THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION,
UNDER SAID ACT.
XXXXXXXXXXXXXXXXXX.XXX INC.
8.0% DEBENTURE
SERIES 1999A
$1,500,000 Dallas, Texas
January 28, 1999
XXXXXXXXXXXXXXXXXX.XXX INC., a Delaware corporation (the "Company"),
the principal office of which is located at 0000 Xxxxxxx Xxxxxx, Xxxxxxx,
Xxxxx 00000, for value received hereby promises to pay to JAT III L.L.C., or
its registered assigns, the sum of One Million Five Hundred Thousand and
00/100ths Dollars ($1,500,000), or such lesser amount as shall then equal the
outstanding principal amount hereof and any unpaid accrued interest thereon,
as set forth below, on January 27, 2004. Payment of all amounts due hereunder
shall be made by registered or certified mail to the registered address of
the Holder, or at such other address as Holder may, from time to time,
designate in writing to the Company.
This Debenture is issued in connection with the transactions
described in Section 1.1 of that certain Common Stock and Debenture Purchase
Agreement of even date herewith by and among the Company and the Purchasers
described therein, as the same may from time to time be amended, modified or
supplemented (the "Purchase Agreement"). The Holder of this Debenture is
subject to certain restrictions set forth in the Purchase Agreement and shall
be entitled to certain rights and privileges set forth in the Purchase
Agreement. This Debenture is one of the Debentures referred to as the
"Debentures" in the Purchase Agreement.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Debenture is subject, and to which
the Holder hereof, by the acceptance of this Debenture, agrees:
1. DEFINITIONS. As used in this Debenture, the following terms,
unless the context otherwise requires, have the following meanings:
(a) "Anniversary Year" shall mean that period of time
commencing on January 28th of each year and terminating on January 27 of the
following year.
(b) "Company" includes any corporation which shall succeed
to or assume the obligations of the Company under this Debenture.
(c) "Holder," when the context refers to a holder of this
Debenture, shall mean any person who shall at the time be the registered
holder of this Debenture.
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(d) "First Level Qualified Public Offering" shall mean the
closing of an initial public offering of the common stock of the Company
pursuant to which the Company shall raise at least Twenty Million Dollars
($20,000,000) after commissions and underwriting discounts.
(e) "Second Level Qualified Public Offering" shall mean the
closing of an initial public offering of the common stock of the Company
pursuant to which the Company shall raise at least Thirty Million Dollars
($30,000,000) after commissions and underwriting discounts.
(f) "Sale of Assets" shall mean the sale of all or
substantially all of the assets of the Company.
2. INTEREST.
(a) INTEREST RATE. The unpaid principal balance of this
Debenture shall bear interest at a rate equal to 8.0% per annum from the date
hereof until paid in full.
(b) PAYMENT OF PRINCIPAL AND INTEREST. Accrued interest
shall not be payable during the first two Anniversary Years hereof unless
otherwise determined by the Board of Directors of the Company. At the end of
the second Anniversary Year the accrued amount of interest not paid shall be
added to the principal amount of this Debenture (collectively, the "Revised
Principal Amount") and interest thereafter should be calculated on the
Revised Principal Amount or so much of the unpaid principal balance of this
Debenture then outstanding. During the third Anniversary Year hereof the
Company shall pay interest only on a quarterly basis such amounts to be due
and payable on March 31, 2001, June 30, 2001, September 30, 2001, and
December 31, 2001, respectively. During the fourth and fifth Anniversary
Years quarterly payments of principal and interest shall be due and payable.
The amount of the principal payment due for each such quarterly payment,
unless earlier paid, shall be 12.5% of the principal amount of this Debenture
outstanding as of the end of the second Anniversary Year, or if higher, the
Revised Principal Amount.
3. VOLUNTARY PAYMENT. Upon five (5) days' prior written notice to
the Holder, the Company may prepay the principal sum of this Debenture, at
any time, in whole or in part, plus unpaid accrued interest to the date of
payment.
4. MANDATORY PAYMENTS.
(a) UPON LIQUIDATION OF THE COMPANY. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company or a Sale of Assets, prior and in preference to any distribution of
any of the assets or surplus funds of the Company to the holders of capital
stock of the Company by reason of their ownership thereof, all outstanding
principal and unpaid accrued interest on this Debenture shall be immediately
due and payable. If the assets and funds of the Company are insufficient to
permit payment in full of all of the then
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outstanding Debentures issued pursuant to the Purchase Agreement, then the
entire assets and funds of the Company legally available for distribution
shall be distributed ratably among the holders of such Debentures in
proportion to the principal amounts thereof outstanding at the time of
payment.
(b) UPON EVENT OF DEFAULT. Within 30 days of the Holder
obtaining actual knowledge of the occurrence of an Event of Default (as
hereinafter defined), the Holder may demand the prepayment of all or any
portion of this Debenture by submission of written notice of prepayment to
the Company. Following the receipt of such notice, the Company shall prepay
the portion of this Debenture requested to be prepaid as soon as reasonably
practicable, but in any event within 30 days of date of such notice. An Event
of Default for purposes of this Section 4(b) shall mean: (i) the failure to
pay interest or principal on any scheduled payment date; (ii) the occurrence
of any material breach of any representation, warranty or covenant by the
Company under the Purchase Agreement, if such breach is not cured within 30
days of the receipt by the Company of written notice thereof; or (iii) the
filing of any petition, whether voluntary or involuntary, seeking the
reorganization or liquidation of the Company under any provision of the
Federal Bankruptcy Code or any other federal or state reorganization,
insolvency or debtor relief law; or (iv) the appointment of any receiver,
liquidator or trustee for the Company or any of its properties by a court
order and which appointment is not vacated within 30 days; or (v) the Company
is adjudicated insolvent or the Company shall make an assignment for the
benefit of any of its creditors, admit in writing an inability to pay debts
when they become due in the ordinary course of its business, or consent to
the appointment of a receiver, trustee or liquidator for the Company or all
or any part of the property of the Company.
(c) UPON QUALIFIED PUBLIC OFFERING. If, at any time, the
Company proposes to make a First Level Qualified Public Offering, then at the
closing of the First Level Qualified Public Offering, fifty percent (50%) of
the principal amount of this Debenture, plus the unpaid accured interest
thereon, shall be prepaid. If, at any time, the Company proposes to make a
Second Level Qualified Public Offering, then at the closing of the Second
Level Qualified Public Offering, all of the principal amount of this
Debenture, plus the unpaid accrued interest thereon, shall be prepaid.
(d) LIMITATION. If, the Company lacks sufficient funds to
pay lawfully all of the Debentures which the Company is, at any such time,
obligated to pay in accordance with this Section 4, then holders of all the
then outstanding Debentures issued pursuant to the Purchase Agreement shall
share ratably in any funds legally available for payment of such Debentures
according to the respective amounts which would be payable with respect to
the face amount of the Debentures owned by them if all such Debentures were
paid in full.
5. ASSIGNMENT. Subject to the restrictions on transfer described in
Section 7 below, the rights of the Company and the Holder shall be binding
upon and benefit the permitted successors, assigns, heirs, administrators and
transferees of the parties.
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6. WAIVER AND AMENDMENT. Any provision of this Debenture may be
amended, waived or modified upon the written consent of the Company and the
holders of all then outstanding Debentures issued pursuant to the Purchase
Agreement.
7. AGREEMENT NOT TO ATTACH. The Holder, by its acceptance of this
Debenture, agrees that in the Event of Default as described in subsection
4(b)(i) or (ii) hereof, and whether or not the Holder shall have obtained an
judgment thereon, unless the Company shall also be in default pursuant to
subsections 4(b)(iii), (iv) or (v) hereof, Holder shall not seek, or cause
any third party to seek, an attachment on or possession of any of the
Company's intellectual property, including but not limited to any of the
Company's technology, patents, trademarks, copyright or any goodwill
associated with any of the foregoing.
8. TRANSFER OF THIS DEBENTURE. This Debenture may not be transferred
or assigned without the prior written consent of holders of at least
seventy-five percent (75%) of the face amount of all the then outstanding
Debentures issued pursuant to the Purchase Agreement, except that the Holder
may transfer or assign this Debenture to an affiliate of the initial Holder
of this Debenture without requiring such consent. With respect to any
proposed offer, sale or other disposition of this Debenture, the Holder will
give prior written notice to the Company and each of the other holders of the
then outstanding Debentures issued pursuant to the Purchase Agreement,
describing briefly the manner thereof, together with a written opinion of the
Holder's counsel, addressed to the Company, to the effect that such offer,
sale or other distribution may be effected without registration or
qualification (under any federal or state law then in effect). Promptly upon
receiving such written notice and reasonably satisfactory opinion, the
Company, as promptly as practicable, shall notify the Holder that the Holder
may sell or otherwise dispose of this Debenture, in accordance with the terms
of the notice delivered to the Company and subject to the above consent
requirement from other holders of Debentures. If a determination has been
made pursuant to this Section 7 that the opinion of counsel for the Holder is
not reasonably satisfactory to the Company, the Company shall so notify the
Holder promptly after such determination has been made. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
9. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or, if mailed, by registered or certified mail,
postage prepaid, at the respective addresses of the parties as set forth
herein. Any party hereto by notice so given may change its address for future
notice hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the manner set forth
above and shall be deemed to have been received when delivered.
10. PAYMENTS DUE ON SATURDAY, SUNDAY OR LEGAL HOLIDAYS. If an
interest payment date for this Debenture, or a date fixed for payment or
prepayment of all or a portion of this Debenture shall be a Saturday, Sunday
or, in Dallas, Texas, a legal holiday or a day on which banking institutions
are authorized or required by law or executive order to close or remain
closed, then any such payment need not be made on such date but may be made
on the next
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succeeding day which is not a Saturday, Sunday, or in such city, a legal
holiday or a day on which banking institutions are closed, with the same
force and effect as if made on such required payment date.
11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, excluding that body of law
relating to conflict of laws.
12. HEADINGS; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this
Debenture. Except where otherwise indicated, all references herein to
Sections refer to Sections hereof.
13. USURY SAVINGS CLAUSE. Regardless of any provision contained
herein, or in any document executed in connection herewith, the Holder shall
never be entitled to receive, collect, or apply, as interest on the
indebtedness evidenced hereby, any amount in excess of the maximum rate
permitted by law. If the Holder ever receives, collects, or applies, as
interest, any such excess, such amount which would be excessive interest
shall be deemed a partial prepayment of principal and treated hereunder as
such; and if, the principal hereof is paid in full, any remaining excess
shall be refunded to the Company. In determining whether or not the interest
paid or payable, under any specific contingency, exceeds the maximum rate
permitted by law, the Company and the Holder shall, to the maximum extent
permitted under applicable law: (a) characterize any nonprincipal payment as
an expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) prorate, allocate, and spread,
the total amount of interest throughout the entire contemplated term hereof,
provided, that if the principal balance hereof is paid and performed in full
prior to the end of the full contemplated term hereof. However, if the
interest received for the actual period of existence thereof exceeds the
maximum rate permitted by law, the Holder shall either apply or refund to the
Company the amount of such excess as herein provided, and in such event, the
Holder shall not be subject to any penalties provided by any laws for
contracting for, charging, or receiving interest in excess of the maximum
rate permitted by law.
IN WITNESS WHEREOF, the Company has caused this Debenture to be
issued this 28th day of January, 1999.
XXXXXXXXXXXXXXXXXX.XXX INC.
By: /s/ X. Xxxxx Xxxxxxx
----------------------------
Its: President - Secretary
-----------------------
Name of Holder: JAT III, L.L.C.
Address: 0000 Xxxxxxx Xxx.
Dallas, Texas 75225
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