Exhibit 4.2
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
7 3/4% CONVERTIBLE DEBENTURE
Company: Radix Marine, Inc.
Company Address: 0000 Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxxxx, XX 00000
Closing Date: March ___, 2004
Maturity Date: March ___, 2006
Principal Amount: $300,000
First Payment Due Date: May 15, 2004
Radix Marine, Inc., a Nevada corporation, and any successor or
resulting corporation by way of merger, consolidation, sale or exchange of all
or substantially all of the assets or otherwise (the "Company"), for value
received, hereby promises to pay to the Holder (as such term is hereinafter
defined), or such other Person (as such term is hereinafter defined) upon order
of the Holder, on the Maturity Date, the Principal Amount (as such term is
hereinafter defined), as such sum may be adjusted pursuant to Article 3, and to
pay interest thereon from the Closing Date, monthly in arrears, on the 15th day
of each month (each an "Interest Payment Due Date" and collectively, the
"Interest Payment Due Dates"), commencing on the First Payment Due Date, at the
rate of seven and three-quarter percent (7 3/4 %) per annum (the "Debenture
Interest Rate"), until the Principal Amount of this Debenture has been paid in
full. All interest payable on the Principal Amount of this Debenture shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
Payment of interest on this Debenture shall be in cash or, at the option of the
Holder, in shares of Common Stock of the Company valued at the then applicable
Conversion Price (as defined herein). This Debenture may not be prepaid without
the written consent of the Holder.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The terms defined in this Article whenever
used in this Debenture have the following respective meanings:
(i) "Affiliate" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.
(ii) "Bankruptcy Code" means the United States Bankruptcy Code of
1986, as amended (11 U.S.C.ss.ss.101 et. seq.).
(iii) "Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the State of California are authorized or
obligated to close.
(iv) "Capital Shares" means the Common Stock and any other shares
of any other class or series of capital stock, whether now or hereafter
authorized and however designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution, liquidation or
winding-up) of the Company.
(v) "Common Company's Common Stock. Shares" or "Common Stock"
means shares of the
(vi) "Common Stock Issued at Conversion", when used with reference
to the securities deliverable upon conversion of this Debenture, means all
Common Shares now or hereafter Outstanding and securities of any other class or
series into which this Debenture hereafter shall have been changed or
substituted, whether now or hereafter created and however designated.
(vii) "Conversion" or "conversion" means the repayment by the
Company of the Principal Amount of this Debenture (and, to the extent the Holder
elects as permitted by Section 3.1, accrued and unpaid interest thereon) by the
delivery of Common Stock on the terms provided in Section 3.2, and "convert,"
"converted," "convertible" and like words shall have a corresponding meaning.
(viii) "Conversion Date" means any day on which all or any portion
of the Principal Amount of this Debenture is converted in accordance with the
provisions hereof.
(ix) "Conversion Notice" means a written notice of conversion
substantially in the form annexed hereto as Exhibit A.
(x) "Conversion Price" on any date of determination means the
applicable price for the conversion of this Debenture into Common Shares on such
day as set forth in Section 3.1(a).
(xi) "Current Market Price" on any date of determination means the
closing price of a Common Share on such day as reported on the NASDAQ OTCBB
Exchange; provided that, if such security is not listed or admitted to trading
on the NASDAQ OTCBB, as reported on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of such security
on the over-the-counter market on the day in question as reported by Bloomberg
LP or a similar generally accepted reporting service, as the case may be.
(xii) "Deadline" means the date that is the 120th day from the
Closing Date.
(xiii) "Debenture" or "Debentures" means this Convertible
Debenture of the Company or such other convertible debenture(s) exchanged
therefor as provided in Section 2.1.
(xiv) "Discount Multiplier" has the meaning set forth in Section
3.1(a).
(xv) "Event of Default" has the meaning set forth in Section 6.1.
(xvi) "Holder" means La Jolla Cove Investors, Inc., any successor
thereto, or any Person to whom this Debenture is subsequently transferred in
accordance with the provisions hereof.
(xvii) "Interest Payment Due Date" has the meaning set forth in
the opening paragraph of this Debenture.
(xviii) "Market Disruption Event" means any event that results in
a material suspension or limitation of trading of the Common Shares.
(xix) "Market Price" per Common Share means the lowest price of
the Common Shares during any Trading Day as reported on the NASDAQ OTCBB;
provided that, if such security is not listed or admitted to trading on the
NASDAQ OTCBB, as reported on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the lowest price of the Common Shares
during any Trading Day on the over-the-counter market as reported by Bloomberg
LP or a similar generally accepted reporting service, as the case may be.
(xx) "Maximum Rate" has the meaning set forth in Section 6.4.
(xxi) "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively, "Shares") means, on any date of determination, all
issued and outstanding Shares, and includes all such Shares issuable in respect
of outstanding scrip or any certificates representing fractional interests in
such Shares; provided, however, that any such Shares directly or indirectly
owned or held by or for the account of the Company or any Subsidiary of the
Company shall not be deemed "Outstanding" for purposes hereof.
(xxii) "Person" means an individual, a corporation, a partnership,
an association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(xxiii) "Principal Amount" means, for any date of calculation, the
principal sum set forth in the first paragraph of this Debenture (but only such
principal amount as to which the Holder has (a) actually advanced pursuant to
the Securities Purchase Agreement, and (b) not theretofore furnished a
Conversion Notice in compliance with Section 3.2).
(xxiv) "Registration Rights Agreement" means that certain
Registration Rights Agreement of even date herewith by and between the Company
and Holder, as the same may be amended from time to time.
(xxv) "SEC" means the United States Securities and Exchange
Commission.
(xxvi) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.
(xxvii) "Securities Purchase Agreement" means that certain
Securities Purchase Agreement of even date herewith by and among the Company and
Holder, as the same may be amended from time to time.
(xxviii) "Subsidiary" means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Company.
(xxix) "Trading Day" means any day on which (i) purchases and
sales of securities on the principal national security exchange or quotation
system on which the Common Shares are traded are reported thereon, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, as reported by Bloomberg LP or a similar generally accepted
reporting service, as the case may be, (ii) at least one bid for the trading of
Common Shares is reported and (iii) no Market Disruption Event occurs.
All references to "cash" or "$" herein means currency of the
United States of America.
ARTICLE 2
EXCHANGES, TRANSFER AND REPAYMENT
SECTION 2.1 Registration of Transfer of Debentures. This Debenture,
when presented for registration of transfer, shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument of transfer
in form reasonably satisfactory to the Company duly executed, by the Holder duly
authorized in writing.
SECTION 2.2 Loss, Theft, Destruction of Debenture. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Debenture and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Debenture, the Company shall make, issue and deliver, in
lieu of such lost, stolen, destroyed or mutilated Debenture, a new Debenture of
like tenor and unpaid Principal Amount dated as of the date hereof (which shall
accrue interest from the most recent Interest Payment Due Date on which an
interest payment was made in full). This Debenture shall be held and owned upon
the express condition that the provisions of this Section 2.2 are exclusive with
respect to the replacement of a mutilated, destroyed, lost or stolen Debenture
and shall preclude any and all other rights and remedies notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without the surrender
thereof.
SECTION 2.3 Who Deemed Absolute Owner. The Company may deem the Person
in whose name this Debenture shall be registered upon the registry books of the
Company to be, and may treat it as, the absolute owner of this Debenture
(whether or not this Debenture shall be overdue) for the purpose of receiving
payment of or on account of the Principal Amount of this Debenture, for the
conversion of this Debenture and for all other purposes, and the Company
shall not be affected by any notice to the contrary. All such payments and such
conversions shall be valid and effectual to satisfy and discharge the liability
upon this Debenture to the extent of the sum or sums so paid or the conversion
or conversions so made.
SECTION 2.4 Repayment at Maturity. At the Maturity Date, the Company
shall repay the outstanding Principal Amount of this Debenture in whole in cash,
together with all accrued and unpaid interest thereon, in cash, to the Maturity
Date.
ARTICLE 3
CONVERSION OF DEBENTURE
SECTION 3.1 Conversion; Conversion Price; Valuation Event.
(a) Subject to the filing of a certificate of amendment to the
certificate of incorporation of the Company, at the option of the Holder, this
Debenture may be converted, either in whole or in part, up to the full Principal
Amount hereof (in increments of $1,000 in Principal Amount) into Common Shares
(calculated as to each such conversion to the nearest 1/100th of a share), at
any time and from time to time on any Business Day, subject to compliance with
Section 3.2. The number of Common Shares into which this Debenture may be
converted is equal to the dollar amount of the Debenture being converted
multiplied by eleven, minus the product of the Conversion Price multiplied by
ten times the dollar amount of the Debenture being converted, and the entire
foregoing result shall be divided by the Conversion Price. In addition, the
Company shall pay to the Holder on the Conversion Date, in cash, any accrued and
unpaid interest on the Debenture being converted not included at the option of
the Holder in clause (i) of the immediately preceding sentence. The "Conversion
Price" shall be equal to the lesser of (i) $0.20, or (ii) eighty percent (80%)
of the average of the 3 lowest Volume Weighted Average Prices during the twenty
(20) Trading Days prior to Holder's election to convert (a "Discount
Multiplier"); provided, that in the event the Registration Statement has not
been declared effective by the SEC by the Deadline or, if the Registration
Statement has theretofore been declared effective but is not thereafter
effective, then the applicable Discount Multiplier shall decrease by three
percentage points (3%) for each month or partial month occurring after the
Deadline that the Registration Statement is not effective.
Beginning in the first full calendar month after the Registration Statement is
declared effective, Holder shall convert at least 5% of the face value of the
Debenture per calendar month into Common Shares of the Company, provided that
the Common Shares are available, registered and freely tradable. If Holder
converts more than 5% of the face value of the Debenture in any calendar month,
the excess over 5% shall be credited against the next month's minimum conversion
amount. In the event Holder does not convert at least 5% of the Debenture in any
particular calendar month, Holder shall not be entitled to collect interest on
the Debenture for that month.
If the Holder elects to convert a portion of the Debenture and, on the day that
the election is made, the Volume Weighted Average Price is below $0.05, the
Company shall have the right to prepay that portion of the Debenture that Holder
elected to convert, plus any accrued and unpaid interest, at 150% of such
amount. In the event that the Company elects to prepay that portion of the
Debenture, Holder shall have the right to withdraw its Conversion Notice.
(b) Notwithstanding the provisions of Section 3.1(a), in the event the
Company's Registration Statement has not been declared effective by the Deadline
or, if the Registration Statement has theretofore been declared effective but is
not thereafter effective, the following will also apply in addition to any
damages incurred by the Holder as a result thereof:
(i) The Holder may demand repayment of one hundred and fifty
percent (150%) of the Principal Amount of the Debenture, together with all
accrued and unpaid interest thereon, in cash, at any time prior to the Company's
Registration Statement being declared effective by the SEC or during the period
that the Company's Registration Statement is not effective, such repayment to be
made within three (3) business days of such demand. In the event that the
Debenture is so accelerated, in addition to the repayment of one hundred and
fifty percent (150%) of the Principal Amount together with accrued interest as
aforesaid, the Company shall immediately issue and pay, as the case may be, to
the Holder 50,000 Shares of Common Stock and $15,000 for each thirty (30) day
period, or portion thereof, during which the Principal Amount, including
interest thereon, remains unpaid, with the monthly payment amount to increase to
$20,000 for each thirty (30) day period, or portion thereof, after the first
ninety (90) day period;
(ii) If the Holder does not elect to accelerate the Debenture, the
Company shall immediately issue or pay, as the case may be, to Holder 50,000
Shares of Common Stock and $15,000 for each thirty (30) day period, or portion
thereof, that the Registration Statement is not effective, with the monthly
payment amount to increase to $20,000 for each thirty (30) day period, or
portion thereof, after the first ninety (90) day period.
(iii) If the SEC indicates that the Company's Registration
Statement will be declared effective upon request by the Company, and the
Company does not, within 3 business days of the SEC indication, request that the
Registration Statement become effective, the amounts set forth in subsections
(ii) and (iii) above shall double.
SECTION 3.2 Exercise of Conversion Privilege. (a) Conversion of this
Debenture may be exercised on any Business Day by the Holder by telecopying an
executed and completed Conversion Notice to the Company. Each date on which a
Conversion Notice is telecopied to the Company in accordance with the provisions
of this Section 3.2 shall constitute a Conversion Date. The Company shall
convert this Debenture and issue the Common Stock Issued at Conversion in the
manner provided below in this Section 3.2, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the persons who are to become the
holders of the Common Stock Issued at Conversion in connection with such
conversion. As promptly as practicable after the receipt of the Conversion
Notice as aforesaid, but in any event not more than three (3) Business Days
after the Company's receipt of such Conversion Notice, the Company shall (i)
issue the Common Stock Issued at Conversion in accordance with the provisions of
this Article 3 and (ii) cause to be mailed for delivery by overnight courier, or
if a Registration Statement covering the Common Stock has been declared
effective by the SEC cause to be electronically transferred, to Holder (x) a
certificate or certificate(s) representing the number of Common Shares to which
the Holder is entitled by virtue of such conversion, (y) cash, as provided in
Section 3.3, in respect of any fraction of a
Common Share deliverable upon such conversion and (z) cash or shares of Common
Stock, as applicable, representing the amount of accrued and unpaid interest on
this Debenture as of the Conversion Date. Such conversion shall be deemed to
have been effected at the time at which the Conversion Notice indicates, and at
such time the rights of the Holder of this Debenture, as such (except if and to
the extent that any Principal Amount thereof remains unconverted), shall cease
and the Person and Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby, and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Company, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 3.4), to surrender this Debenture and to release the Company from all
liability thereon (except if and to the extent that any Principal Amount thereof
remains unconverted). No cash payment aggregating less than $1.00 shall be
required to be given unless specifically requested by the Holder.
(b) If, at any time after the date of this Debenture, (i) the
Company challenges, disputes or denies the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares or otherwise dishonors or
rejects any Conversion Notice delivered in accordance with this Section 3.2 or
(ii) any third party who is not and has never been an Affiliate of the Holder
commences any lawsuit or legal proceeding or otherwise asserts any claim before
any court or public or governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares, then the Holder shall have
the right, by written notice to the Company, to require the Company to promptly
redeem this Debenture for cash at one hundred and fifty (150%) of the Principal
Amount thereof, together with all accrued and unpaid interest thereon to the
date of redemption. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in defending
itself in any such action or pursuing its rights hereunder (in addition to any
other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion
privilege notwithstanding the commencement of any case under the Bankruptcy
Code. In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the Holder's conversion
privilege. The Company hereby waives to the fullest extent permitted any rights
to relief it may have under 11 U.S.C. ss. 362 in respect of the conversion of
this Debenture. The Company agrees, without cost or expense to the Holder, to
take or consent to any and all action necessary to effectuate relief under 11
U.S.C. ss. 362.
SECTION 3.3 Fractional Shares. No fractional Common Shares or scrip
representing fractional Common Shares shall be delivered upon conversion of this
Debenture. Instead of any fractional Common Shares which otherwise would be
delivered upon conversion of this Debenture, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
multiplied by the Current Market Price on the Conversion Date. No
cash payment of less than $1.00 shall be required to be given unless
specifically requested by the Holder.
SECTION 3.4 Adjustments. The Conversion Price and the number of shares
deliverable upon conversion of this Debenture are subject to adjustment from
time to time as follows:
(i) Reclassification, Etc. In case the Company shall reorganize
its capital, reclassify its capital stock, consolidate or merge with or into
another Person (where the Company is not the survivor or where there is a change
in or distribution with respect to the Common Stock of the Company), sell,
convey, transfer or otherwise dispose of all or substantially all its property,
assets or business to another Person, or effectuate a transaction or series of
related transactions in which more than fifty percent (50%) of the voting power
of the Company is disposed of (each, a "Fundamental Corporate Change") and,
pursuant to the terms of such Fundamental Corporate Change, shares of common
stock of the successor or acquiring corporation, or any cash, shares of stock or
other securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of common stock
of the successor or acquiring corporation ("Other Property") are to be received
by or distributed to the holders of Common Stock of the Company, then the Holder
of this Debenture shall have the right thereafter, at its sole option, to (x)
require the Company to prepay this Debenture for cash at one hundred and fifty
percent (150%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of prepayment, (y) receive the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property as is receivable
upon or as a result of such Fundamental Corporate Change by a holder of the
number of shares of Common Stock into which the outstanding portion of this
Debenture may be converted at the Conversion Price applicable immediately prior
to such Fundamental Corporate Change or (z) require the Company, or such
successor, resulting or purchasing corporation, as the case may be, to, without
benefit of any additional consideration therefor, execute and deliver to the
Holder a debenture with substantial identical rights, privileges, powers,
restrictions and other terms as this Debenture in an amount equal to the amount
outstanding under this Debenture immediately prior to such Fundamental Corporate
Change. For purposes hereof, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to prepayment and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions shall similarly apply to successive Fundamental Corporate
Changes.
SECTION 3.5 Certain Conversion Limits.
Notwithstanding anything herein to the contrary, if and to the extent
that, on any date, the holding by the Holder of this Debenture would result in
the Holder's being deemed the beneficial owner of more than 4.99% of the then
Outstanding shares of Common Stock, then the Holder shall not have the right,
and the Company shall not have the obligation, to convert any portion of this
Debenture as shall cause such Holder to be deemed the beneficial owner of more
than 4.99%
of the then Outstanding shares of Common Stock. If any court of competent
jurisdiction shall determine that the foregoing limitation is ineffective to
prevent a Holder from being deemed the beneficial owner of more than 4.99% of
the then Outstanding shares of Common Stock, then the Company shall prepay such
portion of this Debenture as shall cause such Holder not to be deemed the
beneficial owner of more than 4.99% of the then Outstanding shares of Common
Stock. Upon such determination by a court of competent jurisdiction, the Holder
shall have no interest in or rights under such portion of the Debenture. Any and
all interest paid on or prior to the date of such determination shall be deemed
interest paid on the remaining portion of this Debenture held by the Holder.
Such prepayment shall be for cash at a prepayment price of one hundred and fifty
percent (150%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of prepayment.
SECTION 3.6 Surrender of Debentures. Upon any redemption of this
Debenture pursuant to Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to
Section 2.4, the Holder shall either deliver this Debenture by hand to the
Company at its principal executive offices or surrender the same to the Company
at such address by nationally recognized overnight courier. Payment of the
redemption price or the amount due on maturity specified in Section 2.4, shall
be made by the Company to the Holder against receipt of this Debenture (as
provided in this Section 3.5) by wire transfer of immediately available funds to
such account(s) as the Holder shall specify by written notice to the Company. If
payment of such redemption price is not made in full by the redemption date, or
the amount due on maturity is not paid in full by the Maturity Date, the Holder
shall again have the right to convert this Debenture as provided in Article 3
hereof or to declare an Event of Default.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1 Status of Debenture. This Debenture constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms subject, as to enforceability, to general principles of equity and to
principles of bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights and remedies
generally.
SECTION 4.2 Restrictions on Transfer. This Debenture, and any Common
Shares deliverable upon the conversion hereof, have not been registered under
the Securities Act. The Holder by accepting this Debenture agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Debenture or such shares may be sold pursuant to an exemption from
registration under the Securities Act or (ii) a registration statement relating
to this Debenture or such shares has been filed by the Company and declared
effective by the SEC.
Each certificate for shares of Common Stock deliverable hereunder shall
bear a legend as follows unless and until such securities have been sold
pursuant to an effective registration statement under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). The securities may not be offered for sale,
sold or otherwise transferred except (i) pursuant to an
effective registration statement under the Securities Act or
(ii) pursuant to an exemption from registration under the
Securities Act in respect of which the issuer of this
certificate has received an opinion of counsel satisfactory to
the issuer of this certificate to such effect. Copies of the
agreement covering both the purchase of the securities and
restrictions on their transfer may be obtained at no cost by
written request made by the holder of record of this
certificate to the Secretary of the issuer of this certificate
at the principal executive offices of the issuer of this
certificate."
ARTICLE 5 COVENANTS
SECTION 5.1 Conversion. The Company shall cause the transfer agent, not
later than three (3) Business Days after the Company's receipt of a Conversion
Notice, to issue and deliver to the Holder the requisite shares of Common Stock
Issued at Conversion. Such delivery shall be by electronic transfer if a
Registration Statement covering the Common Stock has been declared effective by
the SEC.
SECTION 5.2 Notice of Default. If any one or more events occur which
constitute or which, with notice, lapse of time, or both, would constitute an
Event of Default, the Company shall forthwith give notice to the Holder,
specifying the nature and status of the Event of Default or such other event(s),
as the case may be.
SECTION 5.3 Payment of Obligations. So long as this Debenture shall be
outstanding, the Company shall pay, extend, or discharge at or before maturity,
all its respective material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
SECTION 5.4 Compliance with Laws. So long as this Debenture shall be
outstanding, the Company shall comply with all applicable laws, ordinances,
rules, regulations and requirements of governmental authorities, except for such
noncompliance which would not have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries.
SECTION 5.5 Inspection of Property, Books and Records. So long as this
Debenture shall be outstanding, the Company shall keep proper books of record
and account in which full, true and correct entries shall be made of all
material dealings and transactions in relation to its business and activities
and shall permit representatives of the Holder at the Holder's expense to visit
and inspect any of its respective properties, to examine and make abstracts from
any of its respective books and records, not reasonably deemed confidential by
the Company, and to discuss its respective affairs, finances and accounts with
its respective officers and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION 5.6 Right of First Refusal on Other Financing. In the event
that the Company obtains any other financing (either debt, equity, or a
combination thereof) which is to close during the term of this Debenture, Holder
shall be entitled to a right of first refusal to enable it to, at Holder's
option, either: (i) match the terms of the other financing, or (ii) add
additional principal to this Debenture, in the amount of such other financing,
on the same terms and conditions as this Debenture. The Company shall deliver to
Holder, at least 10 days prior to the proposed closing date of such transaction,
written notice describing the proposed transaction, including the terms and
conditions thereof, and providing Holder an option during the 10 day period
following delivery of such notice to either provide the financing being offered
in such transaction on the same terms as contemplated by such transaction, or to
add additional principal to this Debenture, in the amount of such other
financing, on the same terms and conditions as this Debenture.
ARTICLE 6
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1 Events of Default. any one of the following events: "Event
of Default" wherever used herein means
(i) the Company shall default in the payment of principal of or
interest on this Debenture as and when the same shall be due and payable and, in
the case of an interest payment default, such default shall continue for five
(5) Business Days after the date such interest payment was due, or the Company
shall fail to perform or observe any other covenant, agreement, term, provision,
undertaking or commitment under this Debenture, the Conversion Warrants (as
defined in the Securities Purchase Agreement), the Securities Purchase Agreement
or the Registration Rights Agreement and such default shall continue for a
period of ten (10) Business Days after the delivery to the Company of written
notice that the Company is in default hereunder or thereunder;
(ii) any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement, the Registration Rights
Agreement or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection
with the execution and delivery of this Debenture, the Warrants, the Securities
Purchase Agreement or the Registration Rights Agreement shall be false or
misleading in a material respect on the Closing Date;
(iii) under the laws of any jurisdiction not otherwise covered
by clauses (iv) and (v) below, the Company or any Subsidiary (A) becomes
insolvent or generally not able to pay its debts as they become due, (B) admits
in writing its inability to pay its debts generally or makes a general
assignment for the benefit of creditors, (C) institutes or has instituted
against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent,
(y) liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors including any plan
of compromise or arrangement or other corporate proceeding involving or
affecting its creditors or (z) the entry of an order for relief or the
appointment of a receiver, trustee or other similar person for it or for any
substantial part of its properties and assets, and in the case of any such
official proceeding instituted against it (but not instituted by it), either the
proceeding remains
undismissed or unstayed for a period of sixty (60) calendar days, or any of the
actions sought in such proceeding (including the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its properties and assets) occurs
or (D) takes any corporate action to authorize any of the above actions;
(iv) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under the
Bankruptcy Code or any other applicable Federal or state law, or appointing a
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or ordering
the winding-up or liquidation of its affairs, and any such decree or order
continues and is unstayed and in effect for a period of sixty (60) calendar
days;
(v) the institution by the Company or any Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Bankruptcy Code or any other applicable federal or state law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as and when they
become due, or the taking of corporate action by the Company in furtherance of
any such action;
(vi) a final judgment or final judgments for the payment of
money shall have been entered by any court or courts of competent jurisdiction
against the Company and remains undischarged for a period (during which
execution shall be effectively stayed) of thirty (30) days, provided that the
aggregate amount of all such judgments at any time outstanding (to the extent
not paid or to be paid, as evidenced by a written communication to that effect
from the applicable insurer, by insurance) exceeds One Hundred Thousand Dollars
($100,000);
(vii) it becomes unlawful for the Company to perform or comply
with its obligations under this Debenture, the Conversion Warrant, the
Securities Purchase Agreement or the Registration Rights Agreement in any
respect;
(viii) the Common Shares shall be delisted from the NASDAQ
OTCBB (the "Trading Market" or, to the extent the Company becomes eligible to
list its Common Stock on any other national security exchange or quotation
system, upon official notice of listing on any such exchange or system, as the
case may be, it shall be the "Trading Market") or suspended from trading on the
Trading Market, and shall not be reinstated, relisted or such suspension lifted,
as the case may be, within five (5) days or;
(ix) the Company shall default (giving effect to any applicable
grace period) in the payment of principal or interest as and when the same shall
become due and payable, under any indebtedness, individually or in the
aggregate, of more than One Hundred Thousand Dollars ($100,000);
SECTION 6.2 Acceleration of Maturity; Rescission and Annulment. If an
Event of Default occurs and is continuing, then and in every such case the
Holder may, by a notice in writing to the Company, rescind any outstanding
Conversion Notice and declare that all amounts owing or otherwise outstanding
under this Debenture are immediately due and payable and upon any such
declaration this Debenture shall become immediately due and payable in cash at a
price of one hundred and fifty percent (150%) of the Principal Amount thereof,
together with all accrued and unpaid interest thereon to the date of payment;
provided, however, in the case of any Event of Default described in clauses
(iii), (iv), (v) or (vii) of Section 6.1, such amount automatically shall become
immediately due and payable without the necessity of any notice or declaration
as aforesaid.
SECTION 6.3 Late Payment Penalty. If any portion of the principal of or
interest on this Debenture shall not be paid within ten (10) days of when it is
due, the Discount Multiplier under this Debenture, and under all warrants
granted by the Company to the Holder, shall decrease by one percentage point
(1%) for all conversions of this Debenture and warrant exercises thereafter.
SECTION 6.4 Maximum Interest Rate. Notwithstanding anything herein to
the contrary, if at any time the applicable interest rate as provided for herein
shall exceed the maximum lawful rate which may be contracted for, charged, taken
or received by the Holder in accordance with any applicable law (the "Maximum
Rate"), the rate of interest applicable to this Debenture shall be limited to
the Maximum Rate. To the greatest extent permitted under applicable law, the
Company hereby waives and agrees not to allege or claim that any provisions of
this Note could give rise to or result in any actual or potential violation of
any applicable usury laws.
SECTION 6.5 Remedies Not Waived. No course of dealing between the
Company and the Holder or any delay in exercising any rights hereunder shall
operate as a waiver by the Holder.
SECTION 6.6 Remedies. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Debenture will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Debenture, that the Holder shall be entitled to all other available remedies at
law or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Debenture and to enforce specifically the terms and provisions thereof, without
the necessity of showing economic loss and without any bond or other security
being required.
SECTION 6.7 Payment of Certain Amounts. Whenever pursuant to this
Debenture the Company is required to pay an amount in excess of the Principal
Amount plus accrued and unpaid interest, the Company and the Holder agree that
the actual damages to the Holder from the receipt of cash payment on this
Debenture may be difficult to determine and the amount to be so paid by the
Company represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this
Debenture and to earn a
return from the sale of shares of Common Stock acquired upon conversion of this
Debenture at a price in excess of that price paid for such shares pursuant to
this Debenture. The Company and the Holder hereby agree that such amount of
stipulated damages is not disproportionate to the possible loss to the Holder
from the receipt of a cash payment without the opportunity to convert this
Debenture into shares of Common Stock.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Notice of Certain Events. In the case of the occurrence of
any event described in Section 3.4 of this Debenture, the Company shall cause to
be mailed to the Holder of this Debenture at its last address as it appears in
the Company's security registry, at least twenty (20) days prior to the
applicable record, effective or expiration date hereinafter specified (or, if
such twenty (20) days' notice is not possible, at the earliest possible date
prior to any such record, effective or expiration date), a notice thereof,
including, if applicable, a statement of (y) the date on which a record is to be
taken for the purpose of such dividend, distribution, issuance or granting of
rights, options or warrants, or if a record is not to be taken, the date as of
which the holders of record of Common Stock to be entitled to such dividend,
distribution, issuance or granting of rights, options or warrants are to be
determined or (z) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of Common Stock will be entitled to exchange their shares for securities, cash
or other property deliverable upon such reclassification, consolidation, merger,
sale transfer, dissolution, liquidation or winding-up.
SECTION 7.2 Register. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this
Debenture. Upon any transfer of this Debenture in accordance with Articles 2 and
4 hereof, the Company shall register such transfer on the Debenture register.
SECTION 7.3 Withholding. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Debenture.
SECTION 7.4 Transmittal of Notices. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally, or sent by
telecopier machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier machine or
overnight courier service as follows:
(1) if to the Company, to:
Radix Marine, Inc.
0000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile:
(2) if to the Holder, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 7.4.
SECTION 7.5 Attorneys' Fees. Should any party hereto employ an attorney
for the purpose of enforcing or construing this Debenture, or any judgment based
on this Debenture, in any legal proceeding whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litigation, the prevailing
party shall be entitled to receive from the other party or parties thereto
reimbursement for all reasonable attorneys' fees and all reasonable costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not, and that such reimbursement shall be included in
any judgment or final order issued in that proceeding. The "prevailing party"
means the party determined by the court to most nearly prevail and not
necessarily the one in whose favor a judgment is rendered.
SECTION 7.6 Governing Law. This Debenture shall be governed by, and
construed in accordance with, the laws of the State of California (without
giving effect to conflicts of laws principles). With respect to any suit, action
or proceedings relating to this Debenture, the Company irrevocably submits to
the exclusive jurisdiction of the courts of the State of California sitting in
San Diego and the United States District Court located in the City of San Diego
and hereby waives, to the fullest extent permitted by applicable law, any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. Subject to applicable law, the Company agrees that final judgment against
it in any legal action or proceeding arising out of or relating to this
Debenture shall be conclusive and may be enforced in any other jurisdiction
within or outside the United States by suit on the judgment, a certified copy of
which judgment shall be conclusive evidence thereof and the amount of its
indebtedness, or by such other means provided by law.
SECTION 7.7 Waiver of Jury Trial. To the fullest extent permitted by
law, each of the parties hereto hereby knowingly, voluntarily and intentionally
waives its respective rights to a jury trial of any claim or cause of action
based upon or arising out of this Debenture or any other document or any
dealings between them relating to the subject matter of this Debenture and other
documents. Each party hereto (i) certifies that neither of their respective
representatives, agents or attorneys has represented, expressly or otherwise,
that such party would not, in the event of litigation, seek to enforce the
foregoing waivers and (ii) acknowledges that it has been induced to enter into
this Debenture by, among other things, the mutual waivers and certifications
herein.
SECTION 7.8 Headings. The headings of the Articles and Sections of this
Debenture are inserted for convenience only and do not constitute a part of this
Debenture.
SECTION 7.9 Payment Dates. Whenever any payment hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
SECTION 7.10 Binding Effect. Each Holder by accepting this Debenture
agrees to be bound by and comply with the terms and provisions of this
Debenture.
SECTION 7.11 No Stockholder Rights. Except as otherwise provided
herein, this Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
SECTION 7.12 Facsimile Execution. Facsimile execution shall be deemed
originals.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
by its duly authorized officer on the date of this Debenture.
Radix Marine, Inc.
By: ________________________________________
Title: _____________________________________
EXHIBIT A
DEBENTURE CONVERSION NOTICE
TO: Radix Marine, Inc.
The undersigned owner of this Convertible Debenture due March ___, 2006
(the "Debenture") issued by Radix Marine, Inc. (the "Company") hereby
irrevocably exercises its option to convert $__________ Principal Amount of the
Debenture into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert the portion
of the Debenture specified above into shares of Common Stock Issued at
Conversion in accordance with the provisions of Article 3 of the Debenture. The
undersigned directs that the Common Stock and certificates therefor deliverable
upon conversion, the Debenture reissued in the Principal Amount not being
surrendered for conversion hereby, [the check or shares of Common Stock in
payment of the accrued and unpaid interest thereon to the date of this Notice,]
together with any check in payment for fractional Common Stock, be registered in
the name of and/or delivered to the undersigned unless a different name has been
indicated below. All capitalized terms used and not defined herein have the
respective meanings assigned to them in the Debenture. The conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the
Principal Amount of the Debenture set forth above shall cease and the Person or
Persons in whose name or names the Common Stock Issued at Conversion shall be
registered shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest with
such Person or Persons.
Date and time: __________________
By: ______________________________
Title: ___________________________
Fill in for registration of Debenture: Please print
name and address (including ZIP code number):
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