EXHIBIT 10.37
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET FORTH
IN SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS OF APRIL
8, 1998, BETWEEN FIX-CORP INTERNATIONAL, INC. (THE "COMPANY") AND THE ORIGINAL
HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
No. A-14 U.S. $3,000,000
FIX-CORP INTERNATIONAL, INC.
4% CONVERTIBLE DEBENTURE DUE APRIL 8, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures of
Fix-Corp International, Inc., a Delaware corporation having a principal place of
business at 0000 Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (the
"COMPANY"), designated as its 4% Convertible Debentures, due April 8, 2001 (the
"DEBENTURES"), in an aggregate principal amount of $3,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC Strategic Fund Ltd.,
or registered assigns (the "HOLDER"), the principal sum of Three Million Dollars
($3,000,000), on or prior to April 8, 2001 or such earlier date as the
Debentures are required to be repaid as provided hereunder (the "MATURITY DATE")
and to pay interest to the Holder on the principal sum at the rate of 4% per
annum, payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing June 30, 1998, and on each Conversion Date
(as defined in Section 4(a)). Interest shall accrue daily commencing on the
Original Issue Date (as defined in Section 6) until payment in full of the
principal sum, together with all accrued and unpaid interest and other amounts
which may become due hereunder, has been made. Interest shall be calculated on
the basis of a 360-day year and for the actual number of days elapsed. Interest
hereunder will be paid to the Person (as defined in Section 6) in whose name
this Debenture is registered on the records of the Company regarding
registration and transfers of the Debentures (the "DEBENTURE REGISTER"). All
overdue, accrued and unpaid interest and other amounts due hereunder shall bear
interest at the rate of 18% per annum and accrue daily from the date such
interest is due hereunder through and including the date of payment. 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 debts, at the address of the Holder
last appearing on the Debenture Register, except that interest due on the
principal amount (but not overdue interest) may, at the Company's option, be
paid in shares of Common Stock (as defined in Section 6) calculated based upon
the Conversion Price (as defined below) at the time such interest becomes due.
All amounts due hereunder other than interest shall be paid in cash.
Notwithstanding anything to the contrary contained herein, the Company may not
issue shares of the Common Stock in payment of interest on the principal amount
if: (i) the number of shares of Common Stock at the time authorized, unissued
and unreserved for all purposes, or held as treasury stock, is insufficient to
pay interest hereunder in shares of Common Stock; (ii) such shares are not
either registered for resale pursuant to an Underlying Securities Registration
Statement (as defined in Section 6) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT"), as determined by counsel to the Company
pursuant to a written opinion letter, addressed to and in form and substance
acceptable to the Company's transfer agent or other person or entity performing
similar functions thereto; (iii) such shares are not listed on the OTC Bulletin
Board (or the American Stock Exchange, Nasdaq National Market, Nasdaq SmallCap
Market or The New York Stock Exchange) and any other exchange, market and
trading facility on which the Common Stock is then listed for trading; or (iv)
the issuance of such shares would result in the recipient thereof beneficially
owning more than 4.999% of the issued and outstanding shares of Common Stock as
determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended. Payment of interest on the principal amount in shares of
Common Stock is further subject to the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of Debentures
outstanding to such Holder. No service charge will be made for such
registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 6) and may be transferred or exchanged only in
compliance with the Purchase Agreement. 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.
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SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of, interest on or
liquidated damages in respect of, this Debenture, free of any claim of
subordination, as and when the same shall become due and payable (whether
on the applicable quarterly interest payment date, the Conversion Date or
the Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, the Purchase Agreement or the Registration
Rights Agreement (as defined in Section 6), and such failure or breach
shall not have been remedied within 10 days after the date on which written
notice of such failure or breach shall have been given;
(iii) 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 hereafter in
effect or any successor thereto, or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction whether now or hereafter in effect relating to the Company
or any subsidiary thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 60 days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or
the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the Company
or any subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition or adjustment of
its debts; or the Company or any subsidiary thereof shall by any act or
failure to act indicate its consent to, approval of or acquiescence in any
of the foregoing; or any corporate or other action is taken by the Company
or any subsidiary thereof for the purpose of effecting any of the
foregoing;
(iv) the Company shall default in any of its obligations or an
event shall
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occur, or shall fail to occur, which gives (or would give after the passage
of time or giving of notice or both) the payee of any such obligation the
right to accelerate the payment thereof under any mortgage, credit
agreement or other facility, indenture agreement, promissory note or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness of the Company in an amount exceeding
one hundred thousand dollars ($100,000), 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;
(v) the Common Stock shall be delisted from the OTC Bulletin Board
or any other national securities exchange or market on which such Common
Stock is then listed for trading or suspended from trading thereon without
being relisted or having such suspension lifted, as the case may be, within
three (3) Trading Days (if after the Original Issue Date the Common Stock
shall be listed for trading or quoted on the Nasdaq SmallCap Market, Nasdaq
National Market or any other national securities exchange or market, this
provision shall apply to any delistings or suspensions therefrom);
(vi) the Company shall be a party to any merger or consolidation
pursuant to which the Company shall not be the surviving entity or shall
sell, transfer or otherwise dispose of all or substantially all of its
assets in one or more transactions, or shall redeem more than a de minimis
number of shares of Common Stock (other than redemptions of Underlying
Shares);
(vii) an Underlying Securities Registration Statement shall not have
been declared effective by the Securities and Exchange Commission (the
"COMMISSION") on or prior to the 70th day after the Original Issue Date; or
(viii) an Event (as hereinafter defined) shall not have been cured to
the satisfaction of the Holder prior to the expiration of thirty (30) days
from the Event Date (as hereinafter defined) relating thereto.
(b) If any Event of Default occurs and is continuing, the Holder
may, by notice to the Company, declare the full principal amount of this
Debenture (and, at the Holder's option, all other Debentures then held by such
Holder), together with interest and other amounts owing in respect thereof, to
the date of acceleration, to be, whereupon the same shall become, immediately
due and payable in cash. The aggregate amount payable in respect of the
Debentures shall be equal to the sum of (i) the Mandatory Repayment Amount plus
(ii) the product of (A) the number of Underlying Shares issued in respect of
conversions hereunder and then held by the demanding Holder and (B) the Per
Share Market Value on the date prepayment is demanded or the date the full
prepayment price is paid, whichever is greater. The demanding Holder need not
provide and the 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
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other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by the Holder at any time prior to payment hereunder. No
such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
SECTION 4. CONVERSION.
(a) 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
after the Original Issue Date and prior to the close of business on the Maturity
Date. The number of shares of Common Stock as shall be issuable upon a
conversion hereunder shall be determined by dividing the outstanding principal
amount of this Debenture to be converted, plus all accrued but unpaid interest
thereon (which the Company does not elect to pay in cash), by the Conversion
Price (as defined below), each as subject to adjustment as provided hereunder.
The Holder shall effect conversions by surrendering the Debentures (or such
portions thereof) to be converted, together with the form of conversion notice
attached hereto as EXHIBIT A (the "CONVERSION NOTICE") to the Company. Each
Conversion Notice shall specify the principal amount of Debentures to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date such Conversion Notice is deemed to have been
delivered hereunder (the "CONVERSION DATE"). If no Conversion Date is specified
in a Conversion Notice, the Conversion Date shall be the date that the
Conversion Notice is deemed delivered hereunder. Subject to Section 4(b) hereof
and Section 3.8 of the Purchase Agreement, each Conversion Notice, once given,
shall be irrevocable. If the Holder is converting less than all of the
principal amount represented by the Debenture(s) tendered by the Holder with the
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Company shall honor such conversion to the extent permissible
hereunder and shall promptly deliver to such Holder (in the manner and within
the time set forth in Section 5(b)) a new Debenture for such principal amount as
has not been converted.
(b) Not later than three Trading Days after the Conversion Date,
the Company will deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than those
required by Section 3.1(b) of the Purchase Agreement) representing the number of
shares of the Common Stock being acquired upon the conversion of Debentures
(subject to reduction pursuant to Section 3.8 of the Purchase Agreement), (ii)
Debentures in a principal amount equal to the principal amount of Debentures not
converted; (iii) a bank check in the amount of all accrued and unpaid interest
(if the Company has elected to pay accrued interest in cash), together with all
other amounts then due and payable in accordance with the terms hereof, in
respect of Debentures tendered for conversion and (iv) if the Company has
elected to pay accrued interest in shares of the Common Stock, certificates,
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement), representing such
number of shares of the Common Stock as equals such interest divided by the
Conversion Price calculated on the Conversion Date; PROVIDED, HOWEVER, that the
Company shall not be obligated to issue certificates evidencing the shares of
the Common Stock issuable upon conversion of the principal amount of Debentures
until Debentures are delivered for conversion to the Company or the Holder
notifies the Company that such Debenture has been
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mutilated, lost, stolen or destroyed and complies with Section 9 hereof. The
Company shall, upon request of the Holder, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case
of any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of the Common Stock to be issued on the Conversion
Date on account of accrued but unpaid interest hereunder, are not delivered to
or as directed by the applicable Holder by the third Trading Day after the
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 Debentures tendered for conversion. If the Company fails
to deliver to the Holder such certificate or certificates pursuant to this
Section, including for purposes hereof, any shares of the Common Stock to be
issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the third Trading Day after the Conversion Date, the Company
shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
$1,500 for each day thereafter until the Company delivers such certificates. If
the Company fails to deliver to the Holder such certificate or certificates
pursuant to this Section prior to the 20th day after the Conversion Date, the
Company shall, at the Holder's option (i) prepay, from funds legally available
therefor at the time of such prepayment, the aggregate of the principal amount
of Debentures then held by such Holder, as requested by such Holder, and (ii)
pay all accrued but unpaid interest on account of the Debentures for which the
Company shall have failed to issue the Common Stock certificates hereunder, in
cash. The prepayment price shall equal the Mandatory Prepayment Amount for the
Debentures to be prepaid. If the Holder has required the Company to prepay
Debentures pursuant to this Section and the Company fails for any reason to pay
the prepayment price within seven days after such notice is deemed delivered
hereunder, the Company will pay interest on the prepayment price at a rate of
18% per annum (to accrue daily), in cash to such Holder, accruing from such
seventh day until the prepayment price and any accrued interest thereon is paid
in full.
(c) (i) The conversion price (the "CONVERSION PRICE") in
effect on any Conversion Date shall be the lesser of (A) $4.22 (the "INITIAL
CONVERSION PRICE") and (B) 83% multiplied by the average of the five lowest
Per Share Market Values during the ten (10) Trading Days immediately
preceding the Conversion Date; PROVIDED THAT, (a) if an Underlying Securities
Registration Statement is not filed on or prior to the Filing Date (as such
term is defined in the Registration Rights Agreement), or (b) if the Company
fails to file with the Commission a request for acceleration in accordance
with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as
amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed" or is not
subject to further review or comment by the Commission, or (c) if the
Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date (as defined in the
Registration Rights Agreement), or (d) if such Underlying Securities
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities (as
such term is defined in the Registration Rights Agreement) at any time prior
to the expiration of the "Effectiveness Period" (as such
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term as defined in the Registration Rights Agreement), without being
succeeded by a subsequent Underlying Securities Registration Statement filed
with and declared effective by the Commission within ten (10) days, or (e) if
trading in the Common Stock shall be suspended, or if the Common Stock shall
be delisted from trading, on the OTC Bulletin Board or any other national
securities market or exchange on which the Common Stock is then listed or
quoted for trading for any reason for more than three (3) Trading Days, or
(f) if the conversion rights of the Holder are suspended for any reason or if
the Holder is not permitted to resell Registrable Securities under the
Underlying Securities Registration Statement, or (g) if an amendment to the
Underlying Securities Registration Statement is not filed by the Company with
the Commission within ten (10) days of the Commission's notifying the Company
that such amendment is required in order for the Underlying Securities
Registration Statement to be declared effective (any such failure being
referred to as an "EVENT," and for purposes of clauses (a), (c) and (f) the
date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) days period is exceeded, or for purposes of clauses (d)
and (g) the date which such ten (10) day period is exceeded, or for purposes
of clause (e) the date on which such three (3) Trading Day period is
exceeded, being referred to as "EVENT DATE"), the Conversion Price shall be
decreased by 2.5% each month (i.e., the Conversion Price would decrease by
2.5% as of the Event Date and additional 2.5% as of each monthly anniversary
of the Event Date) until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is cured.
Commencing the second month anniversary after the Event Date, the Company
shall pay to the holders of the Debentures 2.5% of the aggregate principal
amount of Debentures then outstanding (each holder being entitled to receive
such portion of such amount as equals its pro rata portion of the Debentures
then outstanding) in cash as liquidated damages, and not as a penalty on the
first day of each monthly anniversary of the Event Date until such time as
the applicable Event, is cured. Any decrease in the Conversion Price
pursuant to this Section shall continue notwithstanding the fact that the
Event causing such decrease has been subsequently cured. The provisions of
this Section are not exclusive and shall in no way limit the Company's
obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of the Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
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(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common Stock
(and not to the Holder) entitling them to subscribe for or purchase shares of
the Common Stock at a price per share less than the Per Share Market Value of
the Common Stock at the record date mentioned below, the Initial Conversion
Price shall be multiplied by a fraction, of which the denominator shall be the
number of shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of the Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of shares which the aggregate offering price
of the total number of shares so offered would purchase at such Per Share Market
Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase shares of the
Common Stock the issuance of which resulted in an adjustment in the Initial
Conversion Price pursuant to this Section, if any such right or warrant shall
expire and shall not have been exercised, the Initial Conversion Price shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made pursuant
to the provisions of this Section 4 after the issuance of such rights or
warrants) had the adjustment of the Initial Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to the
Holder) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial 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
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market Value
of the Common Stock 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; PROVIDED, HOWEVER, that in
the event of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "APPRAISER") selected in
good faith by the holders of a majority in interest of Debentures then
outstanding; and PROVIDED, FURTHER, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
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adjustments shall be described in a statement provided to the holders of
Debentures of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(v) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Debenture shall have
the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture only into the shares
of stock and other securities, cash and property receivable upon or deemed to be
held by holders of the Common Stock following such reclassification or share
exchange, and the Holder shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common Stock of the
Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay, from funds legally available therefor at the time of such
prepayment, the aggregate of its outstanding principal amount of Debentures,
plus all interest and other amounts due and payable thereon, at a price
determined in accordance with Section 3(b). The entire prepayment price shall
be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vi) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is adjusted
pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly mail to
each Holder of Debentures a notice setting forth the Initial Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
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; or
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D. the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, 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 of exchange whereby the
Common Stock is converted into other securities,
cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up
of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Debentures, and shall cause to be mailed to the
Holder at its last addresses as they shall appear upon the stock books of the
Company, at least 30 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; PROVIDED, HOWEVER, 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. The Holder is
entitled to convert the Debentures during the 30-day period commencing the date
of such notice to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of the Common Stock
solely for the purpose of issuance upon conversion of the Debentures and payment
of interest on the Debentures, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holder, not less than such number of shares of the Common Stock as shall be
required by the Purchase Agreement (taking into account the adjustments and
restrictions of Section 4(c).
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value 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.
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(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holder thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to
be provided by the Holder, including, without limitation, any Conversion Notice,
shall be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to the Company, at 0000 Xxxxx Xxxxx Xxxx, Xxxxx 000,
Xxxxxxxxx, XX 00000 (facsimile number (000) 000-0000), attention Chief Financial
Officer, or such other address or facsimile number as the Company may specify
for such purposes by notice to the Holder delivered in accordance with this
Section. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to each Holder of
the Debentures at the facsimile telephone number or address of such Holder
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 7:00 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
7:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) four days after deposit in the United States
mail, (iv) the Business Day following the date of mailing, if send by nationally
recognized overnight courier service, or (v) upon actual receipt by the party to
whom such notice is required to be given. For purposes of Section 4(c)(i), if a
Conversion Notice is delivered by facsimile prior to 7:00 p.m. (New York City
time) on any date, then the day prior to such date shall be the last Trading Day
calculated to determine the Conversion Price applicable to such Conversion
Notice, and the date of such delivery shall commence the counting of days for
purposes of Section 4(b).
SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right, exercisable at any time upon
twenty (20) Trading Days prior written notice to the Holder (the "OPTIONAL
PREPAYMENT NOTICE"), to prepay, from funds legally available therefor at the
time of such prepayment, all or any portion of the outstanding principal amount
of the Debentures which have not previously been repaid or for which Conversion
Notices have not previously been delivered hereunder, at a price
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equal to the Optional Prepayment Price (as defined below). Any such prepayment
by the Company shall be in cash and shall be free of any claim of subordination.
The Holder shall have the right to tender, and the Company shall honor,
Conversion Notices delivered prior to the expiration of the twentieth (20th)
Trading Day after receipt by the Holder of an Optional Prepayment Notice for
such Debentures (such date, the "OPTIONAL PREPAYMENT DATE").
(b) If any portion of the Optional Prepayment Price shall not be paid
by the Company by the Optional Prepayment Date, the Optional Prepayment Price
shall be increased by 18% per annum (to accrue daily) until paid (which amount
shall be paid as liquidated damages and not as a penalty). In addition, if any
portion of the optional Prepayment Price remains unpaid through the expiration
of the Optional Prepayment Date, the Holder subject to such prepayment may elect
by written notice to the Company to either (i) demand conversion in accordance
with the formula and the time period therefor set forth in Section 4 of any
portion of the principal amount of Debentures for which the Optional Prepayment
Price (including interest therefor), plus accrued liquidated damages thereof,
has not been paid in full (the "UNPAID PREPAYMENT PRINCIPAL AMOUNT"), in which
event the applicable Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Optional Prepayment Date and the Per Share Market
Value as of the Holder's written demand for conversion, or (ii) invalidate AB
INITIO such optional redemption, notwithstanding anything herein contained to
the contrary. If the Holder elects option (i) above, the Company shall within
three (3) Trading Days such election is deemed delivered hereunder to the Holder
the shares of Common Stock issuable upon conversion of the Unpaid Prepayment
Amount subject to such conversion demand and otherwise perform its obligations
hereunder with respect thereto; or, if the Holder elects option (ii) above, the
Company shall promptly, and in any event not later than three Trading Days from
receipt of notice of such election, return to the Holder new Debentures for the
full Unpaid Prepayment Principal Amount. If, upon an election under option (i)
above, the Company fails to deliver the shares of Common Stock issuable upon
conversion of the Unpaid Prepayment Principal Amount within the time period set
forth in this Section, the Company shall pay to the Holder in cash, as
liquidated damages and not as a penalty, $1,500 per day until the Company
delivers such Common Stock to the Holder.
(c) The "OPTIONAL PREPAYMENT PRICE" for any Debentures shall equal the
sum of (i) the principal amount of Debentures to be prepaid, plus all accrued
and unpaid interest thereon, divided by the Conversion Price on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is less, multiplied by the Average Price on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is greater, and (ii) all other amounts and liquidated damages due in
respect of such principal amount.
SECTION 6. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"AVERAGE PRICE" on any date means the average Per Share Market Value
for the five (5) Trading Days immediately preceding such date.
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"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday 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.
"COMMON STOCK" means common stock, $.001 par value per share, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"MANDATORY REPAYMENT AMOUNT" for any Debentures shall equal the sum of
(i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or (y) the date the Mandatory Prepayment
Amount is paid in full, whichever is less, multiplied by the Per Share Market
Value on (x) the date the Mandatory Prepayment Amount is demanded or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of any
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.
"PER SHARE MARKET VALUE" on any particular date means (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq SmallCap
Market or other stock exchange or quotation system on which the Common Stock is
listed for trading, or (b) if the Common Stock is not listed on the Nasdaq
SmallCap Market or any other stock exchange or market, the closing bid price per
share of the Common Stock on such date on the over-the-counter market, as
reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on
the OTC Bulletin Board, the closing bid price per share of Common Stock on such
date on the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices), or (d) if the Common Stock is no longer traded on the
over-the-counter market and reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices), such closing bid price shall be determined by reference to
"Pink Sheet" quotes for the relevant conversion period as determined in good
faith by the Holder or (c) if the Common Stock is not then publicly traded, the
fair market value of a share of Common Stock as determined by an appraiser
selected in good faith by the Holders of a majority in interest of the
Debentures (the Company, after receipt of the determination by such appraiser,
shall have the right to select an additional appraiser, in which case, the fair
market value shall be equal to the average of the determinations by each such
appraiser).
"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 Convertible Debenture Purchase
Agreement,
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dated as of the Original Issue Date, among the Company and the original Holder,
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 Original Issue Date, among the Company and the
original Holder, as amended, modified or supplemented from time to time in
accordance with its terms.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
the Nasdaq Stock Market or other stock exchange or market on which the Common
Stock has been listed, or (b) if the Common Stock is not then listed on the
Nasdaq Stock Market or any stock exchange or market, a day on which the Common
Stock is traded on the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day
on which the Common Stock is quoted on the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
"UNDERLYING SHARES" means the shares of Common Stock into which the
Debentures, and interest thereon, are convertible in accordance with the terms
hereof and the Purchase Agreement.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholders" thereunder.
SECTION 7. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation of
the Company. This Debenture ranks PARI PASSU with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
SECTION 8. 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 9. 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
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Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
SECTION 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, 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 that such suit, action or proceeding is
improper. The Company hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
receiving a copy thereof sent to the Company at the address in effect for
notices to it under this instrument 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.
SECTION 11. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
SECTION 12. If any provision of this Debenture is invalid, illegal
or unenforceable, the balance of this Debenture shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
SECTION 13. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next calendar month, the preceding Business Day in the appropriate
calendar month).
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[SIGNATURE PAGE FOLLOWS]
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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.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
Title: President/CEO
Attest:
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Name: Xxxxxx X. Xxxxx
Title: Asst. Secretary
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-14 into shares of
Common Stock, $.001 par value per share (the "Common Stock"), of Fix-Corp
International, Inc. (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 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.
Conversion calculations:
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Date to Effect Conversion
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Principal Amount of Debentures to be Converted
--------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------
Applicable Conversion Price
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Signature
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Name
-------------------------------------------------------
Address
