NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: April 6, 2005
Original Conversion Price (subject to adjustment herein): $0.11
$---------------
SECURED CONVERTIBLE DEBENTURE
DUE APRIL 6, 2007
THIS DEBENTURE is one of a series of duly authorized and issued Secured
Convertible Debentures of TNX Television Holdings, Inc., a Delaware corporation,
having a principal place of business at Presidential Place, 000 X. Xxxxx Xxxx,
X0, Xxxx Xxxxx Xxx. 00000 (the "Company"), designated as its Secured Convertible
Debenture, due April 6, 2007 (the "Debenture(s)").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), or shall have
paid pursuant to the terms hereunder, the principal sum of $_______________ by
April 6, 2007, or such earlier date as the Debentures are required or permitted
to be repaid as provided hereunder (the "Maturity Date"). This Debenture is
subject to the following additional provisions:
Section 1. 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 Purchase Agreement, and (b)
the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in
Section 5(d).
"Base Conversion Price" shall have the meaning set forth in Section
5(b).
1
"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 are authorized or
required by law or other government action to close.
"Buy-In" shall have the meaning set forth in Section 4(d)(v).
"Change of Control Transaction" means the occurrence of (i) after
the Original Issue Date and prior to the Shareholder Approval Date, any of
(a) 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 50% of the voting securities of the Company, or (b) the Company
merges into or consolidates with any other Person, or any Person merges
into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 50% of the aggregate voting power of the Company
or the successor entity of such transaction, or (c) the Company sells or
transfers its assets, as an entirety or substantially as an entirety, to
another Person and the stockholders of the Company immediately prior to
such transaction own less than 50% of the aggregate voting power of the
acquiring entity immediately after the transaction, or (d) 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 (e) 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 (a) or (e); or (ii)
after the Shareholder Approval Date until this Debenture is no longer
outstanding, any of (a) 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 33% of the voting securities of the Company,
or (b) the Company merges into or consolidates with any other Person, or
any Person merges into or consolidates with the Company and, after giving
effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power
of the Company or the successor entity of such transaction, or (c) the
Company sells or transfers its assets, as an entirety or substantially as
an entirety, to another Person and the stockholders of the Company
immediately prior to such transaction own less than 66% of the aggregate
voting power of the acquiring entity immediately after the transaction, or
(d) 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 (e) 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 (a) or (e).
2
"Closing Price" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b)
if there is no such price on such date, then the closing bid price on the
Trading Market on the date nearest preceding such date (as reported by
Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price for
regular session trading on such day), or (c) if the Common Stock is not
then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the "pink sheets" published by the Pink Sheets,
LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock
so reported, 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 a
qualified independent appraiser selected in good faith by the Purchasers
of a majority in interest of the Principal Amount of Debentures then
outstanding.
"Common Stock" means the common stock, par value $0.001 per share,
of the Company and stock of any other class of securities into which such
securities may hereafter have been reclassified or changed into.
"Conversion Date" shall have the meaning set forth in Section 4(a).
"Conversion Price" shall have the meaning set forth in Section 4(b).
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of Debentures.
"Debenture Register" shall have the meaning set forth in Section
2(c).
"Dilutive Issuance" shall have the meaning set forth in Section
5(b).
"Dilutive Issuance Notice" shall have the meaning set forth in
Section 5(b).
"Effectiveness Period" shall have the meaning given to such term in
the Registration Rights Agreement.
"Equity Conditions" shall mean, during the period in question, (i)
the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notice of
Conversions, if any, (ii) all liquidated damages and other amounts owing
in respect of the Debentures shall have been paid; (iii) there is an
effective Registration Statement pursuant to which the Holder is permitted
to utilize the prospectus thereunder to resell all of the shares issuable
pursuant to the Transaction Documents (and the Company believes, in good
faith, that such effectiveness will continue uninterrupted for the
foreseeable future), (iv) the Common Stock is trading on the Trading
3
Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on a Trading Market (and the Company
believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (v) 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, (vi) there is then existing no
Event of Default or event which, with the passage of time or the giving of
notice, would constitute an Event of Default, (vii) the issuance of all of
the shares issued or issuable pursuant to the Transaction Documents would
not violate the limitations set forth in Section 4(c)(ii) and (viii) no
public announcement of a pending or proposed Fundamental Transaction,
Change of Control Transaction or acquisition transaction has occurred that
has not been consummated.
"Event of Default" shall have the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(d).
"Forced Conversion Notice" shall have the meaning set forth in
Section 6.
"Force Conversion Notice Date" shall have the meaning set forth in
Section 6.
"Mandatory Prepayment Amount" for any Debentures shall equal the sum
of (i) the greater of: (A) 120% of the principal amount of Debentures to
be prepaid, or (B) the principal amount of Debentures to be prepaid,
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
VWAP 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.
"New York Courts" shall have the meaning set forth in Section 9(d).
"Notice of Conversion" shall have the meaning set forth in Section
4(a).
"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.
"Permitted Liens" means trade payables and indebtedness consisting
of capitalized lease obligations and purchase money indebtedness incurred
in connection with acquisition of capital assets and obligations under
sale-leaseback arrangements with respect to newly acquired or leased
assets (including, but not limited to equipment financing transactions);
provided, however, that in each case such obligations are not secured by
liens on any assets of the Company or its Subsidiaries existing as of the
date of the Purchase Agreement and may only be secured by the assets so
acquired or leased thereafter.
4
"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 Securities Purchase Agreement, dated
as of April 6, 2005, 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 date of the Purchase Agreement, 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 Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement, covering
among other things the resale of the Conversion Shares and naming the
Holder as a "selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" shall have the meaning given to such term in the
Purchase Agreement.
"Threshold Period" shall have the meaning given to such term in
Section 6.
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
the Nasdaq SmallCap Market, the American Stock Exchange, the New York
Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the primary
Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30
5
a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the
Common Stock is not then listed or quoted on the Trading Market and if
prices for the Common Stock are then reported in the "Pink Sheets"
published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other
cases, the fair market value of a share of Common Stock as determined by a
nationally recognized-independent appraiser selected in good faith by
Purchasers holding a majority of the Principal Amount of Debentures then
outstanding.
Section 2. Interest.
a) No Payment of Interest. The Company shall not pay interest to the
Holder on this Debenture. The Company acknowledges and agrees that this
Debenture was issued at an original issue discount.
b) Prepayment. Except as otherwise set forth in this Debenture, the
Company may not prepay any portion of the principal amount of this
Debenture without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. 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.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder set
forth in the Purchase Agreement and may be transferred or exchanged only
in compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Debenture Register. 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 4. Conversion.
a) Voluntary Conversion. At any time after the Shareholder Approval
Date (as defined in the Purchase Agreement), until this Debenture is no
longer outstanding, 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 (subject to the limitations on conversion set forth
in Section 4(c) hereof). The Holder shall effect conversions by delivering
to the Company the form of Notice of Conversion attached hereto as Annex A
6
(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 Business Day
immediately following 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 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 2 Business
Days 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.
b) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $0.11 (subject to adjustment herein)(the
"Conversion Price"). In the event the Company effects a reverse stock
split of its Common Stock, the Conversion Price shall be reduced to equal
to the average of the 10 lowest VWAPs during the 60 consecutive Trading
Days beginning on the 15th Trading Day following the effective date of
such reverse stock split, subject to further adjustment herein. If such an
adjustment does not result in a reduction of the Conversion Price then in
effect, no adjustment will be made.
c) Conversion Limitations.
i. Shareholder Approval. Notwithstanding anything herein to
the contrary, prior to the Shareholder Approval Date (as defined in
Section 4.12(d) of the Purchase Agreement), and until such time as
the Company holds the Shareholder Meeting, this Debenture shall not
be convertible into Conversion Shares.
ii. Holder's Restriction on Conversion. The Company shall not
effect any conversion of this Debenture, and the Holder shall not
have the right to convert any portion of this Debenture, pursuant to
Section 4(a) or otherwise, to the extent that after giving effect to
such conversion, the Holder (together with the Holder's affiliates),
as set forth on the applicable Notice of Conversion, would
beneficially own in excess of 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to which the
7
determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted portion of this Debenture
beneficially owned by the Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of
any other securities of the Company (including, without limitation,
any other Debentures or the Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates. Except as
set forth in the preceding sentence, for purposes of this Section
4(c)(ii), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this section applies, the determination of
whether this Debenture is convertible (in relation to other
securities owned by the Holder) and of which a portion of this
Debenture is convertible shall be in the sole discretion of such
Holder. To ensure compliance with this restriction, the Holder will
be deemed to represent to the Company each time it delivers a Notice
of Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 4(c)(ii), in determining
the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as
reflected in (x) the Company's most recent Form 10-Q or Form 10-K,
as the case may be, (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Company's
Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the
Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of
securities of the Company, including this Debenture, by the Holder
or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The provisions of
this Section 4(c) may be waived by the Holder upon, at the election
of the Holder, upon not less than 61 days' prior notice to the
Company, and the provisions of this Section 4(c) shall continue to
apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver).
d) Mechanics of Conversion
i. Conversion Shares Issuable Upon Conversion of Principal
Amount. The number of shares of Common Stock issuable upon a
conversion hereunder shall be determined by the quotient obtained by
dividing (x) the outstanding principal amount of this Debenture to
be converted by (y) the Conversion Price.
ii. Delivery of Certificate Upon Conversion. Not later than
three Trading Days after any Conversion Date, the Company will
deliver or cause to be delivered to the Holder a certificate or
8
certificates representing the Conversion Shares which shall be free
of restrictive legends and trading restrictions (other than those
required by the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of
Debentures. The Company shall, if available and if allowed under
applicable securities laws, use its commercially reasonable 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.
iii. Failure to Deliver Certificates. 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.
iv. Obligation Absolute; Partial Liquidated Damages. If the
Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(d)(ii) by the
fifth Trading Day after the Conversion Date, the Company shall pay
to such Holder, in cash, as liquidated damages and not as a penalty,
for each $1000 of principal amount being converted, $7.50 per
Trading Day (increasing to $15 per Trading Day after 5 Trading Days
after such damages begin to accrue) for each Trading Day after such
fifth Trading Day until such certificates are delivered. The
Company's obligations to issue and deliver the Conversion Shares
upon conversion of this Debenture in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any
obligation to the Company or any violation or alleged violation of
law by the Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such
Conversion Shares; provided, however, t 6 18 12 such delivery shall
not operate as a waiver by the Company of any such action the
Company may have against the Holder. 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
9
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 upon a properly noticed conversion. Nothing herein shall
limit a Xxxxxx's right to pursue actual damages or declare an Event
of Default pursuant to Section 8 herein for the Company's failure to
deliver Conversion Shares 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 Holder from seeking to enforce
damages pursuant to any other Section hereof or under applicable
law.
v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. 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(d)(ii) by the fifth Trading Day after the Conversion Date,
and if after such fifth 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 Conversion 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(d)(ii). 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 Conversion 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(d)(iv) in respect of the certificates resulting in
such Buy-In.
10
vi. Reservation of Shares Issuable Upon Conversion. After the
Shareholder Approval Date, 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, free from preemptive rights or any
other actual contingent purchase rights of persons other than the
Holder (and the other Holders of the Debentures), 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 5) upon the
conversion of the outstanding principal amount of the Debentures.
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 Registration
Statement is then effective under the Securities Act, registered for
public sale in accordance with such Registration Statement.
vii. Fractional Shares. 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 VWAP 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.
viii. Transfer Taxes. The issuance of certificates for shares
of the Common Stock on conversion of this Debenture shall be made
without charge to the Holder hereof 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.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any
time while this Debenture is outstanding: (A) pays 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), (B) subdivides outstanding shares of
Common Stock into a larger number of shares, (C) combines (including
by way of reverse stock split) outstanding shares of Common Stock
11
into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the
Company, then the 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 immediately before
such event and of which the denominator shall be the number of
shares of Common Stock outstanding immediately 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.
b) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while this Debenture is
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 offer, sale, grant or
any option to purchase or other disposition) any Common Stock or
Common Stock Equivalents entitling any Person to acquire shares of
Common Stock, at an effective price per share less than the then
Conversion Price (such lower price, the "Base Conversion Price" and
such issuances collectively, a "Dilutive Issuance"), as adjusted
hereunder (if the holder of the Common Stock or Common Stock
Equivalents 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 Conversion Price,
such issuance shall be deemed to have occurred for less than the
Conversion Price), then the Conversion Price shall be reduced to
equal the Base Conversion Price. 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
second Business Day following the issuance of any Common Stock or
Common Stock Equivalents subject to this section, indicating therein
the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms (such
notice the "Dilutive Issuance Notice"). For purposes of
clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 5(b), upon the occurrence
of any Dilutive Issuance, after the date of such Dilutive Issuance
the Holder is entitled to receive a number of Conversion Shares
based upon the Base Conversion Price regardless of whether the
Holder accurately refers to the Base Conversion Price in the Notice
of Conversion.
c) Pro Rata Distributions. 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 (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security, then in each such case the
Conversion Price shall be adjusted by multiplying such 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 VWAP determined
12
as of the record date mentioned above, and of which the numerator
shall be such VWAP 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.
d) Fundamental Transaction. 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 this
Debenture, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of 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 Conversion 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 Conversion 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.
13
e) Calculations. All calculations under this Section 5 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 5, the number of
shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and outstanding.
f) Exempt Issuance. Notwithstanding the foregoing, no
adjustment will be made under this Section 5 in respect of an Exempt
Issuance.
g) Notice to Holders.
i. Adjustment to Conversion Price. Whenever the
Conversion Price is adjusted pursuant to any of this Section
5, the Company shall promptly mail to each Holder a notice
setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or
exercise price at which such securities may be converted or
exercised in the case of a Variable Rate Transaction (as
defined in the Purchase Agreement), or the lowest possible
adjustment price in the case of an MFN Transaction (as defined
in the Purchase Agreement).
ii. Notice to Allow Conversion by Xxxxxx. 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 this Debenture, and shall cause to be mailed to
the Holder at its last address 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
14
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. Subject to the other terms and conditions of this
Debenture, the Holder is entitled to convert this Debenture
(or any part hereof) during the 20-day period commencing the
date of such notice to the effective date of the event
triggering such notice.
Section 6. Forced Conversion. Notwithstanding anything herein to the
contrary, if after the later of the Shareholder Approval Date (as defined in the
Purchase Agreement) and the Effective Date, each of the VWAPs for any 30
consecutive Trading Days (such period commencing only after the later of the
Shareholder Approval Date and the Effective Date, such period the "Threshold
Period")) exceeds $0.50 (subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the Original Issue Date), the Company may,
within 1 Trading Day of the end of any such period, deliver a notice to the
Holder (a "Forced Conversion Notice" and the date such notice is received by the
Holder, the "Forced Conversion Notice Date") to cause the Holder to immediately
convert all or part of the then outstanding principal amount of Debentures
pursuant to Section 4(a). The Company may only effect a Forced Conversion Notice
if all of the Equity Conditions are met through the applicable Threshold Period
until the date of the applicable Forced Conversion and through and including the
date such shares of Common Stock are issued to the Holder. Any Forced Conversion
shall be applied ratably to all Holders based on their initial purchases of
Debentures pursuant to the Purchase Agreement.
Section 7. Negative Covenants. 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:
a) except for Permitted Liens or with the prior written consent of
the Agent (as defined in the Security Agreement), enter into, create,
incur, assume or suffer to exist (other than as set forth on the
Disclosure Schedules to the Purchase Agreement) any indebtedness for
borrowed money of any kind, including but not limited to, a guarantee, 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 to, or pari passu with, in any respect, the Company's
obligations hereunder;
b) enter into, create, incur, assume or suffer to exist any liens 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 to, in any respect, the Company's obligations
hereunder except for Permitted Liens;
c) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holder;
15
d) repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common Stock or
Common Stock Equivalents other than as to the Conversion Shares to the
extent permitted or required under the Transaction Documents or as
otherwise permitted by the Transaction Documents;
e) enter into any agreement with respect to any of the foregoing; or
f) pay cash dividends on any equity securities of the Company.
Section 8. 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 amount of any
Debenture, or liquidated damages in respect of, any Debenture, in
each case 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, if possible to cure, within 5 Trading Days;
ii. the Company shall fail to observe or perform any other
covenant or agreement contained in this Debenture (other than a
breach by the Company of its obligations to deliver shares of Common
Stock to the Holder upon conversion which breach is addressed in
clause (xii) below) which failure is not cured, if possible to cure,
within 10 Trading Days after notice of such default sent by the
Holder or by any other Holder;
iii. a default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document or
instrument) shall occur under (A) any of the Transaction Documents
other than the Debentures, or (B) any other material agreement,
lease, document or instrument to which the Company or any Subsidiary
is bound;
iv. any representation or warranty made herein, in any other
Transaction Documents, in any written statement pursuant hereto or
thereto, or in any other report, financial statement or certificate
made or delivered to the Holder or any other holder of Debentures
shall be untrue or incorrect in any material respect as of the date
when made or deemed made;
v. (i) other than the pending bankruptcy of TNCI UK Limited,
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
16
hereafter in effect or any successor thereto, or the Company or any
Subsidiary 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 (ii) there is commenced against the Company or any
Subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 90 days; or
(iii) the Company or any Subsidiary thereof is adjudicated by a
court of competent jurisdiction insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is
entered; or (iv) 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 90 days; or (v) the Company or any Subsidiary thereof
makes a general assignment for the benefit of creditors; or (vi) 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 (vii) 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 (viii) 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 (ix) any corporate or other action is taken by the
Company or any Subsidiary thereof for the purpose of effecting any
of the foregoing;
vi. the Company or any Subsidiary shall default in any of its
obligations under 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 $200,000, 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;
vii. the Common Stock shall not be eligible for quotation on
or quoted for trading on a Trading Market and shall not again be
eligible for and quoted or listed for trading thereon within five
Trading Days;
viii. the Company shall be a party to any Change of Control
Transaction or Fundamental Transaction, shall agree to sell or
dispose of 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 its outstanding shares of Common Stock or other
equity securities of the Company (other than redemptions of
Conversion Shares and repurchases of shares of Common Stock or other
equity securities of departing officers and directors of the
Company; provided such repurchases shall not exceed $100,000, in the
aggregate, for all officers and directors during the term of this
Debenture);
17
ix. a Registration Statement shall not have been declared
effective by the Commission on or prior to the 180th calendar day
after the Filing Date;
x. if, during the Effectiveness Period (as defined in the
Registration Rights Agreement), the effectiveness of the
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 Registration Statement, in
either case, for more than 15 consecutive Trading Days or 20
non-consecutive Trading Days during any 12 month period; provided,
however, that in the event that the Company is negotiating a merger,
consolidation, acquisition or sale of all or substantially all of
its assets or a similar transaction and in the written opinion of
counsel to the Company, the Registration Statement, would be
required to be amended to include information concerning such
transactions or the parties thereto that is not available or may not
be publicly disclosed at the time, the Company shall be permitted an
additional 15 consecutive Trading Days during any 12 month period
relating to such an event;
xi. the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(d) 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
xii. any Person shall breach the agreements delivered to the
initial Holders pursuant to Section 2.2(a)(x) of the Purchase
Agreement and the Company does not obtain Shareholder Approval.
b) Remedies Upon Event of Default. If any Event of Default occurs,
the full principal amount of this Debenture, together with other amounts
owing in respect thereof, to the date of acceleration shall become, at the
Holder's election (except with respect to Section 8(a)(v) which shall
automatically trigger without notice by the Holder upon an occurrence),
immediately due and payable in cash. The aggregate amount payable upon an
Event of Default shall be equal to the Mandatory Prepayment Amount.
Commencing 5 days after the occurrence of any Event of Default that
results in the eventual acceleration of this Debenture, the interest rate
on this Debenture shall accrue at the rate of 15% per annum, or such lower
maximum amount of interest permitted to be charged under applicable law.
All Debentures for which the full Mandatory Prepayment Amount 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
18
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 9. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder 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: Xxxxx Xxxxx 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, with a copy by
fax to (215) 000- 0000, Attn: Xxxxx Xxxxxxx. 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. (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 5:30 p.m. (New York City time) on any
date and earlier than 11:59 p.m. (New York City time) on such date, (iii)
the 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.
b) Absolute Obligation. 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 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. This Debenture ranks pari passu
with all other Debentures now or hereafter issued under the terms set
forth herein.
c) Security Interest. This Debenture is a direct debt obligation of
the Company and, pursuant to the Security Agreement and Custodial
Agreement is secured by a first priority perfected security interest in
all of the assets of the Company for the benefit of the Holders.
19
d) Lost or Mutilated Debenture. 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.
e) Governing Law. 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 New York, 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 commenced in the
state and federal courts sitting in the City of New York, Borough of
Manhattan (the "New York Courts"). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York 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 New York 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 attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
f) Waiver. 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.
20
g) Severability. 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 this Debenture 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.
h) Next Business Day. Whenever any payment, notice or other
obligation hereunder shall be due on a day other than a Business Day, such
payment, notice or other obligation shall be made on the next succeeding
Business Day.
i) Headings. The headings contained herein are for convenience only,
do not constitute a part of this Debenture and shall not be deemed to
limit or affect any of the provisions hereof.
*********************
21
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
TNX TELEVISION HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
22
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Secured
Convertible Debenture of TNX Television Holdings, Inc., a Delaware corporation
(the "Company"), due on April 6, 2007, into shares of common stock, par value
$0.001 per share (the "Common Stock"), of 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.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the 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:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
23
Schedule 1
CONVERSION SCHEDULE
The Secured Convertible Debentures due on April 6, 2007, in the aggregate
principal amount of $____________ issued by TNX Television Holdings, Inc. This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.
Dated:
====================== ================= ============== =====================
Aggregate
Principal
Amount
Date of Conversion Remaining
(or for first entry, Subsequent
Original Issue Date) to Conversion
Amount of (or original Company Attest
Conversion Principal
Amount)
---------------------- ----------------- -------------- ---------------------
---------------------- ----------------- -------------- ---------------------
---------------------- ----------------- -------------- ---------------------
---------------------- ----------------- -------------- ---------------------
---------------------- ----------------- -------------- ---------------------
---------------------- ----------------- -------------- ---------------------
---------------------- ----------------- -------------- ---------------------
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====================== ================= ============== =====================
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