AMENDMENT NUMBER 1
TO
XXXX SYSTEMS, INC.
CONVERTIBLE SUBORDINATED DEBENTURE
This Amendment Number 1 to the Xxxx Systems, Inc. Convertible
Subordinated Debenture Due February 6, 2003, No. CSD-9809 (the "Amendment")
is made as of October 7, 1998 between Xxxx Systems, Inc., a Delaware
corporation (the "Company"), and The Tail Wind Fund, Ltd. (the "Holder").
WHEREAS, the Company and the Holder entered into a Convertible
Securities Subscription Agreement dated as of February 6, 1998 pursuant to
which the Holder made a loan to the Company of $1,333,333.34 and the Company
issued to the Holder a convertible subordinated debenture (the "Original
Debenture") dated June 11, 1998; and
WHEREAS, the Company has agreed not to exercise its right to redeem the
Original Debenture pursuant to Section 5A thereof and has granted to Holder a
right of first refusal to participate in convertible subordinated debt
financings until October 7, 1999 in exchange for Holder's agreement to amend
certain conversion terms in the Original Debenture; and
WHEREAS, the Company and the Holder have executed a Right of First Refusal
agreement of even date herewith; and
WHEREAS, the Company and the Holder wish to amend the Original Debenture
such that it is not convertible at the option of the Holder until after
October 7, 1999, and that for certain other purposes it sets a minimum
conversion price of $4.00 per share of the Company's Common Stock until
October 7, 1999, after which the Original Debenture's original conversion
terms will be reinstated;
NOW THEREFORE in consideration of the premises set forth above and for
other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Holder agree as follows:
1. The definition of "Conversion Date Market Price," defined in Section 4
of the Original Debenture, is amended to read:
"CONVERSION DATE MARKET PRICE" shall mean, unless otherwise specified
herein, an amount that is equal to the lesser of (a) the Maximum
Conversion Price or (b) 101% of the average of the two lowest closing bid
prices of the Common Stock as reported by the Bloomberg Service for the
thirty (30) trading days immediately preceding the Holder Conversion Date,
subject to adjustment from time to time as set forth in Paragraph 8
hereof and/or in the Subscription Agreement and/or Rights Agreement (as
defined in the Subscription Agreement); PROVIDED
HOWEVER, that if the Holder Conversion Date is on or before October 7,
1999, in no event shall the Conversion Date Market Price be less than
$4.00.
2. Section 6(a) of the Original Debenture is amended in its entirety to
read:
HOLDER'S RIGHT TO CONVERT. This Debenture shall be convertible at any
time after October 7, 1999 (unless previously redeemed), in whole or
in part, at the option of the Holder hereof, into fully paid, validly
issued and nonassessable shares of Common Stock. If this Debenture is
converted in part, the remaining portion of this Debenture not so
converted shall remain entitled to the conversion and other rights
provided herein.
3. ORIGINAL DEBENTURE. Except as set forth above, the remainder of the
Original Debenture, including Exhibits 1 and 2 thereto, shall remain in
full force and effect as originally issued. After October 7, 1999, all
original terms of the Original Debenture shall be reinstated and fully
effective.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
XXXX SYSTEMS, INC. THE TAIL WIND FUND, LTD.
By: /s/ Xxxxxx X. Xxxxxxx By: [signature not legible]
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(Signature) (Signature)
Name: Name: BRIGHTON HOLDINGS LIMITED AS
Xxxxxx X. Xxxxxxx SOLE DIRECTOR
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(Print name of signer) (Print name of signer)
Title: Title:
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