EXHIBIT 10.8
THIS NOTE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY, THE
"SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
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EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
AND/OR REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN
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THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S AND/OR REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED
WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
DEBENTURE
FOREFRONT INC.
5% Convertible Debenture
Due January ___, 2006
No. ___ $
This Debenture is issued by FOREFRONT, INC., a ________ corporation (the
"Company"), to ____________________________ (together with its permitted
successors and assigns, the "Holder") pursuant to exemptions from registration
under the Securities Act of 1933, as amended.
Principal and Interest. For value received, on January ___, 2001, the Company
hereby promises to pay to the order of the Holder in lawful money of the United
States of America and in immediately available funds the principal sum of
_________DOLLARS (US $____), together with interest on the unpaid principal of
this Debenture at the rate of five percent (5%) per year (computed on the basis
of a 365-day year and the actual days elapsed) from the date of this Debenture
until paid. At the Company's option, the entire principal amount and all
accrued interest shall be either (a) paid to the Holder on the five (5) year
anniversary from the date hereof or (b) converted in accordance with Section
4.02 herein.
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Optional Conversion. The Holder is entitled, at its option, to convert at any
time and from time to time after ninety (90) days from the Closing Date, until
payment in full of this Debenture, all or any part of the principal amount of
the Debenture, plus accrued interest, into shares (the "Conversion Shares") of
the Company's common stock, $0.001 par value ("Common Stock"), at the price per
share (the "Conversion Price") equal to either (a) an amount equal to Fixed
Price of 120% of the closing bid price on the Closing Date of the Common Stock
as listed on a Principal Market (as defined herein), as quoted by Bloomberg L.P.
(the "Closing Bid Price") as of the date hereof, or (b) an amount equal to
eighty percent (80%) of the five (5) lowest Closing Bid Price of the Common
Stock for the twenty (20) trading days immediately preceding the Conversion Date
(as defined herein). Subparagraphs (a) and (b) above are individually referred
to as a "Conversion Price". As used herein, "Principal Market" shall mean the
Nasdaq Bulletin Board System, Nasdaq SmallCap Market, or American Stock
Exchange. If the Common Stock is not traded on a Principal Market, the Closing
Bid Price shall mean, the reported Closing Bid Price for the Common Stock, as
furnished by the National Association of Securities Dealers, Inc., for the
applicable periods. No fraction of shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. To convert this Debenture, the Holder
hereof shall deliver written notice thereof, substantially in the form of
Exhibit "A" to this Debenture, with appropriate insertions (the "Conversion
Notice"), to the Company at its address as set forth herein. The date upon
which the conversion shall be effective (the "Conversion Date") shall be deemed
to be the date set forth in the Conversion Notice, provided that the Company or
the transfer agent delivers the Conversion Shares within ten (10) business days
after receipt of a Conversion Notice. If such Conversion Shares are not
delivered within such ten (10) business day period, the Conversion Date shall be
the date such shares are actually delivered to the Holder. The "Closing Date,"
as used in this document, is the date of the Company filing a registration
statement with the SEC to including the Conversion Shares in such registration.
Section 1.03 RIGHT OF REDEMPTION. The Company shall the right to
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redeem the entire amount of the outstanding Convertible Debentures at 120%
premium to the market at any time after the Closing Date.
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Section 1.04 Reservation of Common Stock. The Company shall reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Debenture, such number of
shares of Common Stock as shall from time to time be sufficient to effect such
conversion, based upon the Conversion Price. If at any time the Company does
not have a sufficient number of Conversion Shares authorized and available, then
the Company shall call and hold a special meeting of its stockholders within
thirty (30) days of that time for the sole purpose of increasing the number of
authorized shares of Common Stock.
Section 1.05 Registration Rights. The Company is obligated to register the
resale of the Conversion Shares under the Securities Act of 1933, as amended,
pursuant to the terms of a Registration Rights Agreement, between the Company
and the Holder of even date herewith (the "Registration Rights Agreement").
Section 1.06 Interest Payments. The interest so payable will be paid at the
time of maturity or conversion to the person in whose name this Debenture is
registered. At the time such interest is payable, the Company, in its sole
discretion, may elect to pay interest in cash (via wire transfer or certified
funds) or in the form of Common Stock. In the event of default, as described in
Article III Section 3.01 hereunder, the Holder may elect that the interest be
paid in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of Common Stock, the amount of stock to be issued
will be calculated as follows: the value of the stock shall be the Closing Bid
Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number
of shares of Common Stock with a value equal to the amount of interest due shall
be issued. No fractional shares will be issued; therefore, in the event that
the value of the Common Stock per share does not equal the total interest due,
the Company will pay the balance in cash.
Section 1.07 Paying Agent and Registrar. Initially, the Company will act
as paying agent and registrar. The Company may change any paying agent,
registrar, or Company-registrar by giving the Holder not less than ten (10)
business days' written notice of its election to do so, specifying the name,
address, telephone number and facsimile number of the paying agent or registrar.
The Company may act in any such capacity.
Section 1.08 Subordinated Nature of Debenture. This Debenture and all
payments hereon, including principal or interest, shall be subordinate and
junior in right of payment to all accounts payable of the Company incurred in
the ordinary course of business and/or bank debt of the Company not to exceed
$250,000.
Amendments and Waiver of Default. The Debenture may be amended with the consent
of the Holder. Without the consent of the Holder, the Debenture may be amended
to cure any ambiguity, defect or inconsistency, to provide for assumption of the
Company obligations to the Holder or to make any change that does not adversely
affect the rights of the Holder.
Events of Default. An Event of Default is defined as follows: (a) failure by
the Company to pay amounts due hereunder within ten (10) business days of the
date of maturity of this Debenture; (b) failure by the Company to advise its
transfer agent to issue Common Stock to the Holder within ten (10) business days
of the Company's receipt of the attached Notice of Conversion from Holder; (c)
failure by the Company for the (10) business days after notice to it to comply
with any of its other agreements in the Debenture; (d) events of bankruptcy or
insolvency; (e) a breach by the Company of its obligations under the
Registration Rights Agreement which is not cured by the Company within fifteen
(15) business days after receipt of written notice thereof. The Holder may not
enforce the Debenture except as provided herein.
Failure to Issue Unrestricted Common Stock. As indicated in Article III Section
3.01, a breach by the Company of its obligations under the Registration Rights
Agreement shall be deemed an Event of Default, which if not cured within ten
(10) days, shall entitle the Holder accelerated full repayment of all debentures
outstanding. The Company acknowledges that failure to honor a Notice of
Conversion shall cause hardship to the Holder.
Rights and Terms of Conversion. This Debenture, in whole or in part, may be
converted at any time after ninety (90) days following the date of closing, into
shares of Common Stock at a price equal to the Conversion Price as described in
Section 1.02 above.
Re-issuance of Debenture. When the Holder elects to convert a part of the
Debenture, then the Company shall reissue a new Debenture in the same form as
this Debenture to reflect the new principal amount.
Limitation on Right and Power to Exercise. Any provision in this Debenture or
any other document to the contrary not withstanding, the Holder shall not have
the right or power to convert this Debenture into Common Stock, either in whole
or in part, and any attempt to do so shall be void, if, after having given
effect to such conversion, the Holder shall be or shall be deemed to be the
beneficial owner of ten percent (10%) or more of the then outstanding Common
Stock within the meaning or for the purposes of Section 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or as the term
"beneficial owner" is defined in Rule 13d-3 of the Act.
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Termination of Conversion Rights. The Holder's right to convert the Debenture
into the Common Stock in accordance with paragraph 4.01 shall terminate on the
date that is the five (5) year anniversary from the date hereof and this
Debenture shall be automatically converted on that date in accordance with the
formula set forth in Section 4.01 hereof, and the appropriate shares of Common
Stock and amount of interest shall be issued to the Holder.
Anti-dilution. In the event that the Company shall at any time prior to the
Conversion Date subdivide the outstanding shares of Common Stock, or shall issue
a stock dividend on the outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
Consent of Holder to Sell Common Stock. So long as any of the principal of or
interest on this Note remains unpaid and unconverted, the Company shall not,
without the prior consent of the Holder, issue or sell (i) any Common Stock
without consideration or for a consideration per share less than its fair market
value determined immediately prior to its issuance, or (ii) issue or sell any
warrant, option, right, contract, call, or other security or instrument granting
the holder thereof the right to acquire Common Stock without consideration or
for a consideration per share less than such Common Stock's fair market value
determined immediately prior to its issuance.
Notice. Notices regarding this Debenture shall be sent to the parties at the
following addresses, unless a party notifies the other parties, in writing, of a
change of address:
If to the Company: Forefront Inc.,.
0000 X. Xxxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
With a copy to:
If to Holder:
_____________________________
_____________________________
_____________________________
_____________________________
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Governing Law. This Debenture shall be deemed to be made under and shall be
construed in accordance with the laws of the State of New York without giving
effect to the principals of conflict of laws thereof. Each of the parties
consents to the jurisdiction of the U.S. District Court sitting in the Southern
District of the State of New York or the state courts of the State of New York
sitting in Manhattan in connection with any dispute arising under this Debenture
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens to the bringing of any
such proceeding in such jurisdictions.
Severability. The invalidity of any of the provisions of this Debenture shall
not invalidate or otherwise affect any of the other provisions of this
Debenture, which shall remain in full force and effect.
Entire Agreement and Amendments. This Debenture represents the entire agreement
between the parties hereto with respect to the subject matter hereof and there
are no representations, warranties or commitments, except as set forth herein.
This Debenture may be amended only by an instrument in writing executed by the
parties hereto.
Counterparts. This Debenture may be executed in multiple counterparts, each of
which shall be an original, but all of which shall be deemed to constitute on
instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Company
as executed this Debenture as of the date first written above.
FOREFRONT INC.
By:____________________________
Name:
Title:
83
EXHIBIT "A"
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NOTICE OF CONVERSION
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(TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE NOTE)
TO:
The undersigned hereby irrevocably elects to convert $______________
of the principal amount of the above Note into Shares of Common Stock of
Forefront Inc., according to the conditions stated therein, as of the Conversion
Date written below.
CONVERSION DATE: __________________________________________
APPLICABLE CONVERSION PRICE: __________________________________________
SIGNATURE: __________________________________________
NAME: __________________________________________
ADDRESS: __________________________________________
