EXHIBIT 10.4
FORM OF DEBENTURE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO
U.S. PERSONS (OTHER THAN DISTRIBUTORS) UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE ACT IS
AVAILABLE. THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR
A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
No.______ $_________ U.S.
CLEARLOGIC, INC.
8% CONVERTIBLE DEBENTURE DUE DECEMBER 31, 2002
THIS DEBENTURE is one of a duly authorized issue of Debentures of
CLEARLOGIC, INC., a corporation duly organized and existing under the laws of
the State of New Jersey (the "Company") designated as its 8% Convertible
Debentures Due December 31, 2002, in an aggregate principal amount not exceeding
$1,000,000 U.S.
FOR VALUE RECEIVED, the Company promises to pay to ___________________,
the registered holder hereof (the "Holder"), the principal sum of
_____________________ Dollars ($________ U.S.), on December 31, 2002, (the
"Maturity Date") and to pay interest on the principal sum outstanding from time
to time in arrears on the Maturity Date, at the rate of 8% per annum accruing
from the date of initial issuance. Accrual of interest shall commence on the
first such business day to occur after the date hereof until payment in full of
the principal sum has been made or duly provided for. All accrued and unpaid
interest shall bear interest at the same rate as the due date of the interest
payment until paid. The interest so payable will be paid on the Maturity Date to
the person in whose name this Debenture (or one or more predecessor Debentures)
is registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register") on the tenth day prior to the
Maturity Date; provided, however, that the Company's obligation to a transferee
of this Debenture arises only if such transfer, sale or other disposition is
made in accordance with the terms and conditions of the Subscription Agreement
(the "Agreement") executed by the original Holder. The principal of, and
interest on, this Debenture are payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private
(continued on reverse)
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
CLEARLOGIC, INC.
Dated: ________________________ By: _______________________________
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debts, at the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. The Company will pay the
principal of and interest upon this Debenture on the Maturity Date, less any
amounts required by law to be deducted, to the registered holder of this
Debenture reflected in the Debenture Register as of the tenth day prior to the
Maturity Date and addressed to such holder at the last address appearing on the
Debenture Register. The forwarding of such check shall constitute a payment of
interest hereunder and shall satisfy and discharge the liability for principal
and interest on this Debenture to the extent of the sum represented by such
check plus any amounts so deducted unless such check is not paid at par. At the
option of the Company, interest herein may be payable in shares of Company
Common Stock valued at the conversion price described in Section 5.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Five Hundred
Thousand Dollars ($500,000 U.S.) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering the
same. No service charge will be made for such registration of transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act") and upon
receipt of an opinion of counsel reasonably satisfactory to the Company. Prior
to due presentment 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 Company's 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 be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
4. The Company covenants and agrees, and each holder of Debentures, by
his acceptance thereof, likewise covenants and agrees, that the indebtedness
evidenced by the Debentures and the payment of the principal thereof and
interest thereon shall be subordinate and subject in right of payment, to the
extent and in the manner hereinafter set forth, to the prior payment in full of
all "Senior Indebtedness." The term "Senior Indebtedness" of the Company shall
mean (i) the principal of and accrued and unpaid interest on all indebtedness of
the Company, whether outstanding on the date of issuance of this Debenture or
thereafter created, incurred, or assumed, for money borrowed from one or more
banks, insurance companies, financial institutions, governmental entities or any
other persons which regularly engage in lending money, unless such indebtedness
shall, in the instrument creating the same, be
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specifically designated as not being senior in right of payment to the
Debentures; and (ii) any modifications, renewals, extensions, deferrals, and
refunding of any such indebtedness, liabilities, or obligations; provided,
however, that Senior Indebtedness shall not be deemed to include any obligation
of the Company in connection with extensions of credit by trade creditors and
suppliers.
5. The Holder of this Debenture is entitled, at its option, subject to
the conditions in paragraph 6 below, at any time, until maturity hereof to
convert the principal amount of this Debenture or any portion of the principal
amount hereof which is at least Five Hundred Thousand Dollars ($500,000 U.S.),
or, if at the time of such election to convert the aggregate principal amount of
all Debentures registered to the Holder is less than Five Hundred Thousand
Dollars ($500,000 U.S.), then the whole amount thereof, into Shares of Common
Stock of the Company at a conversion price for each share of Common Stock equal
to the lower of the Market Price of the Common Stock on the first day of
trading, or 75% of the Market Price of the Company's Common Stock averaged over
the five trading days prior to the date of conversion. For purposes of this
Section 5, the Market Price shall be the closing bid price of the Common Stock,
as reported by the National Association of Securities Dealers Inc., Automated
Quotation System or, in the event the Common Stock is listed on a stock
exchange, the fair market value per Share shall be the closing price on the
exchange, as reported in the Wall Street Journal. Such conversion shall be
effectuated by surrendering the Debentures to be converted to the Company, at 00
Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000, facsimile (000) 000-0000 with the
form of conversion notice attached hereto as Exhibit A, executed by the Holder
of this Debenture evidencing such Holder's intention to convert this Debenture
or a specified portion (as above provided) hereof, and accompanied, if such
shares are to be issued in a name other than Holder, by proper assignment hereof
in blank. Any accrued and unpaid interest shall be payable, at the option of the
Company, in cash or in shares valued at the then effective conversion price. No
fractions of shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which notice of conversion is given shall be deemed to
be the date on which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or, if earlier, the date set
forth in such notice of conversion if this Debenture is received by the Company
within two business days' thereafter.
6. The Holder of this Debenture is obligated to give two (2) business
days advance notice of its intent to convert at which time the Company may
exercise its right to redeem any or all said portion of such debenture. At the
end of this 48-hour period the Holder may continue with its intended conversion.
7. This Debenture is redeemable at the option of the Company on no less
than 10 days' written notice by the Company at a redemption price equal to 115%
of the face amount hereof, plus accrued and unpaid interest to the redemption
date.
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8. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company. This Debenture ranks
equally and ratably with all other Debentures now or hereafter issued under this
terms set forth herein.
9. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
10. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon exercise thereof except under circumstances which will not result
in a violation of the Act or any applicable state Blue Sky law or similar laws
relating to the sale of securities.
11. This Debenture shall be governed by and construed in accordance
with the laws of the State of Delaware, and shall be further subject to the
terms of the Agreement.
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above
Debenture No. ______________ into Shares of Common Stock of ClearLogic, Inc.
(the "Company") according to the conditions hereof, as of the date written
below.
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Date of Conversion*
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Applicable Conversion Price
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Signature
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Name
Address:
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* This original Debenture and Notice of Conversion must be received by the
Company by the second business day following the Date of Conversion.
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