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Exhibit 2.11
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. IT MAY NOT BE TRANSFERRED,
ASSIGNED, SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION
OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED BECAUSE OF AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
NO. 1 $15,000,000
DATED: JUNE 5, 2000
APPLIED THEORY CORPORATION
5% CONVERTIBLE DEBENTURE DUE JUNE 2, 2003
THIS DEBENTURE ("DEBENTURE") is one of a duly authorized issue of
Debentures of APPLIEDTHEORY CORPORATION. (the "COMPANY"), a corporation duly
organized and existing under the laws of the State of Delaware, designated as
the Company's 5% Convertible Debentures Due June 5, 2003, in an aggregate
principal amount of Thirty Million U.S. Dollars (U.S. $30,000,000) (the
"DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to HALIFAX FUND, L.P.
the initial holder hereof, or its order (including successors-in-interest, the
"HOLDER"), the principal sum of Fifteen Million U.S. Dollars (U.S. $15,000,000)
on June 5, 2003 (the "MATURITY DATE") and to pay interest on the principal sum
outstanding under this Debenture ("OUTSTANDING PRINCIPAL AMOUNT"), at the rate
of 5% per annum, compounded semi-annually, payable in arrears on the first day
of December and June of each year and on the Maturity Date (each an "INTEREST
PAYMENT DATE"), with the first such payment due on December 5, 2000. Interest
shall accrue daily commencing on the date hereof and shall continue until
payment in full of all amounts due under this Debenture. The interest so payable
will be paid to the person in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of the Debenture
(the "DEBENTURE REGISTER"). Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Purchase Agreement dated as of
June 5, 2000 between the Company and the Holder (the "PURCHASE AGREEMENT") or
the Registration Rights Agreement dated as of June 5, 2000 between the Company
and the Holder (the "REGISTRATION RIGHTS AGREEMENT").
The interest on this Debenture is payable, at the Company's option:
(a) in such coin or currency of the United States as of the
time of payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder hereof from time to time;
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(b) by adding the amount thereof to the Outstanding Principal
Amount due under this Debenture ("PIK INTEREST"); or
(c) provided that there is Effective Registration (as defined
in the Purchase Agreement) at such time, in Common Stock (as defined below)
("STOCK INTEREST"). For purposes of calculating the number of shares of Common
Stock to be delivered by the Company to the Holder on the applicable Interest
Payment Date pursuant hereto, the dollar amount then payable will be divided by
the average of the Market Price for Shares of Common Stock (as defined below)
for the five (5) consecutive Trading Days immediately preceding and excluding
such Interest Payment Date.
Except as herein provided for interest, all amounts payable under this
Debenture shall be paid as provided in clause (a) above.
The Company shall exercise its option hereunder by delivering an
irrevocable statement in the form of Exhibit 1 hereto ("PAYMENT STATEMENT")
delivered at least ten (10) Trading Days prior to the applicable Interest
Payment Date and applicable for such Interest Payment Date only. If the Payment
Statement is not timely delivered to the Holder as provided herein, the payment
with respect to such Interest Payment Date shall be in PIK Interest. If the
Company selects either cash interest or Stock Interest in the Payment Statement
and fails to deliver such cash or Common Stock on or before the Interest Payment
Date, the Holder shall have the right to require the Company to pay PIK Interest
in lieu thereof. Any PIK Interest when so added to the Outstanding Principal
Amount due under this Debenture shall, for all purposes of this Debenture, be
deemed to be part of the principal indebtedness evidenced by this Debenture
including, without limitation, for purposes of determining interest payable
hereunder after the applicable Interest Payment Date for which such PIK Interest
is paid and amounts convertible into Common Shares hereunder after the
applicable Interest Payment Date for which such PIK Interest is paid.
The Company will pay any principal due and all accrued and unpaid
interest due upon this Debenture to the person that is the Holder of this
Debenture on the records of the Company as of the applicable Interest Payment
Date and addressed to such Holder at the last address appearing on the Debenture
Register.
The Outstanding Principal Xxxxxx and interest due hereunder shall bear
interest, from and after the day following the occurrence and during the
continuance of an Event of Default hereunder, at the per annum rate equal to the
lower of the Citibank Prime Rate per annum plus six (6%) percent or the highest
rate permitted by law. The Holder shall have the option to receive such interest
as cash interest, PIK Interest or Stock Interest and shall exercise its option
by delivering to the Company a statement in a form substantially similar to the
Payment Statement which shall be effective until the earlier of (a) the date
upon which the applicable default is cured or (b) Holder delivers an additional
statement to the contrary. If the Holder elects to receive the interest in cash,
it shall be payable on demand.
Additional cash payments (referred to as "DEFAULT PAYMENTS") may be
required pursuant to the Registration Rights Agreement if there occurs an
"INTERFERING EVENT" (as
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defined therein), or pursuant to the Purchase Agreement under the terms set
forth in Section 3.14 therein. Such default payments, if not paid in cash when
due, may be treated by the Holder in its sole discretion as being added to the
Outstanding Principal Amount due under this Debenture.
Subject to applicable law, any interest otherwise payable that is not
paid for any applicable period because it would exceed the highest rate
permitted by law shall become payable whenever the payment thereof, together
with other interest due for any such subsequent period, would not exceed such
highest legal rate.
The Holder of this Debenture is entitled to certain rights and remedies
pursuant to the Purchase Agreement and Registration Rights Agreement, including
without limitation provisions requiring mandatory redemption of the Debenture.
This Debenture does not provide voting rights to the Holder.
This Debenture is subject to the following additional provisions:
1. EXCHANGE.
(a) The Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange.
(b) The Debentures are also exchangeable for Debentures
identical to those exchanged except that the new Debentures shall set forth the
actual Closing Price and the actual Initial Conversion Price, which shall be
determined promptly after the close of business on the 40th Trading Day in
accordance herewith by the Company and the Investors. In the event that the
Company and the Investors do not agree on the actual Closing Price and actual
Initial Conversion Price, an accountant mutually designated by the Company and
the Holder(s) shall make such determination. No service charge will be made for
such registration or transfer or exchange.
2. TRANSFERS. This Debenture may be transferred or exchanged in the
United States only in compliance with the Securities Act of 1933, as amended
(the "ACT") and applicable state securities laws, or applicable exemptions
therefrom. Prior to due presentment for transfer of this Debenture, the Company
may treat the person in whose name this Debenture is duly registered on the
Company's Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided, whether or not this Debenture is overdue.
3. DEFINITIONS. For purposes hereof the following definitions shall
apply:
"ACT" shall have the meaning set forth in the legend set forth
on the face of this Debenture.
"ADJUSTMENT DATE" shall have the meaning set forth in Section
8(b)(i).
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"AFFECTED CONVERSION PRICE" shall have the meaning set forth
in Section 8(a).
"CHANGE IN CONTROL CONSIDERATION" shall have the meaning set
forth in Section 4 hereof.
"CHANGE IN CONTROL CONVERSION PRICE" shall have the meaning
set forth in Section 4 hereof.
"CHANGE IN CONTROL TRANSACTION" shall mean the occurrence of
(x) any consolidation or merger of the Company with or into any other
corporation or other entity or person (whether or not the Company is the
surviving corporation), or any other corporate reorganization or transaction or
series of related transactions in which in excess of 50% of the Company's voting
power is transferred through a merger, consolidation, tender offer or similar
transaction, or (y) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")), together with its
affiliates and associates (as such terms are defined in Rule 405 under the Act),
beneficially owns or is deemed to beneficially own (as described in Rule 13d-3
under the Exchange Act without regard to the 60-day exercise period) in excess
of 50% of the Company's voting power.
"CLOSING DATE" shall mean the date of the original issuance of
this Debenture.
"CLOSING PRICE" shall mean the average of the Market Price for
Shares of Common stock for the forty (40) Trading Days following the Closing
Date, and shall be determined in accordance with Section 1(b) above.
"COMMON STOCK" shall mean the common stock, par value $0.01,
of the Company.
"COMPANY" shall have the meaning set forth in the Preamble.
"CONVERSION NOTICE" shall have the meaning set forth in
Section 5(d).
"CONVERTIBLE SECURITIES" shall have the meaning set forth in
Section 8(b)(ii).
"CONVERSION PRICE" shall have the meaning set forth in Section
5(c).
"CONVERSION RATE" shall have the meaning set forth in Section
5(b).
"DEBENTURE" shall have the meaning set forth in the Preamble.
"DEBENTURES" shall have the meaning set forth in the Preamble.
"DEBENTURE REGISTER" shall have the meaning set forth in the
Preamble.
"DEFAULT PAYMENTS" shall have the meaning set forth in the
Preamble.
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"DTC" shall have the meaning set forth in Section 5(d).
"DWAC" shall have the meaning set forth in Section 5(d).
"FAST" shall have the meaning set forth in Section 5(d).
"FINAL RESET" shall have the meaning set forth in Section
5(c).
"FORCED CONVERSION WARRANTS" shall have the meaning set forth
in Section 7(b)(iii).
"HOLDER CONVERSION DATE" shall have the meaning set forth in
Section 5(d).
"INITIAL CONVERSION PRICE" shall have the meaning set forth in
Section 5(c).
"INTEREST PAYMENT DATE" shall have the meaning set forth in
the Preamble.
"MATURITY DATE" shall have the meaning set forth in the
Preamble.
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price
of one share of Common Stock determined as follows:
(i) If the Common Stock is approved for trading on
the NASDAQ National Market System or the Nasdaq Small-Cap Market, the closing
price thereon on the date of valuation;
(ii) If (i) does not apply and the Common Stock is
listed on NYSE or the American Stock Exchange, the closing price on such
exchange on the date of valuation;
(iii) If neither (i) nor (ii) apply but the Common
Stock is quoted in the over-the-counter market, another recognized exchange, on
the pink sheets or bulletin board, (A) the last sales price on the date of
valuation or, if there is no such sales price, (B) the mean between the last
reported "bid" and "asked" prices thereof on the date of valuation; and
(iv) If neither clause (i), (ii) or (iii) above
applies, the market value as determined by a nationally recognized investment
banking firm or other nationally recognized financial advisor retained by the
Company for such purpose, taking into consideration, among other factors, the
earnings history, book value and prospects for the Company, and the prices at
which shares of Common Stock recently have been traded. Such determination shall
be conclusive and binding on all persons.
"NOTICE OF FORCED CONVERSION" shall have the meaning set forth
in Section 7(a).
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"NYSE" shall mean the New York Stock Exchange.
"OUTSTANDING PRINCIPAL AMOUNT" shall have the meaning set
forth in the Preamble.
"PAYMENT STATEMENT" shall have the meaning set forth in the
Preamble.
"PIK INTEREST" shall have the meaning set forth in the
Preamble.
"PRE-NOTICE PERIOD" shall have the meaning set forth in
Section 7(a).
"POST-NOTICE PERIOD" shall have the meaning set forth in
Section 7(a).
"PUBLIC ANNOUNCEMENT" shall mean any public filing with the
Securities and Exchange Commission, any press release by either the Company or a
third party or any other public statement, that announces a proposed transaction
which, if consummated, would constitute a Change in Control Transaction.
"PURCHASE AGREEMENT" shall have the meaning set forth in the
Preamble.
"REDEMPTION DATE" shall have the meaning set forth in Section
6(a).
"REDEMPTION NOTICE" shall have the meaning set forth in
Section 6(a).
"REDEMPTION PRICE" shall have the meaning set forth in Section
4(a).
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set
forth in the Preamble.
"RESET" shall have the meaning set forth in Section 5(c).
"RESET AVERAGE" shall have the meaning set forth in Section
5(c).
"RESET FACTOR" shall have the meaning set forth in Section
5(c).
"RESET PRICING PERIOD" shall have the meaning set forth in
Section 5(c).
"RESTRICTED OWNERSHIP PERCENTAGE" shall have the meaning set
forth in Section 13.
"STOCK INTEREST" shall have the meaning set forth in the
Preamble.
"TRADING DAY" shall mean a day on which the Common Stock is
traded on the NASDAQ National Market System or principal exchange on which the
Common Stock has been listed (or any similar organization or agency succeeding
such market or exchange's functions of reporting prices).
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4. Change in Control, Etc.
(a) If at any time there occurs a Public Announcement of a
pending Change in Control Transaction in which the public shareholders of the
Company are to receive consideration, a material portion of which is cash or
indebtedness not convertible into capital stock, the Holder shall be entitled,
at its sole option, to have the Company redeem this Debenture in whole or in
part at a redemption price equal to 115% of the Outstanding Principal Amount of
this Debenture plus all accrued but unpaid interest and penalties on this
Debenture (the "REDEMPTION PRICE"), which such 15% premium on the Outstanding
Principal Amount shall be reduced by 1/36 per month for each month from the date
of issuance to and including the Maturity Date. Such Holder shall be entitled to
make such election at any time after a Public Announcement of a pending, and up
to 10 days after the effective date of a, Change in Control Transaction.
(b) If at any time there occurs a Public Announcement of a
pending Change in Control Transaction in which the public shareholders of the
Company are to receive consideration, a portion of which is capital stock or any
security convertible into capital stock of another entity in exchange for shares
of Common Stock ("CHANGE IN CONTROL CONSIDERATION"), then prompt provision shall
be made in a manner reasonably acceptable to the Holders so that each Holder
shall have the right (in addition to its rights hereunder) following such Public
Announcement to:
(i) convert its Debentures into the Change in Control
Consideration that such Holder would have been or would be entitled to receive
had it converted all of its Debentures into Common Stock (notwithstanding any
restrictions imposed upon the Holder pursuant to this Debenture or the Purchase
Agreement in its ability to do so) immediately prior to the Change in Control
Transaction at the Change in Control Conversion Price (as defined below), and
acquired the Change in Control Consideration as a shareholder of the Company; or
(ii) convert its Debentures into Common Stock at the
Change in Control Conversion Price (as defined below).
The "CHANGE IN CONTROL CONVERSION PRICE" shall mean a
price, subject to further resets and adjustments in the same manner as
adjustments to the Conversion Price, equal to the lesser of: (i) the then
existing Conversion Price (as defined in Section 5(c) below); (ii) 100% of the
lowest Market Price for Shares of Common Stock for any of the four Trading Days
immediately preceding the Public Announcement of the Change in Control
Transaction; and (iii) 85% of the lowest Market Price for Shares of Common Stock
on (A) the Trading Day on which there was a Public Announcement of the Change in
Control Transaction and the two Trading Days thereafter or (B) in the event that
the Public Announcement did not occur on a Trading Day, the three Trading Days
immediately following the Public Announcement. The Market Price for Shares of
Common Stock shall be appropriately adjusted for stock splits, reverse splits,
stock dividends and other dilutive events, including those events occurring in
connection with the Change in Control Transaction, that occur during the Trading
Days referred to above.
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(c) If at any time there is a Public Announcement of a pending
Change in Control Transaction which does not involve the exchange, conversion,
transfer or other disposition of shares of Common Stock held by the public
shareholders of the Company, then the Conversion Price shall be adjusted so that
thereafter the Conversion Price shall be equal to the Change in Control
Conversion Price.
The rights set forth in this Section 4 are cumulative
and are in addition to any other rights or remedies that the Holder may have.
5. CONVERSION AT THE OPTION OF THE HOLDER. The Holder of this Debenture
shall have the following conversion rights.
(a) Xxxxxx's Right to Convert. This Debenture shall be
convertible at any time, in whole or in part, at the option of the Holder
hereof, into fully paid, validly issued and nonassessable shares of Common
Stock. If this Debenture is converted in part, the remaining portion of this
Debenture not so converted shall remain entitled to the conversion rights
provided herein.
(b) Conversion. The Outstanding Principal Amount of this
Debenture that is converted into shares of Common Stock at the option of the
Holder shall be convertible into the number of shares of Common Stock which
results from application of the following formula:
P + I + D
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Conversion Price
P = Outstanding Principal Amount of this Debenture submitted for
conversion as of the Holder Conversion Date
I = accrued but unpaid interest (not previously added to
principal) on P as of the Holder Conversion Date
D = default payments (not previously added to principal) on P as
of the Holder Conversion Date
The number of shares of Common Stock into which each
$1,000 principal amount of this Debenture hereto may be converted pursuant to
this paragraph hereof is hereafter referred to as the "CONVERSION RATE."
(c) Conversion Price. Subject to adjustments pursuant to
Section 8, this Debenture will have an initial conversion price (the "INITIAL
CONVERSION PRICE") equal to 125% of the Closing Price which shall be determined
in accordance with Section 1(b) above (such price, as Reset and as adjusted in
accordance with Section 8 of this Debenture and Section 2(b)(i) of the
Registration Rights Agreement, shall be referred to herein as the "CONVERSION
PRICE").
On June 5, 2001, December 5, 2001, June 5, 2002,
December 5, 2002 and June 5, 2003, the Conversion Price shall reset ("RESET") to
a price equal to (x)
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the average Market Price for Shares of Common Stock (the "RESET AVERAGE") for
the twenty (20) Trading Day period immediately preceding and excluding such
respective date (the "RESET PRICING PERIOD") multiplied by (y) the Reset Factor
(as defined below), provided that no Reset shall exceed the then current
Conversion Price. If the Reset Average for any Reset Pricing Period is greater
than the Closing Price (as adjusted), no Reset shall occur with respect to such
Reset Pricing Period. The Market Price for Shares of Common Stock shall be
appropriately adjusted for stock splits, reverse splits, stock dividends and
other dilutive events that occur during the Reset Pricing Period. As herein
provided, the Conversion Price shall be subject to further Reset, and adjustment
as set forth in the paragraph above. The "RESET FACTOR" is the number equal to
(1- (the respective Reset Average/the Closing Price)) + 1; provided, however,
that if such number is greater than 1.5, the Reset Factor shall be 1.5.
Notwithstanding the foregoing, provided that there is
Effective Registration during such period, in the event that the volume weighted
average price of the Common Stock as reported by Bloomberg Financial Markets for
each of sixty (60) consecutive Trading Days is in excess of 125% of the Initial
Conversion Price as adjusted, then the Conversion Price shall Reset to the
Initial Conversion Price, subject to all non-Reset adjustments (other than
pursuant to Section 8(b)) from the date of issuance of the Debenture to such
Reset, and thereafter subject to further adjustments as hereinafter provided
(the "FINAL RESET").
In addition to the foregoing and in addition to any
other rights or remedies which may be available to the Holder hereunder, under
the Purchase Agreement and/or the Registration Rights Agreement, if at any time
the Company fails for any reason to repurchase the Debenture (or portion
thereof, as applicable) or make any cash payment (other than interest payments
with respect to which the Holder has the right to require the Company to pay PIK
Interest in lieu thereof) in accordance with the terms of this Debenture, the
Purchase Agreement or the Registration Rights Agreement, then the Conversion
Price shall be subject to further adjustment (downwards only) so that it shall
thereafter be equal to the lesser of (x) the lowest Market Price for Shares of
Common Stock during any of the five (5) days prior to the date that the Holder
submits a Conversion Notice (as defined below) to the Company and (y) the
Conversion Price otherwise applicable at such time, subject to further
adjustment in each case.
(d) Mechanics of Conversion. In order to convert this
Debenture (in whole or in part) into full shares of Common Stock, the Holder (i)
shall give written notice in the form of Exhibit 2 hereto (the "CONVERSION
NOTICE") by facsimile to the Company at such office that the Holder elects to
convert the principal amount (plus accrued but unpaid interest and default
payments) specified therein, which such notice and election shall be
irrevocable, and (ii) as soon as practicable after such notice, shall surrender
this Debenture, duly endorsed, by either overnight courier or 2-day courier, to
the principal office of the Company; provided, however, that the Company shall
not be obligated to issue certificates evidencing the shares of the Common Stock
issuable upon such conversion unless either the Debenture evidencing the
principal amount is delivered to the Company as provided above, or the Holder
notifies the Company that such Debenture(s) have been lost, stolen or destroyed
and promptly executes an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss
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incurred by it in connection with such lost, stolen or destroyed Debentures. If
a Holder is converting less than the maximum number of shares it may convert
under its Debenture, the Company shall reissue the Debenture with the
appropriate remaining principal amount as soon as practicable after the Company
shall have received the Holder's surrendered Debenture.
The Company shall issue and deliver within three (3)
Trading Days of the delivery to the Company of such Conversion Notice, to such
Holder of Debenture(s) at the address of the Holder, or to its designee, a
certificate or certificates for the number of shares of Common Stock to which
the Holder shall be entitled as aforesaid, together with a calculation of the
Conversion Rate and a Debenture or Debentures for the principal amount of
Debentures not submitted for conversion. The date on which the Conversion Notice
is given (the "HOLDER CONVERSION DATE") shall be deemed to be the date the
Company received by facsimile the Conversion Notice, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. In the event that such Holder or its designee has
not received such certificate or certificates within ten (10) calendar days of
the Company's receipt of the Conversion Notice, the Holder may, in addition to
any other rights or remedies it may have, revoke its Conversion Notice.
In lieu of delivering physical certificates
representing the Common Shares issuable upon conversion of Debentures or the
Warrant Shares (as defined in the Purchase Agreement) deliverable upon exercise
of Warrants (as defined in the Purchase Agreement), provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the holder, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Shares and Warrant Shares issuable upon conversion or
exercise to the Holder, by crediting the account of Xxxxxx's prime broker with
DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery described above shall apply to the electronic transmittals
through the DWAC system. The parties agree to coordinate with DTC to accomplish
this objective. The conversions pursuant to Section 5 shall be deemed to have
been made immediately prior to the close of business on the Holder Conversion
Date. The person or persons entitled to receive the Common Shares issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such Common Shares at the close of business on the Holder Conversion
Date.
6. OPTION TO REDEEM.
(a) At least five Trading Days prior to the commencement of a
Reset Pricing Period, the Company may state its intention to redeem all, but not
less than all, of the Debentures (all or none) for a cash price equal to the
Redemption Price by providing an irrevocable, written notice (the "REDEMPTION
NOTICE") to the Holder. The Redemption Notice shall indicate that the Company
seeks to redeem the Debenture, shall set the date for the Company's redemption
of the Debenture (which date shall be within 20 Trading Days of the closing of
the Reset Pricing Period) and may state that such redemption shall be
conditional upon the relevant Reset resulting in the Conversion Price
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being less than x% of the Closing Price, as adjusted (where x is a number less
than or equal to 50%).
(b) A Redemption Notice shall only be effective in the event
that (i) the relevant Reset results in the Conversion Price being less than the
percentage set forth in the Redemption Notice (as adjusted) and in any event
less than 50% of the Closing Price (as adjusted), and (ii) the provisions of
Section 6.15 of the Purchase Agreement have been satisfied. If the Conversion
Price is less than the percentage set forth in the Redemption Notice, as
adjusted and said provisions have been satisfied, the redemption shall occur on
the date set forth in the Redemption Notice (the "REDEMPTION DATE") at the
offices of Xxxxxx's counsel. If the Company fails to pay the Redemption Price in
full on the Redemption Date in immediately available funds, (i) the Company
shall lose its right to redeem any Debenture in accordance with this Section
6(b) and (ii) in addition to any other rights or remedies it may have, the
Holder shall have the right to require the Company to repurchase the Debenture
(or any portion thereof, as selected by the Holder) at a price equal to 110% of
the Redemption Price pursuant to a written notice to the Company.
(c) If the relevant Reset does not result in the Conversion
Price being less than the percentage set forth in the Redemption Notice and in
any event less than 50% of the Closing Price (as adjusted), the Redemption
Notice shall be deemed withdrawn.
(d) Nothing in this Debenture shall limit the Holder's right
to convert after a Redemption Notice has been received but before actual
redemption.
7. FORCED CONVERSION.
(a) In the event that the volume weighted average price of the
Common Stock as reported by Bloomberg Financial Markets is in excess of 200% of
the Initial Conversion Price (as adjusted pursuant to Section 8 hereof only) for
each of sixty (60) consecutive Trading Days ("PRE-NOTICE PERIOD"), the Company
may require the Holder to surrender this Debenture for conversion at the
then-applicable Conversion Price. To exercise such right, the Company must
deliver a notice to that effect ("NOTICE OF FORCED CONVERSION") at least twenty
(20) Trading Days prior to the date fixed for conversion (the "POST-NOTICE
PERIOD").
(b) A Notice of Forced Conversion shall only be effective if:
(i) Effective Registration existed during the entire
Pre-Notice Period and Post-Notice Period;
(ii) no material default or breach exists, and no
event shall have occurred which constitutes (or would constitute with notice or
the passage of time or both) a material default or breach of the Purchase
Agreement, the Registration Rights Agreement, any Warrant or this Debenture; and
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(iii) conversion by the Holder to Common Shares will
not exceed the limits on a Holder's right to
convert under Section 13 below.
In the event that a portion of the Outstanding Principal
Amount may not be converted into Common Shares pursuant to Section 7(a) above by
reason of Section 7(b)(iii) above and Section 13 below, the Holder shall in lieu
of such Common Shares receive a number of warrants (the "FORCED CONVERSION
WARRANTS") equal to the total number of Common Shares which the Holder would
have been entitled to receive but for Section 13 upon conversion of the
remaining portion of the Outstanding Principal Amount at the then-existing
Conversion Price less $.01. Each such Forced Conversion Warrant shall be
exercisable for one Common Share at an exercise price equal to $.01 per share.
The Forced Conversion Warrants shall be in the same form, mutatis mutandis, as
the Put Option Warrants (as defined in the Purchase Agreement).
8. STOCK SPLITS; DIVIDENDS; ADJUSTMENTS; REORGANIZATIONS.
(a) If the Company, at any time while the Debentures are
outstanding, shall (i) pay a stock dividend or otherwise make a distribution or
distributions on any equity securities (including investments or securities
convertible into or exchangeable for such equity securities) in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock into a larger
number of shares, (iii) combine outstanding shares of Common Stock into a
smaller number of shares, then each Affected Conversion Price (as defined below)
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock 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 8(a) shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of an issuance, a subdivision or a
combination.
As used herein, the Affected Conversion Prices (each an
"AFFECTED CONVERSION PRICE") shall refer to: (i) the Conversion Price; (ii) each
Market Price for Shares of Common Stock occurring on any Trading Day included in
the Reset Pricing Period, which Trading Day occurred before the record date in
the case of events referred to in clause (i) of this Section 8(a) and the
effective date in the case of the events referred to in clauses (ii) and (iii)
of this Section 8(a); and (iii) the Closing Price.
(b) In the event that the Company issues or sells any Common
Stock or securities which are convertible into or exchangeable for its Common
Stock, or any warrants or other rights to subscribe for or to purchase or any
options for the purchase of its Common Stock at a per share of Common Stock
selling price ("PER SHARE SELLING PRICE") which is less than:
(i) the Conversion Price on the Trading Day next
preceding such issue or sale or, in the case of issuances to holders of its
Common Stock, the date fixed for the determination of stockholders entitled to
receive such warrants, rights or options (the "ADJUSTMENT DATE"), then the
Conversion Price per share shall be adjusted
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downward to equal such lower Per Share Selling Price effective concurrently with
such issue or sale; and
(ii) the Market Price for Shares of Common Stock on
the Adjustment Date, then the Affected
Conversion Prices per share shall be reduced effective concurrently with such
issue or sale to an amount determined by multiplying the Conversion Price then
in effect by a fraction, (A) the numerator of which shall be the sum of (1) the
number of shares of Common Stock and Convertible Securities (as defined below)
outstanding immediately prior to such issue or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such lower Per Share Selling Price
and (B) the denominator of which shall be the number of shares of Common Stock
and Convertible Securities (as defined below) of the Company outstanding
immediately after such issue or sale.
Notwithstanding the foregoing, this provision shall not apply
to (x) any issuances or sales of securities pursuant to employee or director
option plans of the Company approved by shareholders or pursuant to contracts
currently in effect and disclosed to the Holders, (y) arrangements with the
Holders and (z) strategic acquisitions of other entities by the Company which
engage in businesses related or complementary to the Company's business and that
is not essentially a capital raising transaction on behalf of the Company.
For the purposes of the foregoing adjustment, in the case of
the issuance of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("CONVERTIBLE Securities"), the maximum number of shares of Common Stock
issuable upon exercise, exchange or conversion of such Convertible Securities
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Convertible Securities.
Upon the occurrence of a Final Reset, all prior Resets
pursuant to this Section 8(b) shall be superceded as of the date of the Final
Reset and there shall be no further adjustments thereafter pursuant to this
Section 8(b).
(c) If the Company, at any time while the Debentures are
outstanding, shall distribute to all holders of shares of Common Stock evidences
of its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Section 8(b) above), then the
prices referred to in (ii) and (iii) of the definition of the Affected
Conversion Prices set forth in Section 8(a) above shall be reduced to equal the
relevant Affected Conversion Price multiplied by a fraction (i) the numerator of
which is equal to (A) the Market Price for Shares of Common Stock on the record
date for the distribution minus (B) the price allocable to one share of Common
Stock of the value (as jointly determined in good faith by the board of
directors of the Company and the Holder) of any and all such evidences of
indebtedness, shares of capital stock, other securities or property, so
distributed and (ii) the denominator of which is equal to the Market Price for
Shares of Common Stock on the record date for the distribution.
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(d) In the event that at any time or from time to time after
the Closing Date, the Common Stock issuable upon the conversion of the
Debentures is changed into the same or a different number of shares of any class
or classes of stock, whether by merger, consolidation, recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend or reorganization provided for elsewhere in this Section 8),
then and as a condition to each such event provision shall be made in a manner
reasonably acceptable to the Holders of Debentures so that each Holder of
Debentures shall have the right thereafter to convert such Debenture into the
kind of stock receivable upon such recapitalization, reclassification or other
change by holders of shares of Common Stock, all subject to further adjustment
as provided herein. In such event, the formulae set forth herein for conversion
and redemption shall be equitably adjusted to reflect such change in number of
shares or, if shares of a new class of stock are issued, to reflect the market
price of the class or classes of stock (applying the same factors used in
determining the Conversion Price) issued in connection with the above described
transaction.
(e) Whenever any element of the Conversion Price is adjusted
pursuant to Section 8, the Company shall promptly mail to each Holder of the
Debentures, a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
(f) In the event of any taking by the Company of a record date
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
any security or right convertible or exchangeable into or entitling the holder
thereof to receive additional shares of Common Stock, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall deliver
to each Holder of Debentures at least 20 days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution, security or right and the amount
and character of such dividend, distribution, security or right.
(g) If the Company, at any time while the Debentures are
outstanding, shall distribute to all holders of Shares of Common Stock evidences
of its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Section 8(b) above) then the Holder
shall participate in such distribution on a pro rata basis with the holders of
shares of Common Stock entitled to receive such dividend, distribution,
issuance, subdivision or combination as if the Holder held that number of shares
of Common Stock that the Holder would have been entitled to receive hereunder
upon conversion of the Debenture (without regard to Section 13) immediately
prior to the record date fixed for determination of shareholders entitled to
receive such dividend, at the Conversion Price then in existence.
9. FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up to the nearest whole share.
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10. RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
(a) Reservation Requirement. The Company covenants that it
will at all times reserve and keep available out of its authorized and unissued
Common Stock solely for the purpose of issuance upon conversion of the
Debentures as herein provided, free from preemptive rights or any other present
or contingent purchase rights of persons other than the Holders of the
Debentures, 200% of the maximum number of shares of Common Stock as shall be
issuable (taking into account the adjustments and restrictions of Sections 5 and
8 hereof) upon the conversion of all of the Debentures pursuant hereto. 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 and
nonassessable. Without in any way limiting the foregoing, so long as any
Debentures remain outstanding the Company agrees to reserve and at all times
keep available solely for purposes of conversion of Debentures such number of
authorized but unissued shares of Common Stock that is set forth in the Purchase
Agreement.
(b) Deficiency. If the Company does not have a sufficient
number of shares of Common Stock available to satisfy the Company's obligations
to a Holder of Debentures upon receipt of a Conversion Notice or is otherwise
unable to issue such shares of Common Stock in accordance with the terms of this
Agreement such Holder shall be entitled to the rights and remedies set forth in
the Registration Rights Agreement, subject to the Company's right (if any) to
cure as set forth thereunder.
11. NO REISSUANCE OF THE DEBENTURE. No Debentures acquired by the
Company by reason of redemption, purchase, exchange or otherwise shall be
reissued, and all such Debentures shall be retired.
12. NO IMPAIRMENT. The Company shall not intentionally take any action
which would impair the rights and privileges of the Debentures set forth herein
or the Holders thereof.
13. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
(a) Notwithstanding anything to the contrary contained herein,
no Debenture may be converted to the extent that, after giving effect to shares
of Common Stock to be issued pursuant to a Conversion Notice, the total number
of shares of Common Stock deemed beneficially owned by such Holder (other than
by virtue of the ownership of Debentures or ownership of other securities that
have limitations on a Holder's rights to exchange, convert or exercise similar
to those limitations set forth herein), together with all shares of Common Stock
deemed beneficially owned by the holder's "AFFILIATES" (as defined in Rule 144
of the Act) that would be aggregated for purposes of determining whether a group
under Section 13(d) of the Exchange Act, exists (an "AGGREGATION PARTY"), would
exceed 9.9% (the "RESTRICTED OWNERSHIP PERCENTAGE") of the total issued and
outstanding shares of the Company's Common Stock; provided that (w) each holder
shall have the right at any time and from time to time to reduce its Restricted
Ownership Percentage immediately upon notice to the Company, (x) each Holder
shall have the right at any time and from time to time, to increase its
Restricted Ownership Percentage and otherwise waive in whole or in part the
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restrictions of this Section 13(a) upon 61 days' prior notice to the Company or
immediately in the event of the announcement of a pending or proposed Change in
Control Transaction, (y) each holder can make subsequent adjustments pursuant to
(w) or (x) any number of times from time to time (which adjustment shall be
effective immediately if it results in a decrease in the percentage or shall be
effective upon 61 days' prior written notice or immediately in the event of the
announcement of a pending or proposed Change in Control Transaction if it
results in an increase in the percentage) and (z) each Holder may eliminate or
reinstate this limitation at any time and from time to time (which elimination
will be effective upon 61 days' prior notice and which reinstatement will be
effective immediately). Without limiting the foregoing, in the event of the
announcement of a pending or proposed Change in Control Transaction, any Holder
may reinstate immediately (in whole or in part) the requirement that any
increase in its Restricted Ownership Percentage be subject to 61 days' prior
written notice, notwithstanding such Change in Control Transaction, without
imposing such requirement on, or otherwise changing such Holder's rights with
respect to, any other Change in Control Transaction. For this purpose, any
material modification of the terms of a Change in Control Transaction will be
deemed to result in a new Change in Control Transaction. The term "DEEMED
BENEFICIALLY OWNED" as used in this Debenture shall exclude shares that might
otherwise be deemed beneficially owned by reason of the convertibility of the
Debentures. The Company shall provide all Holders with the later of (i) 20 days'
prior written notice of any such Change in Control Transaction, to the extent
the Company has prior knowledge of a Change in Control Transaction; or (ii)
notice on the day immediately following the Company's learning of any such
transaction, but only after, in the case of (i) and (ii), such Change in Control
Transaction has been publicly disclosed.
(b) Each time (a "COVENANT TIME") the Holder makes a
Triggering Acquisition (as defined below) of shares of Common Stock (the
"TRIGGERING SHARES"), the Holder will be deemed to covenant that it will not,
during the balance of the day on which such Triggering Acquisition occurs, and
during the 61-day period beginning immediately after that day, acquire
additional shares of Common Stock pursuant to rights-to-acquire existing at that
Covenant Time, if the aggregate amount of such additional shares so acquired
(without reducing that amount by any dispositions) would exceed (x) the
Restricted Ownership Percentage of the number of shares of Common Stock
outstanding at that Covenant Time (including the Triggering Shares) minus (y)
the number of shares of Common Stock actually owned by the Holder at that
Covenant Time (regardless of how or when acquired, and including the Triggering
Shares). A "TRIGGERING ACQUISITION" means the giving of a Conversion Notice or
any other acquisition of Common Stock by the Holder or an aggregation party;
provided, however, that with respect to the giving of such Conversion Notice, if
the associated issuance of shares of Common Stock does not occur, such event
shall cease to be a Triggering Acquisition and the related covenant under this
paragraph shall terminate. At each Covenant Time, the Holder shall be deemed to
waive any right it would otherwise have to acquire Common Stock to the extent
that such acquisition would violate any covenant given by the Holder under this
paragraph. For the avoidance of doubt:
(i) The covenant to be given pursuant to this Section
13(b) will be given at every Covenant Time and shall be calculated based on the
circumstances then
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in effect. The making of a covenant at one Covenant Time shall not terminate or
modify any prior covenants.
(ii) the Holder may therefore from time to time be
subject to multiple such covenants, each one having been made at a different
Covenant Time, and some possibly being more restrictive than others. The Holder
must comply with all such covenants then in effect.
14. OBLIGATIONS ABSOLUTE. No provision of this Debenture, the Purchase
Agreement or the Registration Rights Agreement shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest and default payments on, this Debenture or to issue
shares of Common Stock in response to a Conversion Notice at the time, place and
rate, and in the manner, herein prescribed.
15. WAIVERS OF DEMAND, ETC. The Company hereby expressly and
irrevocably waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or intent
to accelerate, bringing of suit and diligence in taking any action to collect
amounts called for hereunder and will be directly and primarily liable for the
payment of all sums owing and to be owing hereon, regardless of and without any
notice, diligence, act or omission as or with respect to the collection of any
amount called for hereunder.
16. REPLACEMENT DEBENTURE. In the event that any Holder notifies the
Company that its Debenture(s) have been lost, stolen or destroyed, replacement
Debenture(s) identical in all respects to the original Debenture(s) (except for
registration number and Outstanding Principal Amount, if different than that
shown on the original Debenture(s)), shall be issued to the Holder, provided
that the Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Debenture.
17. PAYMENT OF EXPENSES; ISSUE TAXES. The Company agrees to pay all
debts and expenses, including attorneys' fees, which may be incurred by the
Holder in enforcing the provisions of this Debenture and/or collecting any
amount due under this Debenture, the Purchase Agreement, any Warrant or the
Registration Rights Agreement. The Company shall pay any and all issue and other
taxes (excluding any income, franchise or similar taxes) that maybe payable in
respect of any issue or delivery of shares of Common Stock on conversion of any
Debenture pursuant hereto.
18. DEFAULTS. If one or more of the following described "EVENTS OF
DEFAULT" shall occur:
(a) the Company shall default in the payment of (i)
interest on this Debenture or any other Debenture
issued pursuant to the Purchase Agreement (subject to
the Company's option to pay PIK Interest), and such
default shall continue for five (5) business days
after the due date thereof, or (ii) the principal of
this Debenture or any other Debenture issued pursuant
to the Purchase Agreement; or
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(b) any of the representations or warranties made by the
Company herein, in the Purchase Agreement, the
Registration Rights Agreement, any Warrant or in any
certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or such other documents
shall be false or misleading at the time made; or
(c) the Company shall fail to materially perform or
observe any covenant or agreement in the Purchase
Agreement or the Registration Rights Agreement, or
any other covenant, term, provision, condition,
agreement or obligation of the Company under this
Debenture and such failure shall continue uncured for
a period of ten (10) business days after notice of
such failure; or
(d) the Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
it or for a substantial part of its property or
business; or
(e) a trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within forty-five (45) days after
such appointment; or
(f) any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within forty-five (45) days thereafter; or
(g) the Company shall sell or otherwise transfer all or
substantially all of its assets and either (i) a
material portion of the consideration received by the
Company is cash or (ii) the public shareholders of
the Company did not receive Change in Control
Consideration; or
(h) bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any
bankruptcy law or any law for the relief of debt
shall be instituted by or against the Company and, if
instituted against the Company shall not be dismissed
within forty-five (45) days after such institution,
or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings
or admit to any material allegations of, or default
in answering a petition filed in any such proceeding;
or
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(i) the Company shall be in default of any other of its
indebtedness exceeding $1,000,000, or any other event
shall have occurred, and as a result thereof the
holders thereof shall have accelerated or shall have
the right (upon the giving of notice, the passage of
time, or both) to accelerate such indebtedness; or
(j) a "going private" transaction under Rule 13e-3
promulgated pursuant to the Exchange Act shall have
been announced; or
(k) a tender offer by the Company under Rule 13e-4
promulgated pursuant to the Exchange Act shall have
been announced (i) on or before the eighteen (18)
month anniversary of the Closing Date, and/or (ii) to
which the Company is or will be required to dedicate
more than 10% of its available cash and marketable
securities.
then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the Holder may
consider the Debenture immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of any
period of xxxxx, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law. In such event,
the Debenture shall be redeemed at the greater of (i) the Redemption Price per
Debenture equal to 115% of the Outstanding Principal Amount of the Debenture,
plus accrued but unpaid interest and default payments on the Debenture and (ii)
the cash value that the Holder would be entitled to receive upon conversion of
the Debenture at the Conversion Price in existence on such date, without regard
to Section 13, and the subsequent sale of the Common Stock at the Market Price
for Shares of Common Stock then existing.
19. SAVINGS CLAUSE. In case any provision of this Debenture is held by
a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby, and such provision shall remain
effective in all other jurisdictions.
20. ENTIRE AGREEMENT. This Debenture and the agreements referred to in
this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof. Neither
this Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
21. ASSIGNMENT, ETC. The Holder (but not the Company) may without
notice, transfer or assign this Debenture or any interest herein and may
mortgage, encumber or transfer any of its rights or interest in and to this
Debenture or any part hereof and, without limitation, each assignee, transferee
and mortgagee (which may include any
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affiliate of the Holder) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights of the Holder under this Debenture. The Company agrees that, subject to
compliance with the Purchase Agreement, after receipt by the Company of written
notice of assignment from the Holder or from the Holder's assignee, all
principal, interest and other amounts which are then and thereafter become due
under this Debenture shall be paid to such assignee at the place of payment
designated in such notice. This Debenture shall be binding upon the Company and
its successors and affiliates and shall inure to the benefit of the Holder and
its successors and assigns.
22. NO WAIVER. No failure on the part of the Holder to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
23. CERTIFICATE. The Company shall, upon the written request at any
time of any Holder of Debentures, furnish or cause to be furnished to such
Holder a certificate prepared by the chief financial officer of Company setting
forth any adjustments or readjustments of the Conversion Price pursuant to this
Debenture and any right of the Holder to receive additional shares of Common
Stock or any other equity or debt security pursuant to Section 8.
24. NOTICES. The Company shall distribute to the Holders of Debentures
copies of all notices, materials, annual and quarterly reports, proxy
statements, information statements and any other documents distributed generally
to the holders of shares of Common Stock of the Company, at such times and by
such method as such documents are distributed to such holders of such Common
Stock, but shall not directly or indirectly provide material non-public
information to the Holder without such Holder's prior written consent.
25. SPECIFIC ENFORCEMENT. The Company agrees that irreparable damage
would occur in the event that any of the provisions of this Debenture were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Holders of Debentures shall be entitled to swift
specific performance, injunctive relief or other equitable remedies to prevent
or cure breaches of the provisions of this Debenture and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled under agreement, at law or in equity.
26. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to a party hereunder shall be sufficiently given if in
writing and personally delivered, facsimilied or mailed to said party by
certified mail, return receipt requested, at its address set forth herein or
such other address as either may designate for itself in such notice to the
other and communications shall be deemed to have been
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received when delivered personally or, if sent by mail or facsimile, then when
actually received by the party to whom it is addressed. Whenever the sense of
this Debenture requires, words in the singular shall be deemed to include the
plural and words in the plural shall be deemed to include the singular.
Paragraph headings are for convenience only and shall not affect the meaning of
this document.
27. GOVERNING LAW; CONSENT TO JURISDICTION. THIS DEBENTURE SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS TO BE EXECUTED AND PERFORMED ENTIRELY WITHIN
SUCH STATE. THE COMPANY (I) HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURT LOCATED IN NEW YORK COUNTY, NEW YORK
FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO
THIS DEBENTURE AND (II) HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER. THE COMPANY CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AS PROVIDED HEREIN AND
AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS
AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
APPLIEDTHEORY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Sr. VP/CFO
Signature page to 5% Convertible Debenture of APPLIEDTHEORY CORPORATION
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EXHIBIT 1
PAYMENT STATEMENT
Date:______________
To: [NAME OF HOLDER OF DEBENTURE] ("HOLDER")
RE: 5% CONVERTIBLE DEBENTURE DUE JUNE 5, 2003 ("DEBENTURE") OF
APPLIEDTHEORY CORPORATION (THE "COMPANY"), IN THE OUTSTANDING PRINCIPAL
AMOUNT OF US$ .
The Company hereby irrevocably elects to pay interest on the
Debenture, for the Interest Payment Date indicated below, in the following
manner (the Company should check its selection):
____ cash interest;
____ PIK Interest; or
____ Stock Interest
Interest Payment Date: _________________________
If the selection above is PIK Interest, the Company should
fill in the following:
Outstanding Principal Amount prior
to issuance of this Payment Statement: US$____________
PIK Interest: US$____________
Outstanding Principal Amount after
issuance of this Payment Statement: US$____________
The Company hereby certifies to the Holder, its successors and
assigns that the Outstanding Principal Amount due under the Debenture after
delivery of this Payment Statement equals the amount indicated below.
Capitalized terms used in this Payment Statement and not otherwise defined shall
have the meaning ascribed thereto in the Debenture.
IN WITNESS WHEREOF, this Payment Statement has been duly
executed and delivered on the date first written above.
APPLIEDTHEORY CORPORATION
By:________________________
Name:
Title:
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EXHIBIT 2
(To be Executed by Registered Holder
in order to Convert Debenture)
CONVERSION NOTICE
FOR
5% CONVERTIBLE DEBENTURE DUE JUNE 5, 2003
The undersigned, as Holder of the 5% Convertible Debenture Due JUNE
___, 2003 of APPLIEDTHEORY CORPORATION (the "COMPANY"), in the outstanding
principal amount of U.S. $_____________ (the "DEBENTURE"), hereby elects to
convert that portion of the outstanding principal amount of the Debenture shown
on the next page into shares of Common Stock, $0.01 par value per share (the
"COMMON STOCK"), of the Company according to the conditions of the Debenture, as
of the date written below. The undersigned hereby requests that share
certificates for the Common Stock to be issued to the undersigned pursuant to
this Conversion Notice be issued in the name of, and delivered to, the
undersigned or its designee as indicated 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. No fee will be charged to the
Holder for any conversion, except for transfer taxes, if any.
Conversion Information: NAME OF XXXXXX:
By:
Print Name:
Print Title:
Print Address of Holder:
Issue Common Stock to:
at:
Electronically transmit and credit
Common Stock to:
at:
Date of Conversion
Applicable Conversion Rate
THE COMPUTATION OF THE NUMBER OF COMMON SHARES TO
BE RECEIVED IS SET FORTH ON THE ATTACHED PAGE
25
PAGE 2 TO CONVERSION NOTICE FOR:
(NAME OF XXXXXX)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
A. Outstanding Principal Amount converted: $
B. Accrued, unpaid interest on Outstanding Principal Amount converted: $
C. Default payments due Holder on Outstanding Principal Amount converted: $
-----------------
TOTAL DOLLAR AMOUNT CONVERTED (TOTAL OF A + B + C) $
=================
EXCHANGE PRICE $
Number of Shares of Common Stock = Total dollar amount converted =$
----------------------------- -----------------
Conversion Price $
NUMBER OF SHARES OF COMMON STOCK =
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for shares of Common Stock in the following amount(s):
Please issue and deliver _____ new Debenture(s) in the following amounts:
2
