EXHIBIT 6.9
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NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
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.
Date of Issuance: January 6, 2004
$441,750 in Previously Funded Amount
$400,000 in Additional Principal Amount
Totaling $841,750 in the Aggregate
FIRST AMENDED AND RESTATED
6% CONVERTIBLE SECURED DEBENTURE
DUE APRIL 30, 2004
THIS FIRST AMENDED AND RESTATED CONVERTIBLE SECURED DEBENTURE is made by
each of SBS Interactive, Co., a Florida corporation, and SBS Interactive, Inc.,
a Nevada corporation, joint and severally, each having a principal place of
business at 000 Xxxxxxx Xxxxxx, Xxxx 0, Xxxxxxx, Xxxxxxx, Xxxxxx (collectively,
the "Company"), and is designated as the Company's "First Amended and Restated
6% Convertible Secured Debenture, due April 30, 2004" (the "Debenture").
PRELIMINARY STATEMENTS
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WHEREAS, reference is hereby made to (i) that certain Convertible Secured
Debenture (the "1st Debenture"), dated October 30, 2002, in the principal amount
of $72,000, between the Company and the Secured Party, (ii) that certain
Convertible Secured Debenture (the "Additional Debenture"), dated March 14,
2003, in the principal amount of $30,000, between the Company and the Secured
Party, (iii) that certain senior Secured Promissory Note (the "Note"), dated
July 22, 2003, in the principal amount of $52,000, between the Company and the
Secured Party, (iv) that certain 6% Convertible Secured Debenture, as amended,
due January 30, 2004, in the principal amount of $441,750 (the "Convertible
Debenture"), and (v) that certain Pledge and Security Agreement, dated July 22,
2003, securing the 1st Debenture, the Additional Debenture, the Note and the
Convertible Debenture (the "Security Agreement"). The 1st Debenture, the
Additional Debenture, the Note, the Convertible Debenture and the Security
Agreement are sometimes collectively referred to herein as the "Loan Documents."
WHEREAS, it is the intention of the Company and the Secured Party to
reorganize the Loan Documents, such that all issued and outstanding amounts of
principal and interest owing under the Loan Documents will be converted into
part of the Principal Amount owing under this Debenture. The Company and the
Secured Party hereby agree and acknowledge that the total amount of issued and
outstanding principal and interest owing to the Company under the Loan
Documents, as of the date hereof, is $441,750 (the "Previously Funded Amount").
The difference between the Principal Xxxxxx and the Previously Funded Amount is
defined as the "Additional Principal Amount".
AGREEMENT
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FOR VALUE RECEIVED, the Company promises to pay to Karlgar Limited or its
assigns (referred to herein as either the "Holder" or the "Secured Party"), the
principal sum of $841,750 (the "Principal Amount") (which amount is inclusive of
the Previously Funded Amount) on APRIL 30, 2004 or such earlier date as the
Debenture is 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 6% per
annum, payable on the Maturity Date (the "Interest Payment Date"), in cash or
shares of Common Stock at the Interest Conversion Rate, or a combination
thereof; provided, however, payment in shares of Common Stock may only occur if:
(i) there is an effective Underlying Shares Registration Statement pursuant to
which the Holder is permitted to utilize the prospectus thereunder to resell all
of the shares of Common Stock to be issued in lieu of cash (and the Company
believes, in good faith, that such effectiveness will continue uninterrupted for
the foreseeable future), (ii) the Common Stock is listed for trading on a
Principal Market (and the Company believes, in good faith, that trading of the
Common Stock on a Principal Market will continue uninterrupted for the
foreseeable future), and (iii) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all
of the shares issuable pursuant to the Transaction Documents, including the
shares to be issued for interest in lieu of cash. Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in shares of
Common Stock or cash shall be at the discretion of the Company. Interest shall
be calculated on the basis of a 360-day year and shall accrue daily commencing
on the Original Issue Date 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. Payment of interest in shares of Common Stock shall
otherwise occur pursuant to Section 4(b) and only for purposes of the payment of
interest in shares, the Interest Payment Date shall be deemed the Conversion
Date. Interest shall cease to accrue on the Conversion Date with respect to any
principal amount converted, provided that the Company in fact delivers the
Underlying Shares within the time period required by Section 4(b)(i). Interest
hereunder will be paid to the Person in whose name this Debenture is registered
on the records of the Company regarding registration and transfers of Debentures
(the "Debenture Register"). Except as otherwise provided herein, if at anytime
the Company pays interest partially in cash and partially in shares of Common
Stock, then such payment shall be distributed ratably among the Holders based
upon the principal amount of Debentures held by each Holder. All overdue accrued
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and unpaid interest to be paid hereunder shall entail a late fee at the rate of
15% per annum (or such lower maximum amount of interest permitted to be charged
under applicable law) ("Late Fee") which will accrue daily, from the date such
interest is due hereunder through and including the date of payment.
THE COMPANY MAY NOT PREPAY ANY PORTION OF THE PRINCIPAL AMOUNT OF THIS
DEBENTURE WITHOUT THE PRIOR WRITTEN CONSENT OF THE HOLDER.
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 and subject to compliance with applicable laws. No
service charge will be made for such registration of transfer or exchange.
Section 2. This Debenture may be transferred or exchanged only in
compliance with applicable federal and state securities laws and regulations.
Prior to due presentment to the Company for transfer of this Debenture, the
Company and any agent of the Company may treat the Person in whose name this
Debenture is duly registered on the 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 any one 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 on,
or liquidated damages in respect of the Debenture, 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) which default is not cured within 5 days of notice of
such default sent by the Holder;
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 (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the
Holder upon conversion or interest payment which breach is addressed
in clause (x) below);
iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a
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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 be 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 $10,000, 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, which default
is not cured within 10 days of notice of such default sent by the
Holder;
v) the Common Stock shall not be eligible for quotation on or
quoted for trading on a Principal Market and shall not again be
eligible for and quoted or listed for trading thereon within seven
Trading Days;
vi) the Company shall be a party to any Change of Control
Transaction, shall agree to sell or dispose of all or in excess of 40%
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 its outstanding shares of
Common Stock or other equity securities of the Company (other than
redemptions of Underlying Shares and repurchases of shares of Common
Stock or other equity securities of departing officers and directors
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of the Company; provided no repurchase shall exceed $50,000 for any
officer or director);
vii) an Underlying Shares Registration Statement shall not have
been declared effective by the Commission on or prior to the 150th
calendar day after the Original Issue Date;
viii) if, during the Effectiveness Period (as defined in the
Registration Rights Agreement), 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 15 consecutive
Trading Days or 25 non-consecutive Trading Days during any 12 month
period;
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 Effectiveness Date (as defined in the Registration Rights
Agreement), 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 seventh 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; or
(xi) 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 thereof is delivered hereunder.
b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture, 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. The
aggregate amount payable upon an Event of Default shall be equal to the
Mandatory Prepayment Amount. Interest shall immediately accrue on the
Mandatory Prepayment Amount hereunder from the day such amount is due
(being the date of an Event of Default) through the date of prepayment in
full thereof in an amount equal to the Late Fee, to accrue daily from the
date such payment is due hereunder through and including the date of
payment. All Debentures 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
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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) At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture shall be
convertible into shares of Common Stock of SBS Interactive, Co.,
Florida corporation (the "Common Stock"), at the option of the Holder,
in whole or in part at any time and from time to time. The Holder
shall effect conversions by delivering to the Company the form of
Notice of Conversion attached hereto as Annex A (a "Notice of
Conversion"), specifying therein the principal amount of Debentures to
be converted and the date on which such conversion is to be effected
(a "Conversion Date"). If no Conversion Date is specified in a Notice
of Conversion, the Conversion Date shall be the date that such Notice
of Conversion is provided hereunder. To effect conversions hereunder,
the Holder shall not be required to physically surrender Debentures to
the Company unless the entire principal amount of this Debenture plus
all accrued and unpaid interest thereon has been so converted.
Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture in an amount equal to
the applicable conversion. The Holder and the Company shall maintain
records showing the principal amount converted and the date of such
conversions. The Company shall deliver any objection to any Notice of
Conversion within 1 Business Day of receipt of such notice. In the
event of any dispute or discrepancy, the records of the Holder shall
be controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less than the
amount stated on the face hereof.
ii) [Reserved]
iii) Underlying Shares Issuable Upon Conversion and Pursuant to
the Conversion of Principal Amount. The number of shares of Common
Stock issuable upon a conversion shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of this
Debenture to be converted by (y) the Set Price.
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(b) i) Not later than five Trading Days after any Conversion
Date, the Company will deliver to the Holder a certificate or
certificates representing the Underlying Shares which shall be free of
restrictive legends and trading restrictions representing the number
of shares of Common Stock being acquired upon the conversion of
Debentures (including, if so timely elected by the Company, shares of
Common Stock representing the payment of accrued interest) and (B) a
bank check in the amount of accrued and unpaid interest (if the
Company is required to pay accrued interest in cash). The Company
shall, if available and if allowed under applicable securities laws,
use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in
the case of any Notice of Conversion such certificate or certificates
are not delivered to or as directed by the applicable Holder by the
fifth Trading Day after a Conversion Date, the Holder shall be
entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return
the certificates representing the principal amount of Debentures
tendered for conversion.
ii) If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(b)(i) by the
fifth Trading Day after the Conversion Date, the Company shall pay to
such Holder, in Common Stock at the then Set Price, as liquidated
damages and not as a penalty, for each $1,000 of principal amount
being converted, $50 per Trading Day (increasing to $100 per Trading
Day after 3 Trading Days after such damages begin to accrue) for each
Trading Day after such third Trading Day until such certificates are
delivered. In the event a Holder of this Debenture shall elect to
convert any or all of the outstanding principal amount hereof, the
Company may not refuse conversion based on any claim that the Holder
or any one associated or affiliated with the Holder of has been
engaged in any violation of law, agreement or for any other reason,
unless, an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of this Debenture shall have been
sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the principal amount of
this Debenture outstanding, which is subject to the injunction, which
bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall
be payable to such Holder to the extent it obtains judgment. In the
absence of an injunction precluding the same, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed
conversion. Nothing herein shall limit 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 Conversion Shares within the
period specified herein and such Holder shall have the right to pursue
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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 Holder from
seeking to enforce damages pursuant to any other Section hereof or
under applicable law.
(iii) In addition to any other rights available to the Holder, if
the Company 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 is required by its brokerage firm to purchase (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 actual sale price of the Common Stock at the
time of the sale (including brokerage commissions, if any) 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 actual
sale price of the Underlying Shares at the time of the sale (including
brokerage commissions, if any) giving rise to such purchase obligation
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.
(iv) [Reserved]
(c) i) The conversion price in effect on any Conversion Date
shall be equal to $0.04 (subject to adjustment herein)(the "Set
Price"); provided, however, in the event that the Company loses or is
unable to secure its patent relating to the SBS Interactive technology
developed in conjunction with Ultimatte, the conversion price shall
thereafter equal the lesser of (A) the Set Price and (B) 60% of the
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average of the 5 Closing Prices for the 5 Trading Days immediately
prior to the applicable Conversion Date.
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 (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this
Debenture, including interest thereon), (B) subdivide outstanding
shares of Common Stock into a larger number of shares, (C) combine
(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 Set 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 or other securities exercisable,
convertible into or exchangeable for Common Stock (the "Common Stock
Equivalents") at a price per share less than the Closing Price at the
record date mentioned below, then the Set Price shall be adjusted by
multiplying the Set Price in effect immediately prior to such record
date by a fraction, of which the denominator 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 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 the Closing Price
on the record date. Such adjustment shall be made whenever such
rights, options 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.
iv) If the Company or any subsidiary thereof, as applicable, at
any time while Debentures are outstanding, shall offer, sell, grant
any option to purchase or offer, sell or grant any right to reprice
its securities, or otherwise dispose of or issue (or announce any
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offer, sale, grant or any option to purchase or other disposition) any
Common Stock or Common Stock Equivalent entitling any Person to
acquire shares of Common Stock, at an effective price per share less
than the then Set Price ("Dilutive Issuance"), as adjusted hereunder
(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 an effective price per
share which is less than the Set Price, such issuance shall be deemed
to have occurred for less than the Set Price), then the Set Price
shall be reduced to equal the effective conversion, exchange or
purchase price at a 25% discount for such Common Stock or 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 in
writing, no later than the 3rd 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.
v) If the Company, at any time while this Debenture is
outstanding, shall distribute to all holders of Common Stock (and not
to Holder) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such
case the Set Price shall be determined by multiplying such 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 Closing Price determined as of the
record date mentioned above, and of which the numerator shall be such
Closing Price 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 Holder 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) 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.
For purposes of this Section 4, the number of shares of Common Stock
deemed to be outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on a fully diluted basis.
vii) Whenever the Set Price is adjusted pursuant to any of
Section 4(c)(ii) - (v), the Company shall promptly mail to each Holder
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a notice setting forth the Set Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
viii) 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 Holder at its last addresses as it 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. Xxxxxx is
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.
ix) If, at any time while this Debenture is outstanding, (A) the
Company effects any merger or consolidation of the Company with or
into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of
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this Debenture, the Holder shall have the right to receive, for each
Underlying Share that would have been issuable upon such conversion
absent such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one
share of Common Stock (the "Alternate Consideration"). For purposes of
any such conversion, the determination of the Set Price shall be
appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Set Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction.
To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new Debenture consistent with
the foregoing provisions and evidencing the Holder's right to convert
such Debenture into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity
to comply with the provisions of this paragraph (c) and insuring that
this Debenture (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
(x) Notwithstanding the foregoing, no adjustment will be made
under this paragraph (c) in respect of (A) the granting or issuance of
shares of capital stock or of options to employees, officers,
directors and consultants of the Company pursuant to any stock option
plan agreement or arrangement duly adopted or approved by a majority
of the non-employee members of the Board of Directors of the Company
or a majority of the members of a committee of non-employee directors
established for such purpose, (B) upon the exercise of this Debenture
or any other Debenture of this series, or (C) upon the exercise of or
conversion of any Common Stock Equivalents, rights, options or
warrants issued and outstanding on the Original Issue Date, or (D)
issuance of securities in connection with acquisitions, strategic
investments, or strategic partnering arrangements, the primary purpose
of which is not to raise capital.
(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 Debenture, 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 be issuable (taking into account the adjustments and
12
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 Closing Price 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 Holder 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
Notice of Conversion, shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth above, facsimile number
(000) 000-0000, Attn: Xxxx Xxxxxxx or such other address or facsimile
number as the Company may specify for such purposes by notice to the
Holders delivered in accordance with this Section. 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 addressed to each Holder at
the facsimile telephone number or address of such Xxxxxx 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 5:30 p.m. (Los Angeles 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 5:30 p.m. (Los Angeles time) on any
date and earlier than 11:59 p.m. (Los Angeles time) on such date, (iii) the
13
second Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given.
Section 5. Reserved.
Section 6. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Security Agreement, and (b)
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 Los Angeles are authorized or required
by law or other government action to close.
"Change of Control Transaction" means the occurrence after the date
hereof 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 (whether through legal or
beneficial ownership of capital stock of the Company, by contract or
otherwise) of in excess of 40% of the voting securities of the Company, or
(ii) a replacement at one time or within a three year period 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), or (iii) 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) or (ii).
"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.
"Conversion Date" shall have the meaning set forth in Section 4(a)(i)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Interest Conversion Rate" means the lesser of (i) the Set Price and
(ii) 90% of the lesser of (a) the average of the 20 Closing Prices
immediately prior to the applicable Interest Payment Date or (b) the
14
average of the 20 Closing Prices immediately prior to the date the
applicable interest payment shares are issued and delivered if after the
Interest Payment Date.
"Late Fees" shall have the meaning set forth in the second paragraph
to this Debenture.
"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 all other accrued
and unpaid amounts due hereunder, or (B) the principal amount of Debentures
to be prepaid, plus all other accrued and unpaid interest hereon and other
amounts due hereunder, divided by the Set 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 Closing 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 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.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, 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.
"Set Price" shall have the meaning set forth in Section 4(c)(i).
"Trading Day" means (a) a day on which the shares of Common Stock are
traded on a Principal Market on which the shares of Common Stock are then
listed or quoted, or (b) if the shares of Common Stock are not quoted on a
Principal Market, 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 a Business Day.
15
"Transaction Documents" shall mean this Debenture, the Security
Agreement and the Registration Rights 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 debt obligation of the
Company. As long as this Debenture is outstanding, the Company shall not and
shall cause it subsidiaries not to, without the consent of the Holders, (a)
amend its certificate of incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Holders; (b) 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 as otherwise permitted by the
Transaction Documents; or (c) enter into any agreement with respect to any of
the foregoing.
Section 8. 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 9. Except as provided below in this Section 9, so long as any
portion of this Debenture is outstanding, 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 without the prior
consent of the Holder, which consent shall not be unreasonably withheld.
Section 10. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
16
commenced in the state and federal courts sitting in the County of Los Angeles
(the "Los Angeles Courts"). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Los Angeles Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), 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 such Los Angeles Courts are
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture
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. Each party
hereto hereby 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 Debenture or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of this
Debenture, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys' fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
Section 11. 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 12. 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 violates
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,
17
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 13. 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 14. The Preliminary Statements of this Debenture are hereby
incorporated by reference into the body of this Debenture and hereby become an
integral part of this Debenture.
Section 15. Upon full execution of this Debenture, each of the Loan
Documents are hereby cancelled and terminated. The 1st Debenture, the Additional
Debenture, the Note and the Convertible Debenture may be marked cancelled and
terminated by the Company.
Section 16. The Secured Party agrees to fund the Additional Principal
Amount under this Debenture as follows: $100,000 on January 6, 2004, $50,000 on
January 19, 2004, $100,000 on February 5, 2004, $50,000 on February 19, 2004 and
$100,000 on March 5, 2004.
Section 17. This Debenture is hereby secured by that certain Security
Agreement, dated September 10, 2003, between the Company and the Holder.
Section 18. The Company hereby agrees to reimburse the Holder for $5,000 in
legal expenses relating to the negotiation and documentation of this Debenture
and the transactions contemplated thereby, which amount will be directly
deducted from the March payment set forth in Section 16 above of Additional
Principal Amount.
*********************
18
IN WITNESS WHEREOF, the Company has caused this First Amended and Restated
Convertible Secured Debenture to be duly executed by a duly authorized officer
as of the date first above indicated.
SBS INTERACTIVE, CO.
A Florida corporation
By: /S/ XXXX XXXXXXX
-----------------------
Name: Xxxx Xxxxxxx
Title: President
SBS INTERACTIVE, Inc.
A Nevada corporation
By: /S/ XXXX XXXXXXX
-----------------------
Name: Xxxx Xxxxxxx
Title: President
19
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the First Amended and
Restated 6% Convertible Secured Debenture of SBS Interactive, Co., a Florida
corporation and SBS Interactive, Inc., a Nevada corporation (collectively, the
"Company"), due on April 30, 2004, into shares of common stock, $0.001 par value
per share (the "Common Stock"), of SBS Interactive, Co. 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.
By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
Payment of Interest in Common Stock ____ yes ____ no
If yes, $______ of Interest Accrued on Account of
Conversion at Issue.
Number of shares of Common Stock to be issued:
Signature: ___________________________________________
Name: ___________________________________________
Address: ___________________________________________
___________________________________________
___________________________________________
Schedule 1
CONVERSION SCHEDULE
First Amended and Restated 6% Convertible Secured Debenture due on April 30,
2004, in the aggregate principal amount of $841,750 issued by each of SBS
Interactive, Co., a Florida corporation and SBS Interactive, Inc., a Nevada
corporation, jointly and severally. This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Debenture.
Dated:
Aggregate Principal
Amount Remaining
Subsequent to
Date of Conversion Conversion
(or for first entry, Original Amount of (or original
Issue Date) Conversion Principal Amount) Company Attest
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