EXHIBIT 10.25
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: One Voice Technologies, Inc.
COMPANY ADDRESS: 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000
CLOSING DATE: December 12, 2003
MATURITY DATE: December 12, 2005
PRINCIPAL AMOUNT: $250,000
FIRST PAYMENT DUE DATE: February 15, 2004
One Voice Technologies, 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. 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. xx.xx. 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.
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(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 SHARES" or "COMMON STOCK" means shares of the Company's
Common Stock.
(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 90th day from the Closing
Date.
(xiii) "DEBENTURE" or "DEBENTURES" means this 7 3/4 % 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.
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(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 (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.
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(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 OPTIONAL REDEMPTION
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 Xxxxxx 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.
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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) 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) $0.25, or (ii) eighty percent (80%) of the average of the three
lowest volume weighted average prices during the twenty (20) Trading Days prior
to Xxxxxx'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 7%, but no more than 15% (such
15% maximum amount to be cumulative from the Deadline), 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. The 15% monthly
maximum amount shall not be applicable if the Current Market Price of the Common
Stock at anytime during the applicable month is higher than the Current Market
Price of the Common Stock on the Closing Date. In the event Holder breaches this
provision, (x) Holder shall not be entitled to collect interest on the Debenture
for that month, (y) the Company shall be entitled to obtain other sources of
financing, and (z) the Company may prepay the Principal Amount of the Debenture,
plus accrued and unpaid interest, without penalty.
(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
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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.
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
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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 such 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 4.9% 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 4.9% 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 4.9% of the then Outstanding shares of Common Stock, then the Company shall
prepay such portion of this Debenture as shall cause such Holder to be deemed
the beneficial owner of more than 4.9% 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.
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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."
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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.
ARTICLE 6
REMEDIES
SECTION 6.1 EVENTS OF DEFAULT. "EVENT OF DEFAULT" wherever used herein
means any one of the following events:
(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 in 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; (
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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;
11
(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.
12
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.
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:
13
(1) if to the Company, to:
One Voice Technologies, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(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.
14
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 Xxxxxxxxx
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.
One Voice Technologies, Inc.
By:
--------------------------------------
Title:
15
EXHIBIT A
DEBENTURE CONVERSION NOTICE
---------------------------
TO: One Voice Technologies, Inc.
The undersigned owner of this 7 3/4 % Convertible Debenture due
December 12, 2005 (the "DEBENTURE") issued by One Voice Technologies, 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):
________________________________
________________________________
________________________________
A-1
