XXXXXX RESOURCES, INC.
13.02% SINKING FUND CONVERTIBLE BOND
$_________________ February 1, 1999
XXXXXX RESOURCES, INC., a New York corporation (the "Corporation"), for
value received, hereby promises to pay to____________________, or registered
assigns (the "Holder") on or before December 31, 2015, the principal sum of
__________________Dollars, in such coin or currency of the United States of
America as at the time of payment shall be legal tender therein for the payment
of public and private debts, and to pay interest on the principal amount
outstanding under this bond (the "Bond") from this date, at the rate of thirteen
and two-one hundreds percent (13.02%) per annum, in like coin or currency,
semi-annually on the lst day of January and the lst day of July each year,
commencing February 1, 1999, until such principal amount has been paid to the
Holder hereof as shown in the Corporation's records, without presentment or
demand.
The interest so payable, and punctually paid or duly provided for on any
Interest Payment Date will, as provided in such Indenture, be paid to the Holder
in whose name this Bond is registered at the close of business on the Record
Date for such Interest Payment Date, which shall be December 15 or June 15
(whether or not a Business Day) as the case may be, next preceding such Interest
Payment Date. Payment of the principal of and Interest on this Bond will be made
at the office or agency of the Trustee maintained for that purpose in New York,
New York, 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;
provided, however, that at the option of the Corporation, payment of Interest
may be made by check mailed to the address of the Holder entitled thereto as
such address shall appear in the Bond Register. Interest shall be computed on
the basis of a 360-day year and shall accrue from the date of authentication of
the originally issued Bond represented by this certificate.
1. THE BOND EVIDENCED OR CONSTITUTED HEREBY HAS BEEN ACQUIRED FOR
INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). SUCH BOND OR THE UNDERLYING COMMON STOCK ISSUABLE UPON
CONVERSION OF THE BOND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THE REGISTRATION PROVISIONS OF SAID ACT OR APPLICABLE STATE LAW HAVE BEEN
COMPLIED OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
2. This Bond is one of a duly authorized issue of Bonds of the Issuer
designated as its 13.02% Sinking Fund Convertible Bonds due December 31, 2015,
issued and to be issued under an indenture dated as of February 1, 1999 (herein
called the "Indenture"), between the Corporation and Continental Stock Transfer
& Trust Company, as Trustee thereunder (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Corporation, the Trustee, and the Holders of the Bonds and of the terms upon
which the Bonds are, and are to be, authenticated and delivered. All terms used
in this Bond which are defined in the Indenture shall have the meanings assigned
to them in the Indenture.
3. The rights of Holder to receive the principal sum or any part thereof,
and to receive the interest due on this Bond is and shall remain equal in
priority to the payment of the principal of and interest on (i) all future
obligations and guarantees of the Issuer for money borrowed from any bank, trust
company, insurance company or other financial institution engaged in the
business of lending money, for which the Issuer is at the time of determination
responsible or liable as obligor or guarantor, (ii) all existing or future
obligations of the Corporation secured by a lien, mortgage, pledge or other
encumbrance against real or personal property of the Corporation, and (iii) any
modifications, renewals, extensions or refunding of the foregoing, except for
any of such obligations of the Corporation the payment of which is made
expressly subordinate and junior to this Bond.
4. As and for a sinking fund for the retirement of the Bonds, as more
particularly provided in the Indenture, the Corporation, as long as any of the
Bonds shall be outstanding, shall pay to the Trustee on or before the business
day which next precedes December 31 in each year commencing with the year 1999
to and including 2015 (each such business day being herein referred to as a
"Sinking Fund Payment Date"), a sinking fund payment in cash or U.S. Treasury
Bonds maturing on or before December 31, 2015 (herein being referred to as a
"Sinking Fund Payment"), in such amount payable at maturity as (together with
such cash) shall be equal to 6.25% of the principal amount of the outstanding
Bonds. The Indenture also provides that under the circumstances specified
therein funds may be deposited with the Trustee or with any paying agent (other
than the Corporation) in advance of the maturity or redemption date of any of
the Bonds, in trust for the payment or redemption of such Bonds and the Interest
due or to become due thereon, and that thereupon all obligations of the
Corporation in respect of such Bonds shall cease and be discharged and the
holders thereof shall thereafter be restricted exclusively to such funds for any
and all other claims on their part under the Indenture or with respect to such
Bonds.
5. The Holder of this Bond may tender to the Trustee this Bond or a portion
hereof for repurchase by the Corporation at a price of 100% of principal amount,
plus accrued but unpaid interest, commencing on January 1, 2000. Commencing with
calendar 2000, the Corporation shall be obligated to repurchase such Bond or
Bonds on a first come, first served basis, in any one calendar year in an amount
up to 10% of the originally outstanding principal amount of all Bonds
2
theretofore issued. All tenders received by the Trustee on the same Business Day
which, when added to all prior tenders exceed the annual obligation of the
Corporation to honor such tenders, the Trustee shall notify the Corporation of
the amount of such tenders or (i) agree in writing to honor all such tenders or
(ii) advise the Trustee to pro-rate such tenders. If the Corporation shall not
make an election in writing within the period provided, the Trustee shall
pro-rate such tenders.
The Trustee shall give notice to the Corporation of all tenders for
repurchase within five (5) Business Days after the Trustee's receipt thereof.
Provided that the Corporation shall not have preciously repurchased the maximum
principal amount of Bonds provided for, the Corporation shall have forty-five
(45) days to deposit with the Trustee the principal amount of the Bond, Bonds or
part of a Bond tendered for repurchase plus accrued but unpaid interest through
and including the date of such deposit, at the time of which deposit the
Corporation's obligation to pay, and the Holder's right to receive, interest on
such principal amount shall cease. Failure of the Corporation to make such a
deposit within the time permitted shall be an Event of Default under Article XIV
of the Indenture.
6. The Bonds shall be redeemable in whole or in part at the option of the
Corporation at 100% of principal amount plus accrued interest to the Redemption
Date upon notice to the Trustee at any time on or after February 1, 1999 upon
satisfaction of the following conditions:
(a) The Common Stock issuable upon Conversion of the Bonds shall be the
subject of an effective registration statement with the Securities and Exchange
Commission;
(b) The Common Stock shall be listed on the NASDAQ system or a national or
regional securities exchange, and shall have an average daily trading volume for
the ninety (90) trading days immediately prior to the Notice of Redemption of at
least one thousand (1,000) shares;
(c) The average bid price for the Common Stock for the ninety (90) trading
days immediately prior to the Notice of Redemption (calculated by summing the
daily average bid prices and dividing by ninety (90) shall have been at least
133% of the Conversion Rate at the date of the Notice of Redemption; and
(d) The Corporation shall provide the Trustee with an Officers' Certificate
certifying that all of the foregoing conditions have been satisfied.
Partial redemption shall be made pro rata to all Holders of the Bonds then
outstanding, in proportion to the principal amounts of Bonds held by each such
Holder. Upon any Redemption, the Holder shall deliver his Bond to the Trustee
for notation of partial redemption or cancellation if Redemption is made in
full; such delivery shall be made not later than the date fixed for Redemption
in the Corporation's notice thereof. Upon the close of business on such
Redemption Date, the conversion privilege of the Bond shall terminate to the
extent of the redemption of principal and no further interest shall accrue on
the principal portion of the Bond so redeemed. If the Holder shall fail to
deliver his Bond to the Trustee upon Redemption, the Corporation may deposit
sufficient funds to make the Redemption with the Trustee, whereupon all rights
of the Holder with respect to the portion of this Bond so redeemed, other than
the right to receive the Redemption Price, shall terminate .
3
Notice of Redemption shall be given by registered first-class mail, postage
prepaid, mailed at least sixty (60) days before the Redemption Date to the
Holder of this Bond at his address appearing on the records of the Trustee. The
Notice of Redemption shall sate:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become due and
payable and that interest thereon will cease to accrue on and after such date,
(4) the Conversion Rate, the date on which the right to convert the Bond
will terminate and the place where the Bond may be surrendered for Conversion,
and
(5) the place where the Bond is to be surrendered for payment of the
Redemption Price and any accrued interest.
From and after any Redemption Date, this Bond shall cease to bear interest
and only right of the Holder of this Bond is called for redemption, and shall
not be so paid upon surrender thereof for redemption, the principal shall, until
paid, bear interest from the Redemption Date at the Bond Interest Rate and the
Conversion rights shall continue as provided therein until the Redemption Price
is paid in full.
7. Subject to and upon compliance with the provisions of the Indenture, the
Holder shall have the right, at the Holder's option, at any time or from time to
time prior to the date this Bond is redeemed or paid upon Maturity, to convert
each $1,000 principal amount or integral multiple thereof of Bonds into shares
of Common Stock, subject to adjustment pursuant to the further provisions of the
Indenture.
This Bond will be convertible until Maturity at 100% of principal amount
(accrued interest will be paid separately) into Common Stock of the Corporation
at the rate of $8.00 per share of Common Stock.
In order to exercise the conversion privilege, the Holder shall surrender
this Bond to the Trustee at the Corporate Trust Office of the Trustee, with the
conversion notice below fully completed. As soon as practicable after the
receipt of such documents, the Trustee shall request the Issuer to deliver at
said offices to the Holder, or on his written order, to a third party, a
certificate or certificates for the number of full shares of conversion stock
("Conversion Stock") issuable upon the conversion of this Bond or portion
thereof. The Corporation shall not issue fractional interests in shares of its
Common Stock upon conversion of the Bonds. Such Conversion shall be deemed to
have been effected immediately prior to the close of business on the date on
which the documents deliverable upon conversion of this Bond are received by the
Trustee. At such time the rights of the Holder as such Holder shall cease, and
4
the person or persons in whose name or names any certificate for shares of
Conversion Stock shall be issuable upon such Conversion shall be deemed to have
become the holder or holders of record of shares of Conversion Stock represented
thereby.
No fractional shares of Conversion Stock or scrip shall be issued upon
conversion of this Bond. Any fractional shares of Conversion Stock less than
one-half shall be disregarded, and fractional interests on one-half or more of a
share of Conversion Stock shall be rounded up to a full share.
The initial Conversion Rate and the number of shares issuable upon
conversion shall be based upon 12,000,000 (12,000,000) shares of Common Stock
outstanding and shall be subject to adjustment from time to time only as
follows:
(i) If the number of shares of Common Stock outstanding at any time after
the date hereof is increased by a stock dividend or other distribution of
securities to the Corporation's stockholders without consideration (other than a
distribution of rights to purchase securities for cash) payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
immediately following the record date fixed for the determination of holders of
Common Stock issuable upon conversion of this Bond and the Conversion Rate shall
be appropriately adjusted so that the number of shares of Common Stock issuable
on Conversion of this Bond shall be increased in proportion to such decrease in
outstanding shares.
(ii) If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination or a reverse stock split, the
number of shares of conversion stock issuable upon conversion of this Bond and
the Conversion Rate shall be appropriately adjusted so that the number of shares
of Common Stock issuable on Conversion of this Bond shall be decreased and the
Conversion Rate shall be increased in proportion to such decrease in outstanding
shares.
(iii) If any consolidation or merger of the Corporation with or into
another entity, or the sale of all or substantially all of its assets to another
entity shall be effected, or in case of any capital reorganization or
reclassification of the capital stock of the Issuer, then, as a condition of
such consolidation, merger or sale, reorganization or reclassification of the
capital stock of the Issuer, lawful and adequate provision shall be made whereby
the Holder shall thereafter have the right to receive upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock of the Corporation immediately theretofore receivable upon the conversion
of the Bonds, such shares of stock, or of securities, interests or assets (other
than cash) as may be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore so receivable by the Holder had such
consolidation, merger, sale, reorganization or reclassification not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of the Holder to the end that the provisions hereof
(including without limitation provisions for adjustment of the Conversion Rate)
shall thereafter be applicable, as nearly as may be in relation to any shares of
stock, securities, interests or assets thereafter deliverable upon the exercise
of such conversion rights.
5
(iv) Any and all shares of Conversion Stock issued pursuant to a conversion
of this Bond shall (unless covered by an effective public registration
statement) bear a legend reflecting that such shares of Conversion Stock have
not been registered under the Securities Act, or under any state securities law,
and cannot be transferred by sale, pledge or otherwise, except in compliance
with such securities laws and all regulations thereunder. As a condition to the
issuance of Conversion Stock, the holder requesting to so convert the Bonds
shall execute appropriate investment letters and other documents as may be
reasonably required by the Corporation and its counsel to assure that the shares
of Conversion Stock are issued only in compliance with applicable securities
laws.
8. In the event of Redemption or conversion of this Bond in part only, a
new Bond or Bonds for the portion of this Bond not redeemed or converted will be
issued in the name of the Holder hereof upon the cancellation of this Bond.
9. If an Event of Default shall occur and be continuing, the principal of
all the Bonds may be declared due and payable in the manner and with the effect
provided in the Indenture.
10. The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Bonds under the Indenture at
any time by the Corporation and the Trustee with the consent of the Holders of
not less than two-thirds in aggregate principal amount of the Bonds at the time
outstanding. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Bonds at the time outstanding, on
behalf of the Holders of all the Bonds, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults (other than
payment of principal, interest, Trustee fees and certain events described in the
Indenture) under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Bond shall be conclusive and binding upon such
Holder and upon all future Holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Bond.
11. No reference herein to the Indenture and no provision of this Bond or
of the Indenture shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Bond at the times, place and rate, and in the coin or currency,
herein provided or to effect the Conversion of this Bond as provided in the
Indenture.
12. As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Bond for registration of transfer may be made at
the office or agency of the Trustee in New York, New York, duly endorsed by, or
accompanied by, a written instrument of transfer in form satisfactory to the
Corporation and the Trustee, duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Bonds of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferee.
6
The Bonds are issuable only in fully certificated registered form, in
denominations of $1,000 and integral multiples thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Bonds are
exchangeable for a like aggregate principal amount of Bonds of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charges payable in connection therewith.
13. Prior to due presentment of this Bond for registration of transfer, the
Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the person in whose name this Bond is registered as the owner hereof for
all purposes, whether or not this Bond be overdue, and neither the Corporation,
the Trustee nor any such agent shall be affected by notice to the contrary.
IN WITNESS WHEREOF, the Corporation has caused the Bonds to be executed and
delivered, under its corporate seal, by its Chief Executive Officer and attested
by its Secretary or an Assistant Secretary, on the date first above written.
XXXXXX RESOURCES, INC.
By: ---------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
Attest: -----------------
[Corporate Seal]
7
CONVERSION NOTICE
To Xxxxxx Resources, Inc.
The undersigned Holder of this Bond hereby irrevocably exercises the option
to convert this Bond, or the portion hereof (which is $1,000 or any integral
multiple thereof except as provided by the Indenture) below designated, into
shares of Common Stock of Xxxxxx Resources, Inc. in accordance with the terms of
the Indenture referred to in this Bond, and directs that the shares issuable and
deliverable upon the conversion, together with any Bonds representing any
unconverted principal amount hereof, be issued and delivered to the registered
Holder hereof unless a different name has been indicated below and the
undersigned's signature is guaranteed as indicated. If shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
Dated: Principal Xxxxxx to be converted, if less than all:
$-------------------------------------------
--------------------------------------------
(Sign exactly as your name appears on the other side
of this Bond)
---------------------------------------------
Please print name and address (including zip code)
Social Security or other
Taxpayer identifying number
----------------------------------------------
-------------------------
SIGNATURE GUARANTY
(by a New York commercial
bank or trust company or
member of an accepted
medallion guaranty)
8
ASSIGNMENT FORM
If you, the holder, want to assign
this Bond, fill in the form below:
I, or we assign and transfer this
Bond to
---------------------------------------------------
(Insert assignee's social security or tax ID number)
--------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------------------------------
as agent to transfer this Bond on the books of the Issuer. The agent may
substitute another to act for him.
Date ---------------------
Your signature:----------------------
--------------------------------------------
(Sign exactly as your name appears on the
other side of this Bond)
Signature Guaranteed:
----------------------------------------------
The signature must be guaranteed by an officer of a commercial bank or trust
company or Member of an accepted medallion guaranty
