EXHIBIT 4.2.1
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE TRANSFER OF THIS SECURITY AND
THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY IS SUBJECT TO THE
RESTRICTIONS ON TRANSFER SET FORTH HEREIN. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Date of Issuance: March 11, 2004
$5,000,000
4% CONVERTIBLE DEBENTURE
DUE SEPTEMBER 11, 2006
This DEBENTURE is one of a series of duly authorized and issued 4%
Convertible Debentures of LMIC, Inc., a Delaware corporation, having a principal
place of business at 0000 Xxxxxxxx Xxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (the
"Company"), designated as its 4% Convertible Debenture, due September 11, 2006
(the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Omicron Master Trust
or its registered assigns (the "Holder"), the principal sum of $5,000,000 on
September 11, 2006 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 aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of 4% per annum, payable quarterly on January 1,
April 1, July 1 and October 1, beginning on the first such date after the
Original Issue Date and on each Conversion Date (as to that principal amount
then being converted) and on the Maturity Date (except that, if any such date is
not a Business Day, then such payment shall be due on the next succeeding
Business Day) (each such date, an "Interest Payment Date"), in cash
or shares of Common Stock at the Interest Conversion Rate, or a combination
thereof; provided, however, payment in shares of Common Stock may only occur if
during the 20 Trading Days immediately preceding the Interest Payment Date all
of the Equity Conditions have been met and the Company shall have given the
Holder notice in accordance with the notice requirements set forth below.
Subject to the terms and conditions herein, the decision whether to pay interest
hereunder in shares of Common Stock or cash shall be at the discretion of the
Company. Not less than 20 Trading Days prior to each Interest Payment Date, the
Company shall provide the Holder with written notice of its election to pay
interest hereunder either in cash or shares of Common Stock (the Company may
indicate in such notice that the election contained in such notice shall
continue for later periods until revised). Within 20 Trading Days prior to an
Interest Payment Date, the Company's election (whether specific to an Interest
Payment Date or continuous) shall be irrevocable as to such Interest Payment
Date. Subject to the aforementioned conditions, failure to timely provide such
written notice shall be deemed an election by the Company to pay the interest on
such Interest Payment Date in cash. Interest shall be calculated on the basis of
a 360-day year and shall accrue daily commencing on the Original Issue Date
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.
Payment of interest in shares of Common Stock shall otherwise occur pursuant to
Section 4(b) and only for purposes of the payment of interest in shares, the
Interest Payment Date shall be deemed the Conversion Date. Interest shall cease
to accrue with respect to any principal amount converted, when the Company in
fact delivers the Underlying Shares. Interest hereunder will be paid to the
Person in whose name this Debenture is registered on the records of the Company
regarding registration and transfers of Debentures (the "Debenture Register").
Except as otherwise provided herein, if at anytime the Company pays interest
partially in cash and partially in shares of Common Stock, then such payment
shall be distributed ratably among the Holders based upon the principal amount
of Debentures then held by each Holder. All overdue accrued and unpaid interest
to be paid hereunder shall entail a late fee at the rate of 18% per annum (or
such lower maximum amount of interest permitted to be charged under applicable
law) ("Late Fee") which will accrue daily, from the date such interest is due
hereunder through and including the date of payment. Except as provided for in
Section 5, the Company may not prepay any portion of the principal amount of
this Debenture without the prior written consent of the Holder.
This Debenture is subject to the following additional provisions:
Section 1. Exchange of Debentures. This Debenture is exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration of transfer or exchange, 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 in
a name other than that of the then present Holder of such Debentures, 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. Notwithstanding
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anything to the contrary in this Debenture, the Holder and its transferees may
only transfer or assign this Debenture if all of the following criteria are met:
(a) the transfer or assignment is in an increment of $500,000 principal amount
(or lesser outstanding amount), (b) no more than three transfer or assignments
in the aggregate by all holders of Debentures in any 12 month period shall be
permitted, and (c) such transfer or assignment is to a person that is not a
competitor (or an affiliate of a competitor) of the Company.
Section 2. Registration and Transfer of Debentures. This Debenture has
been issued subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged only in
compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations. 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.
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 (including Late Fees) on, or liquidated damages in
respect of, any Debentures, free of any claim of
subordination, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or
by acceleration or otherwise) which default is not cured, if
possible to cure, within 5 Trading Days of notice of such
default sent by the Holder;
ii) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or
otherwise commit any material breach of any of the Transaction
Documents (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder
upon conversion or interest payment which breach is addressed
in clause (vi) below) which is not cured, if possible to cure,
within 10 Trading Days after notice of such default sent by
the Holder;
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 or any Subsidiary commences any other
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similar 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 similar
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 expressly indicate its consent to, approval of or
acquiescence in any of the foregoing;
iv) the Company or any Subsidiary shall default in
any of its obligations under any other Debenture or any
mortgage, credit agreement or other credit facility, indenture
agreement, factoring agreement or other instrument under which
there may be issued, or by which there may be secured or
evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement of the
Company in an amount exceeding $500,000 in the aggregate for
the Company and its Subsidiaries, 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 Company shall redeem or repurchase more than a
de minimis number of its outstanding shares of Common Stock or
other equity securities of the Company (other than redemptions
of Underlying Shares and repurchases of shares of Common Stock
or other equity securities of departing officers and directors
of the Company; provided no repurchase shall exceed $100,000
for any officer or director);
vi) the Company shall fail for any reason to deliver
certificates to a Holder on or prior to the 10th Trading Day
after a Conversion Date pursuant to and in accordance with
Section 4(b) or the Company shall provide notice to the
Holder, including by way of public announcement, at any time,
of its intention not to comply with requests for conversions
of any Debentures in accordance with the terms hereof; or
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vii) the Company shall fail for any reason to deliver
the payment in cash pursuant to a Buy-In (as defined herein)
within fifteen Trading Days after notice thereof is delivered
hereunder.
b) If any Event of Default occurs, the full principal amount
of this Debenture, together with interest and other amounts owing in
respect thereof, to the date of acceleration, shall become, at the
Holder's election, immediately due and payable in cash. The aggregate
amount payable upon acceleration following an Event of Default shall be
equal to the Mandatory Prepayment Amount. Commencing five Trading Days
after the occurrence of any Event of Default that results in the
eventual acceleration of this Debenture, the interest rate on this
Debenture shall accrue at the rate of (18%) per annum (or such lower
maximum amount of interest permitted to be charged under applicable
laws). All Debentures for which the Mandatory Prepayment Amount
hereunder shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The 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 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 and the Holder shall have
all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
Section 4. Conversion.
a) i) At any time after the Original Issue Date until this
Debenture is no longer outstanding, 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
(subject to the limitations on conversion set forth in Section
4(a)(ii) hereof). The Holder shall effect conversions by
delivering to the Company the form of Notice of Conversion
attached hereto as Annex A (a "Notice of Conversion"),
specifying therein the principal amount of Debentures to be
converted and the date on which such conversion is to be
effected (a "Conversion Date"), which date shall not be more
than 10 Trading Days after delivery of the Notice of
Conversion and the Conversion Certificate (as defined in the
Custodial Agreement) as to such conversion. If no Conversion
Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is
provided hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender
Debentures to the Company unless the entire principal amount
of this Debenture plus all accrued and unpaid interest thereon
has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this
Debenture in an amount equal
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to the applicable conversion. The Holder and the Company shall
maintain records showing the principal amount converted and
the date of such conversions. The Company shall deliver any
objection to any Notice of Conversion within 3 Trading Days
after receipt of such notice. The Holder and any assignee, by
acceptance of this Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following
conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less
than the amount stated on the face hereof.
ii) Conversion Limitations. The Company shall not
effect any conversion of this Debenture, and the Holder shall
not have the right to convert any portion of this Debenture,
pursuant to Section 4(a)(i) or otherwise, to the extent that
after giving effect to such conversion, the Holder (together
with the Holder's affiliates), as set forth on the applicable
Notice of Conversion, would beneficially own in excess of
4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to
which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would
be issuable upon (A) conversion of the remaining, nonconverted
portion of this Debenture beneficially owned by the Holder or
any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of
the Company (including any other Debentures or the Warrants)
subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the
Holder or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 4(a)(ii),
beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this Section 4(a)(ii) applies, the
determination of whether this Debenture is convertible (in
relation to other securities owned by the Holder) and of which
a portion of this Debenture is convertible shall be in the
sole discretion of such Holder. To ensure compliance with this
restriction, the Holder will be deemed to represent to the
Company each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 4(a)(ii), in
determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of
Common Stock as reflected in the most recent of the following:
(x) the Company's most recent Form 10-Q or Form 10-K, as the
case may be, (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the
Company's transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the
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written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this
Debenture, by the Holder or its affiliates since the date as
of which such number of outstanding shares of Common Stock was
reported.
iii) Underlying Shares Issuable Upon Conversion of
Principal Amount. The number of shares of Common Stock
issuable upon a conversion shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of
this Debenture to be converted by (y) the Set Price.
(b) i) Not later than five Trading Days after any Conversion
Date, the Company will deliver to the Holder a certificate or
certificates representing the Underlying Shares which shall be
free of restrictive legends and trading restrictions (other
than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the
conversion of Debentures (including, if so timely elected by
the Company, shares of Common Stock representing the payment
of accrued interest) and (B) a check in the amount of accrued
and unpaid interest (if the Company is required to pay accrued
interest in cash) on the principal amount of Debentures then
being converted. The Company shall, if available and if
allowed under applicable securities laws, use commercially
reasonable 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 Notice of Conversion such
certificate or certificates are not delivered to or as
directed by the applicable Holder by the third Trading Day
after a 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 certificates representing the principal
amount of Debentures tendered for conversion.
ii) If the Company fails for any reason to deliver to
the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the seventh Trading Day after the
Conversion Date, the Company shall pay to such Holder, in
cash, as partial liquidated damages and not as a penalty, for
each $5,000 of principal amount being converted, $25 per
Trading Day (increasing to $50 per Trading Day after 3 Trading
Days after such damages begin to accrue) for each Trading Day
after such seventh Trading Day until such certificates are
delivered. The Company's obligations to issue and deliver the
Underlying Shares upon conversion of this Debenture in
accordance with the terms hereof are absolute and
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unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged
violation of law by the Holder or any other person and
irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in
connection with the issuance of such Underlying Shares;
provided, however, such delivery shall not operate as a waiver
by the Company of any such action the Company may have against
the Holder. In the event a Holder of this Debenture shall
elect to convert any or all of the outstanding principal
amount hereof, the Company may not refuse conversion based on
any claim that the Holder or any one associated or affiliated
with the Holder of has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from
a court, on notice, restraining and or enjoining conversion of
all or part of this Debenture shall have been sought and
obtained. In the absence of an injunction precluding the same,
the Company shall issue Conversion Shares or, if applicable,
cash, upon a properly noticed conversion. Nothing herein shall
limit a Xxxxxx's right to pursue actual damages or declare an
Event of Default pursuant to Section 3 herein for the
Company's failure to deliver Conversion Shares within the
period specified herein and such Holder shall have the right
to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under
applicable law. Notwithstanding anything herein to the
contrary, liquidated damages hereunder that accrue as to any
Conversion Shares shall not be payable to a Purchaser if the
Purchaser has previously demanded, as to such Conversion
Shares, liquidated damages pursuant to Section 4.1(d) of the
Purchase Agreement or "buy-in" compensation pursuant to
Section 4(b)(iii) of this Debenture.
(iii) In addition to any other rights available to
the Holder, if the Company fails for any reason to deliver to
the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the fifth Trading Day after the Conversion
Date, and if after such fifth Trading Day the Holder is
required by its brokerage firm to purchase (in an open market
transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares
which the Holder anticipated receiving upon such conversion (a
"Buy-In"), then the Company shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by
the Holder) the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for
the Common Stock so purchased exceeds (y) the product of (1)
the aggregate number of shares of Common Stock that such
Holder was entitled to receive as a result of the
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conversion at issue multiplied by (2) the actual sale price of
the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation
and (B) at the option of the Holder, either reissue Debentures
in principal amount equal to the principal amount of the
attempted conversion or deliver to the Holder the number of
shares of Common Stock that would have been issued had the
Company timely complied with its delivery requirements under
Section 4(b)(i). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of Debentures
with respect to which the actual sale price of the Underlying
Shares at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect
of the Buy-In. Notwithstanding anything contained herein to
the contrary, if a Holder requires the Company to make payment
in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full
such payment, the Company shall not be required to pay such
Holder partial liquidated damages under Section 4(b)(ii) in
respect of the certificates resulting in such Buy-In.
Notwithstanding anything herein to the contrary, Buy-In
compensation hereunder that is payable as to any Conversion
Shares shall not be payable to a Purchaser if the Purchaser
has previously demanded, as to such Conversion Shares,
liquidated damages pursuant to Section 4.1(d) of the Purchase
Agreement or liquidated damages pursuant to Section 4(b)(ii)
of this Debenture.
(iv) Notwithstanding anything herein to the contrary,
if after the Effective Date the VWAP for each of any 15
consecutive Trading Days ("Threshold Period"), which 15
consecutive Trading Day period shall have commenced only after
the Effective Date, is 200% or more of the then effective Set
Price (defined below), the Company may, within 3 Trading Days
after any such Threshold Period, deliver a notice to the
Holder (a "Forced Conversion Notice" and the date such notice
is received by the Holder, the "Forced Conversion Notice
Date") to cause the Holder to immediately convert all or part
of the then outstanding principal amount of Debentures
pursuant to Section 4(a)(i) and the Holder shall surrender (if
the entire Debenture is converted) this Debenture to the
Company for conversion within 5 Trading Days of the Forced
Conversion Notice Date. The Company may only effect a Forced
Conversion Notice if (a) during the period beginning with the
Threshold Period and ending on the 3rd Trading Day following
the Forced Conversion Notice Date, all of the Equity
Conditions shall have been met and (b) the average daily
trading volume of the Common Stock exceeds 30,000 shares for
any 20 consecutive Trading Days immediately prior to the
Forced Conversion Notice Date. If any of the Equity Conditions
shall cease to be satisfied at any time during the required
period, then the Forced Conversion
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Notice shall be null and void, ab initio. To the extent that
the limitation of Section 4(a)(ii) would prevent the
conversion of all or a portion of this Debenture on the Forced
Conversion Notice Date, then from and after the Forced
Conversion Notice Date: (x) the Debenture shall cease to
accrue interest, and (y) all Events of Default (other than (A)
Events of Default arising out of nonpayment at maturity or
upon a Redemption Demand following a Holder Redemption Right,
(B) Events of Default arising out of breach of a covenant
contained in the Debenture relating to conversion of the
Debentures, or (C) Event of Default 3(a)(ii) arising out of a
Transaction Document other than the Debentures) shall be
deemed to be waived and (z) the Holder shall deliver (and
shall be deemed to have delivered) a Consent Certificate
pursuant to the Custodial and Security Agreement releasing all
funds on deposit with the Custodian pursuant to the Custodial
and Security Agreement.
(c) i) The conversion price in effect on any Conversion Date
shall be equal to $2.468 (subject to adjustment herein)(the
"Set Price").
ii) If the Company, at any time while the 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 Common Stock (which, for avoidance of doubt, shall
not include any shares of Common Stock issued by the Company
pursuant to this Debenture, including as interest thereon),
(B) subdivide its outstanding shares of Common Stock into a
larger number of shares, (C) combine (including by way of
reverse stock split) its outstanding shares of 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, then the Set Price shall be
multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and of which the
denominator shall be the number of shares of 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.
iii) If the Company or any subsidiary thereof, as applicable,
at any time while Debentures are outstanding, shall offer,
sell, grant any option to purchase or offer, sell or grant any
right to reprice its securities, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Capital Shares or Capital
Shares Equivalents entitling any Person to acquire shares of
Common Stock at an effective price per share less than the
then Set Price ("Dilutive Issuance"), as adjusted hereunder
(if the holder of the Capital Shares or Capital Shares
Equivalents so issued shall at any time, whether by operation
of purchase price adjustments, reset provisions, floating
conversion,
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exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which is issued in connection with
such issuance, be entitled to receive shares of Common Stock
at an effective price per share which is less than the Set
Price, such issuance shall be deemed to have occurred for less
than the Set Price), then the Set Price shall be reduced to
equal the effective conversion, exchange or purchase price for
such Capital Shares or Capital Shares Equivalents (including
any reset provisions thereof) at issue. Such adjustment shall
be made whenever such Capital Shares or Capital Shares
Equivalents are issued. The Company shall notify the Holder in
writing, no later than the business day following the issuance
of any Capital Shares or Capital Shares Equivalents subject to
this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price,
conversion price and other pricing terms.
iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock
(and not to Holders) evidences of its indebtedness or assets
or rights or warrants to subscribe for or purchase any
security,1 then in each such case the Set Price shall be equal
to the greater of (x) the product of (I) the Set Price in
effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such
distribution and (II) a fraction of which the denominator
shall be the VWAP determined as of the record date mentioned
above, and of which the numerator shall be such VWAP 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, and (y) the Set Price as of the record date mentioned
above, 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.
In either case the adjustments shall be described in a
statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record
date mentioned above.
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v) 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. For purposes of this Section 4, the number of shares
of Common Stock outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding
treasury shares, if any) outstanding.
vi) Whenever the Set Price is adjusted pursuant to any of
Section 4(c)(ii) - (v), the Company shall promptly mail to
each Holder a notice setting forth the Set Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company enters into a
Variable Rate Transaction or an MFN Transaction, despite the
prohibition thereon in the Purchase Agreement, the Company
shall be deemed to have issued Capital Shares or Capital
Shares Equivalents at the lowest possible conversion or
exercise price at which such securities may be converted or
exercised in the case of a Variable Rate Transaction, or the
lowest possible adjustment price in the case of an MFN
Transaction.
vii) If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (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; (D) the approval
of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, 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 exchange whereby the
Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, 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 Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 20
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,
12
consolidation, merger, sale, transfer or share exchange;
provided, 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. Holders are entitled to convert Debentures during
the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
viii) If, at any time while this Debenture is outstanding, (A)
the Company effects any merger or consolidation of the Company
with or into another Person, or (B) the Company effects any
reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or
property (in any such case, a "Fundamental Transaction"), then
upon any subsequent conversion of this Debenture, the Holder
shall have the right to receive, for each Underlying Share
that would have been issuable upon such conversion absent such
Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to
receive upon the occurrence of such Fundamental Transaction if
it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the
"Alternate Consideration"). For purposes of any such
conversion, the determination of the Set Price shall be
appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Set Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this
Debenture following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new
debenture consistent with the foregoing provisions and
evidencing the Holder's right to convert such debenture into
Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to
comply with the provisions of this paragraph (c) and insuring
that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
(ix) Notwithstanding the foregoing, no adjustment will be made
under this paragraph (c) in respect of (A) the granting or
issuance of shares of Capital Shares or of options to
employees, officers or directors of the Company pursuant to
any stock option plan agreement or arrangement duly adopted or
approved by a majority of the non-employee members of the
Board of Directors of the Company
13
or a majority of the members of a committee of non-employee
directors established for such purpose, or (B) upon the
exercise of this Debenture or any other Debenture of this
series or of any other series or any Warrant or security
issued by the Company in connection with the offer and sale of
this Company's securities pursuant to the Purchase Agreement,
or (C) the issuance of any Common Stock as payment of interest
with respect to any Debenture, or (D) upon the exercise of or
conversion of any Capital Shares Equivalents, rights, options
or warrants issued and outstanding on the Original Issue Date,
provided such securities have not been amended in order to
reduce the exercise or conversion price thereof or increase
the number of Shares issuable thereunder since the date of the
Purchase Agreement except as a result of the Purchase
Agreement, or (E) pursuant to the Vertical Ventures Financing
(as defined in the Purchase Agreement).
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the
Debentures and payment of interest on the Debenture, each as herein
provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders, not less than such
number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares
set forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 4(b)) upon the conversion
of the outstanding principal amount of the Debentures and payment of
interest hereunder. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Registration Statement is then effective under the Securities Act,
registered for public sale in accordance with such Registration
Statement.
(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 VWAP
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.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to
the Holders 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
14
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 Holders hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier
service, addressed to the Company, at the address set forth above,
facsimile number ___________________ or such other address or facsimile
number as the Company may specify for such purposes by notice to the
Holders delivered in accordance with this Section 4(h). 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
addressed to each Holder at the facsimile telephone number or address
of such Xxxxxx 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 number
specified on the signature page attached hereto prior to 5:30 p.m. (New
York City time) on a Trading Day and an electronic confirmation of
delivery is received by the sender, (ii) the next Trading Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 5:30 p.m. (New York City time)
on any Trading Day, (iii) three Trading Days following the date of
mailing, if sent by U.S. nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice
is required to be given.
Section 5. Redemption.
(a) Optional Redemption at Election of Company. Subject to the
provisions of this Section 5, the Company may deliver a notice to the
Holders (an "Optional Redemption Notice" and the date such notice is
deemed delivered hereunder, the "Optional Redemption Notice Date") of
its irrevocable election to redeem some or all of the then outstanding
Debentures, for an amount, in cash, equal to the Optional Redemption
Amount on the 20th Trading Day following the Optional Redemption Notice
Date (such date, the "Optional Redemption Date" and such redemption,
the "Optional Redemption"). The Optional Redemption Amount is due in
full on the Optional Redemption Date. The Company may only effect an
optional redemption if during the period commencing on the Optional
Redemption Notice Date through to the Optional Redemption Date, (i)
each of the Equity Conditions shall have been met and (ii) the average
daily trading volume of the Common Stock exceeds 30,000 shares for any
20 consecutive Trading Days immediately prior to the Optional
Redemption Date. If any of the Equity Conditions shall cease to be
satisfied at any time during the required period, then the Holder may
elect to nullify the Optional Redemption Notice by notice to the
15
Company within 5 Trading Days after the first day on which any such
Equity Condition has not been met, in which case the Option Redemption
Notice shall be null and void, ab initio. The Company covenants and
agrees that it will honor all Conversion Notices tendered from the time
of delivery of the Optional Redemption Notice through the later of the
Optional Redemption Date or the date all amounts owing thereon are due
and paid in full.
(b) Redemption Procedure. The payment of cash pursuant to an
Optional Redemption shall be made on the Optional Redemption Date. If
any portion of the cash payment for an Optional Redemption shall not be
paid by the Company by the respective due date, interest shall accrue
thereon at the rate of 12% per annum (or the maximum rate permitted by
applicable law, whichever is less) until the payment of the Optional
Redemption Amount plus all amounts owing thereon is paid in full.
Alternatively, if any portion of the Optional Redemption Amount remains
unpaid after such date, the Holders subject to such redemption may
elect, by written notice to the Company given at any time thereafter,
to invalidate ab initio such redemption, notwithstanding anything
herein contained to the contrary, and, with respect the failure to
honor an Optional Redemption, the Company shall have no further right
to exercise such Optional Redemption Right. Notwithstanding anything to
the contrary in this Section 5, the Company's determination to redeem
in cash shall be applied among the Holders of Debentures according to
each Holder's Pro-Rata Portion. As to any Holder, "Pro Rata Portion" is
the ratio of (x) the principal amount of such Holder's Debentures
outstanding on the Optional Redemption Notice Date and (y) the sum of
the aggregate principal amounts of the Debentures outstanding on the
Optional Redemption Notice Date.
(c) Optional Redemption at Election of the Holder. Upon the
occurrence of a Holder Redemption Right (as defined below), the Holder
shall have the right, at the Holder's sole election, to demand (a
"Redemption Demand") an immediate redemption in cash of the full
principal amount of this Debenture, together with interest and other
amounts owing in respect thereof. If any portion of the cash payment
for a Redemption Demand shall not be paid by the Company by the 5th
Trading Day after a Redemption Demand, interest shall accrue thereon at
the rate of 12% per annum (or the maximum rate permitted by applicable
law, whichever is less) until such payment is made. All Debentures for
which the Redemption Demand price hereunder shall have been paid in
accordance herewith shall promptly be surrendered to or as directed by
the Company. Such Redemption Demand may be rescinded and annulled by
the Holder at any time prior to payment hereunder and the Holder shall
have all rights as a Debenture holder until such time, if any, as the
full payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Redemption Demand
or impair any right consequent thereon. The following events shall
constitute a "Holder Redemption Right":
16
(i) a Registration Statement shall not have been
declared effective by the Commission on or prior to the 210th
calendar day after the Original Issue Date;
(ii) if, during the Effectiveness Period (as defined
in the Registration Rights Agreement), the effectiveness of
the Registration Statement lapses for any reason or the Holder
shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under the
Registration Statement, in either case, for more than 25
consecutive Trading Days or 35 non-consecutive Trading Days
during any 12 month period; provided, however, that in the
event that the Company is negotiating a merger, consolidation,
acquisition or sale of all or substantially all of its assets
or a similar transaction and in the written opinion of counsel
to the Company, the Registration Statement, would be required
to be amended to include information concerning such
transactions or the parties thereto that is not available or
may not be publicly disclosed at the time, the Company shall
be permitted an additional 20 consecutive Trading Days during
any 12 month period relating to such an event;
(iii) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of
the Holder prior to the expiration of forty-five days from the
Event Date (as defined in the Registration Rights Agreement)
relating thereto;
(iv) the Common Stock shall not be eligible for
quotation on a Trading Market for five consecutive Trading
Days; or
(v) in the event of a Change of Control Transaction,
or the Company agrees to sell or dispose of all or
substantially all of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction).
Section 6. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:
"Change of Control Transaction" means the occurrence after
the date hereof of any of (i) an acquisition after the date hereof by
an individual or legal entity or "group" (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the
Company, by contract or otherwise) of in excess of 40% of the voting
securities of the Company, other than by the Permitted Holders, or (ii)
a replacement at one time or within a one year period of more than
one-half of the members of the Company's board of directors which
17
is not approved by a majority of those individuals who are members of
the board of directors on the date hereof (or by those individuals who
are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the
members of the board of directors who are members on the date hereof),
or (iii) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the
events set forth above in (i) or (ii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conversion Date" shall have the meaning set forth in Section
4(a)(i) hereof.
"Equity Conditions" shall mean (i) the Company is not in
default in honoring all conversions and redemptions scheduled to occur
or occurring by virtue of one or more Conversion Notices, if any, (ii)
all liquidated damages and other amounts owing in respect of the
Debentures shall have been paid; (iii) there is an effective
Registration Statement pursuant to which the Holder is permitted to
utilize the prospectus thereunder to resell all of the shares issuable
pursuant to the Transaction Documents (and the Company believes, in
good faith, that such effectiveness will continue uninterrupted for the
foreseeable future), (iv) the Common Stock is trading on the Trading
Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on a Trading Market (and the Company
believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (v)
there is a sufficient number of authorized but unissued and otherwise
unreserved shares of Common Stock for the issuance of all of the shares
issuable pursuant to the Transaction Documents (other than shares
issuable in lieu of cash interest payments), (vi) there is then
existing no Event of Default or event which, with the passage of time
or the giving of notice, would constitute an Event of Default and (vii)
all of the shares issued and still owned by a Holder or issuable
pursuant to the Transaction Documents to the extent required by the
Company pursuant to the relevant Section under this Debenture, would
not violate the limitations set forth in Section 4(a)(ii) and (ix) no
public announcement of a pending or proposed Fundamental Transaction or
acquisition transaction has occurred that has not been consummated.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Interest Conversion Rate" means the lesser of (a) the average
of the 20 VWAPs immediately prior to the applicable Interest Payment
Date or (b) the average of the 20
18
VWAPs immediately prior to the date the applicable interest payment
shares are issued and delivered if after the Interest Payment Date.
"Late Fees" shall have the meaning set forth in the second
paragraph to this Debenture.
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of (a) the greater of: (i) 105% of the principal amount of the
Debentures to be paid prior to January 31, 2005, 103% of the principal
amount of the Debentures to be paid prior to January 31, 2006 and 100%
of the principal amount of the Debentures to be prepaid plus all
accrued and unpaid interest thereon, or (ii) the principal amount of
Debentures to be prepaid, divided by the Set Price on (A) the date the
Mandatory Prepayment Amount is demanded or otherwise due or (B) the
date the Mandatory Prepayment Amount is paid in full, whichever is
less, multiplied by the VWAP on (A) the date the Mandatory Prepayment
Amount is demanded or otherwise due or (B) the date the Mandatory
Prepayment Amount is paid in full, whichever is greater plus all other
accrued and unpaid interest hereon, and (b) all other amounts, costs,
expenses and liquidated damages due in respect of such Debentures.
"Optional Redemption" shall have the meaning set forth in
Section 5(a).
"Optional Redemption Notice" shall have the meaning set forth
in Section 5(a).
"Optional Redemption Amount" shall mean the sum of (i) 115% of
the principal amount of the Debentures outstanding prior to January 31,
2005, 110% of the principal amount of the Debentures outstanding prior
to January 31, 2006 and 105% of the principal amount of the Debentures
outstanding at all other times plus (ii) accrued but unpaid interest.
"Original Issue Date" shall mean the date of the first
issuance of the 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.
"Permitted Holders" means Xxxx Xx, Xxxxxx Xx, Linsang Partners
LLC and their Affiliates, family members, and trusts for the benefit of
the foregoing.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of March 11, 2004, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
19
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering among other things the resale of the Underlying Shares by
the Holder (as provided therein) and naming the Holder as a "selling
stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Set Price" shall have the meaning set forth in Section
4(c)(i).
"Trading Day" shall have the meaning set forth in the Purchase
Agreement.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance
with the terms hereof.
"VWAP" shall have the meaning set forth in the Purchase
Agreement.
Section 7. Obligation Unconditional. 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 debt
obligation of the Company and, pursuant to the Custodial Agreement dated the
date hereof by and between the Company and the Purchasers (as defined therein),
is secured by a first priority security interest in certain Collateral (as
defined therein). This Debenture ranks pari passu with all other Debentures now
or hereafter issued under the terms set forth herein.
Section 8. Replacement Debentures. 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 Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
20
Section 9. Limitation on Additional Liens on Secured Proceeds. So long
as any portion of this Debenture is outstanding, the Company will not and will
not permit any of its subsidiaries to, directly or indirectly, enter into,
create, incur, assume or suffer to exist any Liens of any kind, on or with
respect to any of the Secured Proceeds (as that term is defined in the Custodial
Agreement).
Section 10. Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Debenture and
any of the Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York, borough of Manhattan (the "New York Courts"). Each party
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), 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
the New York Courts are an improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Debenture 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.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Debenture or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of this Debenture, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
Section 11. Waiver. 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.
21
Section 12. Severability. 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. If it
shall be found that any interest or other amount deemed interest due hereunder
violates applicable laws governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum permitted rate of
interest. The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of or interest on this Debenture as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section 13. Payments Due on Non-Trading Days. Whenever any payment or
other obligation hereunder shall be due on a day other than a Trading Day, such
payment shall be made on the next succeeding Trading Day.
*********************
22
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
LMIC, INC.
By: /s/
----------------------------
Name: Xxxx X. Xxxxxxx
Title: President & CEO
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 4% Convertible
Debenture of LMIC, Inc. (the "Company"), due on September 11, 2006, into shares
of common stock, $.001 par value per share (the "Common Stock"), of 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 the 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.
By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
Schedule 1
CONVERSION SCHEDULE
4% Convertible Debentures due on September 11, 2006, in the aggregate principal
amount of $5,000,000 issued by LMIC, Inc. This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Debenture.
Dated:
=============================== ------------------------- ======================= ------------------------------
Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to
(or for first entry, Original Conversion
Issue Date) Amount of Conversion (or original Company Attest
Principal Amount)
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
------------------------------- ------------------------- ----------------------- ------------------------------
=============================== ========================= ======================= ------------------------------
25
