as and when the
same shall become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of any of the Transaction Documents (as defined in Section
6),and such failure or breach shall not have been remedied within five
days after the date on which notice of such failure or breach shall
have been given;
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(iii) the Company or any of its subsidiaries shall
commence, or there shall be commenced against the Company or any such
subsidiary a case under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter
in effect relating to the Company or any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company
or any subsidiary thereof suffers any appointment of any custodian or
the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company or any
subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary thereof shall call a
meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or
any subsidiary thereof for the purpose of effecting any of the
foregoing;
(iv) the Company shall default in any of its obligations
under any other Debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may b~ secured or
evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount
exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which
it would otherwise become due and payable;
(v) the Common Stock shall not be eligible for quotation on
and quoted for trading on the OTC Bulletin Board ("OTC") or listed for
trading on the Nasdaq SmallCap Market, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a
"Subsequent Market") and shall not again be eligible for and quoted or
listed for trading thereon within five Trading Days;
(vi) the Company shall be a party to any Change of Control
Transaction ( as defined in Section 6), shall agree to sell or dispose
all or in excess of 33% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction), or shall redeem or repurchase more than a de minimis
number of shares of Common Stock or other equity securities of the
Company (other than redemptions of Underlying Shares (as defined in
Section 6));
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(vii ) an Underlying Shares Registration Statement (as
defined in Section 6) shall not have been declared effective by the
Commission (as defined in Section 6) on or prior to the 120th day after
the Original Issue Date;
(viii) if, during the Effectiveness Period (as defined in
the Registration Rights Agreement (as defined in Section 6>>, the
effectiveness of the Underlying Shares Registration Statement lapses
for any reason or the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights
Agreement) under the Underlying Shares Registration Statement, in
either case, for more than five consecutive Trading Days or an
aggregate of eight Trading Days (which need not be consecutive Trading
Days);
(ix) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holder
prior to the expiration of thirty days from the Event Date ( as defined
in the Registration Rights Agreement) relating thereto ( other than an
Event resulting from a failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to the
120th day after the Original Issue Date, which shall be covered by
Section 3(a)(vii));
(x) the Company shall fail for any reason to deliver
certificates to a Holder prior to the third Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(b) or the
Company shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with requests
for conversions of any Debentures in accordance with the terms hereof;
(xi) if the registration statement on Form 10 filed by the
Company with with the Commission pursuant to Sections 12(b) or 12(g)
(as applicable) of the Exchange Act is not declared effective by
February 15, 2001 or if after the registration statement is declared
effective, such effectiveness of the registration statement lapses for
any reason for more than five consecutive Trading Days;
(xii) the Company shall fail for any reason to deliver the
payment in cash pursuant to a Buy-In (as defined herein) within five
days after notice is claimed delivered hereunder; or
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the
Holder's election, immediately due and payable in cash, provided however, that
if the Company informs the Holder that it will be unable to pay the amounts due
in cash, the Holder may request payment of such amounts in stock, provided that
if Holder declines to permit payment in securities, such payment in full shall
be nonetheless due and owed in cash. The number of shares of Common Stock
issuable in payment thereof shall be determined by dividing the aggregate amount
due to the Holder by the Conversion Price. The aggregate amount payable upon an
Event of Default shall be equal to the sum of (i) the Mandatory Prepayment
Amount (as defined in Section 6) plus (ii) the product of (A) the number of
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Underlying Shares issued in respect of conversions hereunder within thirty days
of the date of a declaration of an Event of Default and then held by the Holder
and (B) the Per Share Market Value (as defined in Section 6) on the date
prepayment is due or the date the full prepayment price is paid, whichever is
greater. Interest shall accrue on the prepayment amount hereunder from the
seventh day after such amount is due (being the date of an Event of Default)
through the date of prepayment in full thereof at the rate of 15% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law), to
accrue daily from the date such payment is due hereunder through and including
the date of payment. All Debentures and Underlying Shares for which the full
prepayment price hereunder shall have been paid in accordance herewith shall
promptly be surrendered to or as directed by the Company. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Xxxxxx at any time prior to payment hereunder and the
Holder shall have all rights as a Debenture holder until such time, if any, as
the full payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
Section 4. Conversion.
(a) (i) Conversion at Option of Holder. (A) This Debenture
shall .be convertible into shares of Common Stock at the option of the Holder,
in whole or in part at any time and from time to time, after the Original Issue
Date (subject to the limitations on conversion set forth in Section 4(a)(ii)
hereof). The number of shares of Common Stock issuable upon a conversion
hereunder equals the sum of (i) the quotient obtained by dividing (x) the
outstanding principal amount of this Debenture to be converted by (y) the
Conversion Price (as defined herein), and (ii) the amount equal to (I) the
product of (x) the outstanding principal amount of this Debenture to be
converted and (y) the product of (1) the quotient obtained by dividing .12 by
360 and (2) the number of days for which such principal amount was outstanding,
divided by (II) the Conversion Price on the Conversion Date, provided, that if
the Holder shall have elected to receive the interest due on a Conversion Date
in cash, subsection (ii) shall not be used in the calculation of the number of
shares of Common Stock issuable upon a conversion hereunder .
(B) The Holder shall effect conversions by delivering to
the Company and the Escrow Agent a completed notice in the form attached hereto
as Exhibit A (a "Conversion Notice"), including a completed Conversion Schedule
in the form of Schedule 1 to the Conversion Notice (on each Conversion Date, the
"Conversion Schedule"). The Conversion Schedule shall set forth the remaining
principal amount of this Debenture and all accrued and unpaid interest thereon
subsequent to the conversion at issue. The date on which a Conversion Notice is
delivered is the "Conversion Date." Unless the Holder is converting the entire
principal amount outstanding under this Debenture, the Holder is not be required
to physically surrender this Debenture to the Company or Escrow Agent in order
to effect conversions. Subject to Section 4(b), each Conversion Notice, once
given, shall be irrevocable. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Debenture plus all accrued and
unpaid interest thereon in an amount equal to the applicable conversion, which
shall Conversion Schedule. The Holder and the Company shall maintain records
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showing the principal amount converted and the date of such conversions. In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error.
(ii) Certain Conversion Restrictions.
(A) A Holder may not convert Debentures or receive shares
of Common Stock as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder, together with
any affiliate thereof, beneficially owning (as determined in accordance with
Section l3(d) of the Exchange Act and the rules promulgated thereunder) in
excess of 4.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of, and payment of interest on, the
Debentures held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of Common Stock in
excess of 4.999% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the principal amount of Debentures are convertible shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Conversion Notice for a principal amount of Debentures that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the conversion for the
maximum principal amount permitted to be converted on such Conversion Date in
accordance with the periods described in Section 4(b) and, at the option of the
Holder, either retain any principal amount tendered for conversion in excess of
the permitted amount hereunder for future conversions or return such excess
principal amount to the Holder. The provisions of this Section may be waived by
a Holder (but only as to itself and not to any other Holder) upon not less than
61 days prior notice to the Company. Other Holders shall be unaffected by any
such waiver.
(B) A Holder may not convert Debentures or receive shares
of Common Stock as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder, together with
any affiliate thereof, beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules promulgated thereunder) in
excess of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of, and payment of interest on, the
Debentures held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of Common Stock in
excess of 9.999% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the principal amount of Debentures are be evidenced by entries
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set forth in the convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a principal amount
of Debentures that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with the periods described in
Section 4(b) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess principal amount to the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.
(b) (i) Not later than three Trading Days after any Conversion
Date, (i) the Escrow Agent is hereby authorized and directed to deliver to the
Holder a certificate or certificates which shall be free of restrictive legends
and trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement) representing the number of shares of Common Stock issuable
upon such conversion in accordance with the terms hereof (if there is no Escrow
Agent for such purpose or for any reason there are insufficient shares of Common
Stock deposited with the Escrow Agent for delivery to the Holder upon conversion
hereunder, the Corporation will deliver to the Holder within three Trading Days
the shares of Common Stock being acquired upon the conversion), and (ii) if the
Holder has elected to receive accrued interest in cash, the Company will deliver
to the Holder a bank check, payable to Holder, in the amount of accrued and
unpaid interest. If requested by a Holder, the Company and the Escrow Agent will
use their best efforts to deliver conversion shares electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions. If shares of Common Stock issuable following a
Conversion Notice are not delivered to or as directed by the Holder by the third
Trading Day after a Conversion Date, the Holder shall be entitled by written
notice to the Escrow Agent and the Company at any time on or before its receipt
of such shares, to rescind such conversion, in which event the Company shall
immediately return to the Holder a Debenture in principal amount equal to the
principal amount, interest and all other amounts due in respect of the
Conversion Notice (provided the Holder is converting the entire principal amount
outstanding under this Debenture).
(ii) If the Escrow Agent fails to comply with the delivery
requirements, the Company is still liable for compliance. If the Company or
Escrow Agent fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(b)(i) by the third Trading Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, $5,000 for each Trading Day after such third
Trading Day until such certificates are delivered. Nothing herein shall limit a
Xxxxxx's right to pursue actual damages or declare an Event of Default pursuant
to Section 3 herein for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law. Further, if the Company shall not have
delivered any cash due in respect of conversions of Debentures or as payment of
interest thereon by the third Trading Day after the Conversion Date, the Holder
may, by notice to the Company, require the Company to issue shares of Common
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Stock pursuant to Section 4(c), except that for such purpose the Conversion
Price applicable thereto shall be the lesser of the Conversion Price on the
Conversion Date and the Conversion Price on the date of such Holder demand. Any
such shares will be subject to the provision of this Section.
(iii) In addition to any other rights available to the
Holder, if the Company or Escrow Agent fails for any reason to deliver to the
Holder such certificate or certificates pursuant to Section 4(b)(i) by the third
Trading Day after the Conversion Date, and if after such third Trading Day the
Holder purchases (in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by such Holder of the Underlying Shares which
the Holder anticipated receiving upon such conversion (a "Buy-In"), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of ( 1) the aggregate number of
shares of Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the market price of the Common Stock at
the time of the sale giving rise to such purchase obligation and (B) at the
option of the Holder, either reissue Debentures in principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Company timely
complied with its delivery requirements under Section 4(b)(i). For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of Debentures with
respect to which the market price of the Underlying Shares on the date of
conversion was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In. Notwithstanding anything contained herein to
the contrary, if a Holder requires the Company to make payment in respect of a
Buy- In for the failure to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company shall not be required to pay such
Holder liquidated damages under Section 4(b)(ii) in respect of the certificates
resulting in such Buy-In.
(c) (i) The conversion price (the "Conversion Price") in
effect on any Conversion Date shall be the lesser of(l) $0.08 (the "Initial
Conversion Price"), and (2) 50% of the average of the lowest three inter-day
trading prices (which need not occur on consecutive Trading Days) during the ten
Trading Days immediately preceding the applicable Conversion Date (which may
include Trading Days prior to the Original Issue Date ), provided, that such ten
Trading Day period shall be extended for the number of Trading Days during such
period in which (A) trading in the Common Stock is suspended by, or not traded
on, the OTC or a Subsequent Market on which the Common Stock is then listed, or
(B) after the date declared effective by the Commission, the Underlying Shares
Registration Statement is either not effective or the Prospectus included in the
Underlying Shares Registration Statement may not be used by the Holder for the
resale of Underlying Shares.
(ii) If the Company, at any time while the Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
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(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or ( d) issue by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then the Initial
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock ( excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while Debentures are
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value at the
record date mentioned below, then the Conversion Price shall be multiplied by a
fraction, ofwhich the denominator shall be the number of shares of the Common
Stock (excluding treasury shares, ifany) outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered would purchase at such Per Share Market Value. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
such right, option or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section, if any such right, option or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, options or warrants been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such rights, options or
warrants actually exercised.
(iv) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while Debentures are outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock ("Common Stock Equivalents")
entitling any Person to acquire shares of Common Stock, at a price per share
less than the Conversion Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common
Stock at a price per share which is less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion Price),
then, at the sole option of the Holder, the Conversion Price shall be adjusted
to mirror the conversion, exchange or purchase price for such Common Stock or
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Common Stock Equivalents (including any reset provisions thereof) at issue. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Company shall notify the Holder and the Escrow Agent in writing,
no later than the business day following the issuance of any Common Stock or
Common Stock Equivalent subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section shall
be made as a result of (i) issuances of Common Stock or Common Stock Equivalents
to the extent disclosed in Schedule 2.1 ( c ) to the Purchase Agreement, (ii)
issuances and exercises of options to purchase shares of Common Stock issued for
compensatory purposes pursuant to any of the Company's stock option or stock
purchase plans, or (iii) exercises under the Warrants ( as defined in the
Purchase Agreement).
(v) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Conversion
Price at which Debentures shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Per Share Market Value
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holders shall have the right
thereafter to, at their option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b ). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
-10-
(vii) All calculations under this Section 4 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be. No
adjustments in either the Conversion Price or the Initial Conversion Price shall
be required if such adjustment is less than $0.01, provided, however, Initial
Conversion Price shall be required if such adjustment is less than $0.01,
provided, however, that any adjustments which by reason of this Section are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(viii) Whenever either the Initial Conversion Price or the
Conversion Price is adjusted pursuant to any of Section 4(c)(ii) -(v), the
Company shall promptly mail to each Holder a notice setting forth the Initial
Conversion Price or Conversion Price (as applicable) after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(ix) If(A) the Company shall declare a dividend (or any
other distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
(x) In case of any (1) merger or consolidation of the
Company with or into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company in one or a series of related
transactions, a Holder shall have the right to (A) exercise any rights under
Section 3(b), (B) convert its aggregate principal amount of Debentures then
outstanding into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and such Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the shares of Common Stock into which such aggregate principal
amount of Debentures could have been converted immediately prior to such merger,
-11-
consolidation or sales would have been entitled, or (C) in the case of a merger
or consolidation, require the surviving entity to issue to the Debentures then
held by such Holder, plus all accrued and unpaid interest and other amounts
owing thereon, which newly issued convertible debentures shall have terms
identical (including with respect to conversion) to the terms of this Debenture,
and shall be entitled to all of the rights and privileges of a Holder of
Debentures set forth herein and the agreements pursuant to which the Debentures
were issued. In the case of clause (C), the conversion price applicable for the
newly issued shares of convertible preferred stock or convertible debentures
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Conversion Price in
effect immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale or consolidation shall include
such terms so as to continue to give the Holders the right to receive the
securities, cash and property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly apply to
successive such events.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common Stock solely
for the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(b ))upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Underlying Shares Registration Statement has
been declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the Holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock
on conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries
to be provided by the Holders hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to the Company, at 000 Xxxxxxx
Xxxxxxx, Xxxxxxxx Xxxxx, XX 00000, Facsimile No.: (000) 000-0000, attention:
Xxxxxxx X. Xxxxxxxxxx, or such other address or facsimile number as the Company
-12-
may specify for such purposes by notice to the Holders delivered in accordance
with this Section, with a copy to (other than for Conversion Notices) Xxxx
Xxxxxxxxx, Esq., Facsimile No.: (000) 000-0000, Attn: Xxxx Xxxxxxxxx, Esq. Any
and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (New York City
time) on any date and earlier than 11 :59 p.m. (New York City time) on such
date, (iii) four days after deposit in the United States mail, (iv) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
Section 5. Optional Prepayment. During the first 30 days following the
Original Issue Date, the Company shall have the right to prepay all or any
portion of the outstanding principal amount of this Debenture for which
Conversion Notices have not previously been delivered by delivery of the
prepayment price to the Holder together with a written accounting of the
principal amount to be prepaid plus other amounts owing thereon. The prepayment
price applicable to prepayments under this Section must accompany the notice of
intention to prepay. The prepayment price shall equal 130% of the principal
amount of the Debentures to be prepaid, and all unpaid and accrued interest
thereon. Upon receipt of the prepayment price for a prepayment under this
Section, the Holder shall, (i) if such prepayment is only for a portion of the
principal amount then outstanding under this Debenture, promptly deliver to the
Company a revised Conversion Schedule reflecting such prepayment or (ii) if such
prepayment is for the entire then outstanding principal amount under this
Debenture, promptly deliver this Debenture, marked paid in full. The Holder need
not deliver any Debentures and shall still have rights as a Debenture holder
until the full prepayment price hereunder is properly received by it.
Section 6. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which banking
institutions in the State of New York or Commonwealth of Pennsylvania are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence of any of(i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b )(1 ) promulgated under the Exchange Act) of
effective control
-13-
(whether through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 33% of the voting securities of the
Company, (ii) a replacement at one time or over time of more than one-half of
the members of the Company's board of directors which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), (iii) the merger of the Company with or into another entity that is not
wholly-owned by the Company, consolidation or sale of 50% or more of the assets
of the Company in one or a series of related transactions, or (iv) the execution
by the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value per share, of
the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Mandatory Prepayment Amount" for any Debentures shall equal the sum of
(i) the greater of(A) 130% of the principal amount of Debentures to be prepaid,
plus all accrued and unpaid interest thereon, and (B) the principal amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon, divided
by the Conversion Price on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is
paid in full, whichever is less, multiplied by the Per Share Market Value on (x)
the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.
"Original Issue Date" shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless
of the number of instruments which may be issued to evidence such Debenture.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of Common Stock on such date on the Subsequent Market on
which the shares of Common Stock are then listed or quoted (as reported by
Bloomberg L.P. at 4:15 PM (New York time) for the closing sales price for
regular session trading on such day), or if there is no such price on such date,
then the closing bid price on the Subsequent Market on the date nearest
preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New York time)
for the closing sales price for regular session trading on such day), or (b) if
the shares of Common Stock are not then listed or quoted on a Subsequent Market,
the closing bid price for a share of Common Stock in the OTC, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the shares of Common Stock are not then reported by the
-14-
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the Holder, or (d) if the shares of Common Stock are not then publicly traded
the fair market value of a share of Common Stock as determined by an Appraiser
selected in good faith by the Holders of a majority in interest of the principal
amount of Debentures then outstanding.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Secured Convertible Debenture Purchase
Agreement, dated December [ ], 2000, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trading Day" means (a) a day on which the shares of Common Stock are
traded on the OTC or on such Subsequent Market on which the shares of Common
Stock are then listed or quoted, or (b) if the shares of Common Stock are not
listed on a Subsequent Market, a day on which the shares of Common Stock are
traded in the over-the-counter market, as reported by the OTC, or (c) if the
shares of Common Stock are not quoted on the OTC, a day on which the shares of
Common Stock are quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, that in the event that
the shares of Common Stock are not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except a Business Day.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth
-15-
herein. As long as there are Debentures outstanding, the Company shall not and
shall cause it subsidiaries not to, without the consent of the Holders, (i)
amend its certificate of incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Holders; (ii) repay, repurchase or offer
to repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing. The Company may only voluntarily prepay
the outstanding principal amount on the Debentures in accordance with Section 5
hereof.
Section 8. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 9. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 10. No indebtedness of the Company is senior to this Debenture
in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise. The Company will not and will not
permit any of its subsidiaries to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any indebtedness of any kind, on or with
respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom that is senior in any
respect to the Company's obligations under the Debentures.
Section 11. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of a
-16-
Transaction Document, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its' attorneys fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
Section 12. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section 13. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section 14. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
Section 15. The payment obligations under this Debenture and the
obligations of the Company to the Holder arising upon the conversion of all or
any of the Debentures in accordance with the provisions hereof are secured
pursuant to the Security Agreement (as defined in the Purchase Agreement).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Secured Convertible Debenture to
be duly executed by a duly authorized officer as of the date first above
indicated.
DIGITAL DESCRIPTOR SYSTEMS, INC.
By: /s/Xxxxxxx X. Xxxxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal and, if specified, interest
under the 12% Secured Convertible Debenture of the Company due twelve months
from issuance into shares of common stock, $0.001 par value per share (the
"Common Stock"), of Digital Descriptor Systems, Inc. (the "Company") according
to the conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.
Conversion calculations: ______________________________________________
Date to Effect Conversion
______________________________________________
Principal Amount of Debentures to be Converted
Payment of Interest in Kind [ ] Yes [ ] No
If yes, $ of________ Interest Accrued on
Account of Conversion at Issue
______________________________________________
Number of shares of Common Stock to be Issued
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
______________________________________________
Name
______________________________________________
Address
Schedule 1
CONVERSION SCHEDULE
Digital Descriptor Systems, Inc.
12% Secured Convertible Debentures due December [ ], 2001, in the aggregate
principal amount of $600,000 issued by Digital Descriptor Systems, Inc. This
Conversion Schedule reflects conversions made under Section 4(a)(i) of the
above referenced Debentures.
Dated:
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Aggregate
Principal
Amount
Remaining
Subsequent to
Conversion
Date of Conversion (or original
(or for first entry, Amount of Principal
Original Issue Date) Conversion Amount) Company Attest
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