EXHIBIT 10.02
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET
FORTH IN SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS
OF APRIL 30, 1998, BETWEEN GLOBAL INTELLICOM, INC. (THE "COMPANY") AND THE
ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY.
No. A-1 $500,000
GLOBAL INTELLICOM, INC.
6% CONVERTIBLE DEBENTURE APRIL 30, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures of
Global Intellicom, Inc., a Nevada corporation, having a principal place of
business at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "Company"), designated as
its 6% Convertible Debentures, due April 30, 2001 (the "Debentures"), in an
aggregate principal amount of $2,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC Opportunity Fund
Ltd., or registered assigns (the "Holder"), the principal sum of Five Hundred
Thousand Dollars ($500,000), on or prior to April 30, 2001 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 principal sum at the rate of 6%
per annum, payable quarterly in arrears commencing June 30, 1998, but in no
event later than the earlier to occur of a Conversion Date (as defined in
Section 5(a)(i)) for such principal amount or the Maturity Date. Interest shall
accrue daily commencing on the Original Issue Date (as defined in Section 7)
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.
Interest shall be calculated on the basis of a 360-day year and for the actual
number of days elapsed. Interest hereunder will be paid to the Person (as
defined in Section 7) in whose name this Debenture is
registered on the records of the Company regarding registration and transfers of
Debentures (the "Debenture Register"). All overdue, accrued and unpaid interest
and other amounts due hereunder shall bear interest at the rate of 15% per annum
(to accrue daily) from the date such interest is due hereunder through and
including the date of payment. The principal of, and interest on, this
Debenture are payable in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, at the address of the Holder last appearing on the Debenture Register,
except that interest due on the principal amount (but not overdue interest) may,
at the Company's option, be paid in shares of Common Stock (as defined in
Section 7) calculated based upon the Conversion Price (as defined below) on the
date such interest was due. All amounts due hereunder other than such interest
shall be paid in cash. Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of Common Stock in payment of interest
on the principal amount if: (i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay interest hereunder in shares of Common Stock; (ii) such
shares are not either registered for resale pursuant to an Underlying Securities
Registration Statement (as defined in Section 7) or freely transferable without
volume restrictions pursuant to Rule 144(k) promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), as determined by counsel to the
Company pursuant to a written opinion letter addressed and in form and substance
acceptable to the Holder and the transfer agent for such shares; (iii) such
shares are not listed or quoted on the Nasdaq SmallCap Market (or the Nasdaq
National Market, the American Stock Exchange or the New York Stock Exchange) and
any other exchange or market on which the Common Stock is then listed or quoted;
or (iv) the issuance of such shares would result in the recipient thereof
beneficially owning more than 4.999% of the issued and outstanding shares of
Common Stock as determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. Payment of interest on the principal amount
in shares of Common Stock is further subject to the provisions of Section
5(a)(ii).
This Debenture is subject to the following additional provisions:
Section 1. The indebtedness evidenced by this Debenture (and all
indebtedness evidenced by any agreements or instruments in the nature of
replacements to, or extensions or amendments of the obligations represented by,
this Debenture) shall be at all times and in all respects wholly subordinate,
junior and subject in right of payment to (i) indebtedness of the Company and
its subsidiaries to Finova Capital Corp. and Century Business Credit Corporation
("Prior Indebtedness") and (ii) existing or future indebtedness of the Company
and its subsidiaries to a banking or other commercial lending institution ("Bank
Indebtedness"). Without limiting the effect of the foregoing, "subordinate," as
used herein, shall be deemed to mean that, in the event of a declared default in
the payment of any such Prior Indebtedness or Bank Indebtedness resulting in the
acceleration of amounts payable thereunder (after giving effect to "cure"
provisions, if any) or of any liquidation, insolvency, bankruptcy,
reorganization, or similar proceedings relating to the Company or any of its
subsidiaries, all sums payable on such Prior Indebtedness and Bank Indebtedness
shall first be paid in full, with the interest due thereon, if any, before any
payment is made upon the indebtedness evidenced by the Debenture, and in such
event, prior thereto any
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payment or distribution of any character which shall be made in respect of the
Debenture shall be paid over to the holders of the Prior Indebtedness and Bank
Indebtedness for application pro rata to the payment thereof, unless and until
the Prior Indebtedness and the Bank Indebtedness shall have been first paid and
satisfied in full.
Section 2. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of Debentures
outstanding to such Holder. No service charge will be made for such
registration of transfer or exchange.
Section 3. 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. 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 4. 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 on or
liquidated damages in respect of this Debenture, as and when the same shall
become due and payable (whether on the applicable quarterly interest
payment date, a Conversion Date or the Maturity Date or by acceleration or
otherwise, including if by reason of enforcement of any subordination
provisions);
(ii) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of, this
Debenture, the Purchase Agreement or the Registration Rights Agreement, and
such failure or breach shall not have been remedied within 15 days after
the date on which notice of such failure or breach shall have been given;
(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 commences any other
proceeding under any reorganization, arrangement,
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adjustment of debt (other than the restructuring or working out of amounts
owed pursuant to indebtedness to trade creditors, banks, and financial
institutions to the extent such restructurings or work outs do not violate
other provisions hereof) , 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 90 days; or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other 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 90 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 call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company or any subsidiary
thereof shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or
other action is taken by the Company or any subsidiary thereof for the
purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness of the Company in an amount exceeding
one hundred thousand dollars ($100,000), 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 Common Stock shall be delisted from the Nasdaq SmallCap
Market or shall be suspended from trading thereon without resuming trading
and/or being relisted (as the case may be) thereon or on the Nasdaq
National Market, the American Stock Exchange or the New York Stock Exchange
or having such suspension lifted, as the case may be, within four (4) days;
(vi) the Company shall be a party to any merger or consolidation
pursuant to which the Company shall not be the surviving entity (or, if the
Company is the surviving entity, the Company shall issue or sell to another
Person, or group thereof, in excess of 50% of the Common Stock) or shall
dispose of in excess of 50% of its assets in one or more transactions, or
shall redeem more than a de minimis number of shares of Common Stock (other
than redemptions of Underlying Shares);
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(vii) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange Commission (the
"Commission") on or prior to the 180th day after the Original Issue Date;
(viii) an Event (as hereinafter defined) shall not have been cured
to the satisfaction of the Holder prior to the expiration of thirty (30)
days from the Event Date (as hereinafter defined) relating thereto (other
than an Event resulting from a failure of an Underlying Securities
Registration Statement to be declared effective by the Commission on or
prior to the Effective Date (as defined in the Registration Rights
Agreement); or
(ix) the Company shall fail to deliver certificates to a Holder prior
to the Fifteenth (15th) day after the Conversion Date pursuant to Section
5(b).
(b) If any Event of Default occurs and is continuing, the full principal
amount of this Debenture (and, at the Holder's option, all other Debentures then
held by such Holder), together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become, immediately due and payable
in cash. The aggregate amount payable upon an Event of Default shall be equal
to the sum of (i) the Mandatory Prepayment Amount plus (ii) the product of (A)
the number of Underlying Shares issued in respect of conversions hereunder or as
payment of interest hereunder and then held by the Holder and (B) the Per Share
Market Value on the date prepayment is due or the date the full prepayment price
is paid, whichever is greater, provided, upon full payment of the amount
required hereunder upon an Event of Default, all Holders receiving such payment
shall surrender all Debentures and Underlying Securities to the Company.
Interest shall accrue on the prepayment amount hereunder from the seventh day
after such amount is due (being the date of an Event of Default) through the
date of payment in full thereof at the rate of 15% per annum. 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 Xxxxxx at any time prior to payment hereunder. No
such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
Section 5. Conversion.
(a)(i) 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, after the earlier of (i) the date that the Underlying Securities
Registration Statement is declared effective by the Commission, and (ii) the
90th day following the Original Issue Date. The number of shares of Common
Stock issuable upon a conversion hereunder shall be determined by dividing the
outstanding principal amount of this Debenture to be converted, plus all accrued
but unpaid interest thereon, by the Conversion Price (as defined below), each as
subject to adjustment as provided hereunder. The Holder shall effect
conversions by surrendering the Debentures (or such portions thereof) to be
converted, together with the form of conversion notice attached hereto as
Exhibit A (a "Conversion
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Notice") to the Company. Each Conversion Notice shall specify the principal
amount of Debentures to be converted and the date on which such conversion is to
be effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (a "Conversion Date"). If no Conversion
Date is specified in a Conversion Notice, the Conversion Date shall be the date
that such Conversion Notice is deemed delivered hereunder. Subject to Section
5(b) hereof and Section 3.8 of the Purchase Agreement, each Conversion Notice,
once given, shall be irrevocable. If the Holder is converting less than all of
the principal amount represented by the Debenture(s) tendered by the Holder with
the Conversion Notice, or if a conversion hereunder cannot be effected in full
for any reason, the Company shall honor such conversion to the extent
permissible hereunder and shall promptly deliver to such Holder (in the manner
and within the time set forth in Section 5(b)) a new Debenture for such
principal amount as has not been converted. Further, the principal amount of
Debentures that are subject to conversion pursuant to this section shall be
limited to the number of Underlying Shares which may be issued upon such
conversion at the prevailing Conversion Price in accordance with Rule 4460(i)
promulgated under the Rules of the Nasdaq
Stock Market (or any successor entity thereto). Any portion of the principal
amount of the Debentures which cannot be converted at the then Conversion Price
as a result of such rule shall be subject to the provisions of Section
5(a)(iii).
(ii) Automatic Conversion. Subject to the provisions in this
paragraph, the principal amount of Debentures for which conversion notices have
not previously been received or for which prepayment has not been made or
required hereunder shall be automatically converted on the third anniversary of
the Original Issue Date at the Conversion Price on such date. The conversion
contemplated by this paragraph shall not occur if (a) neither (1) an Underlying
Securities Registration Statement is not then effective that names the Holder as
a selling stockholder thereunder nor (2) the Holder is permitted to resell
Underlying Shares pursuant to Rule 144(k) promulgated under the Securities Act,
without volume restrictions, as evidenced by an opinion letter of counsel
acceptable to the Holder and the transfer agent for the Common Stock; (b) there
are not sufficient shares of Common Stock authorized and reserved for issuance
upon such conversion; and (c) the Company shall not have defaulted on its
covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement. Further, the principal amount of Debentures that
are subject to conversion pursuant to this section shall be limited to the
number of Underlying Shares which may be issued upon such conversion at the
prevailing Conversion Price in accordance with Rule 4460(i) promulgated under
the Rules of the Nasdaq Stock Market (or any successor entity thereto). Any
portion of the principal amount of the Debentures which cannot be converted at
the then Conversion Price as a result of such rule shall be subject to the
provisions of Section 5(a)(iii).
(iii) Certain Regulatory Approval. If on any Conversion Date (A) the
Common Stock is listed for trading on the Nasdaq National Market or the Nasdaq
SmallCap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of the aggregate principal amount of all then outstanding
Debentures, together with any shares of the Common Stock previously issued upon
conversion of Debentures and as payment of interest thereon, would equal or
exceed 20% of the number of shares of the Common Stock outstanding on the
Original Issue Date (such number of
6
shares as would not equal or exceed such 20% limit, the "Issuable Maximum"), and
(C) the Company shall not have previously obtained the vote of shareholders (the
"Shareholder Approval"), if any, as may be required by the rules and regulations
of The Nasdaq Stock Market (or any successor thereto) applicable to approve the
issuance of Common Stock in excess of the Issuable Maximum in a private
placement whereby shares of Common Stock are deemed to have been issued at a
price that is less than the greater of book or fair market value of the Common
Stock, then the Company shall issue to the Holder so requesting a conversion a
number of shares of Common Stock equal to the Issuable Maximum and, with respect
to the remainder of the principal amount of Debentures then held by such Holder
for which a conversion in accordance with the Conversion Price would result in
an issuance of Common Stock in excess of the Issuable Maximum, the converting
Holder shall have the option to require the Company to either (1) use its best
efforts to obtain the Shareholder Approval applicable to such issuance as soon
as is possible, but in any event not later than the 60th day after such request,
or (2)(i) issue and deliver to such Holder a number of shares of Common Stock as
equals (x) the principal amount of Debentures tendered for conversion in respect
of the Conversion Notice at issue but for which a conversion in accordance with
the other terms hereof would result in an issuance of Common Stock in excess of
the Issuable Maximum, divided by (y) the Initial Conversion Price (as defined
below), and (ii) cash in an amount equal to the product of (x) the Per Share
Market Value on the Conversion Date and (y) the number of shares of Common Stock
in excess of such Holder's pro rata portion of the Issuable Maximum that would
have otherwise been issuable to the Holder in respect of such conversion but for
the provisions of this Section (such amount of cash being hereinafter referred
to as the "Discount Equivalent"), or (3) pay cash to the converting Holder in an
amount equal to the Mandatory Prepayment Amount for the number of Underlying
Shares in or issuable upon such conversion is excess of the Issuable Maximum.
If the Company fails to pay the Discount Equivalent or the Mandatory Prepayment
Amount, as the case may be, in full pursuant to this Section within seven (7)
days after the date payable, the Company will pay interest thereon at a rate of
15% per annum to the converting holder, accruing daily from the Conversion Date
until such amount, plus all such interest thereon, is paid in full.
(b) (i) Not later than three Trading Days after the Conversion Date,
the Company will deliver or cause to be delivered to the Holder (i) a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement) representing the number of shares of the Common Stock being
acquired upon the conversion of Debentures (subject to reduction pursuant to
Section 3.8 of the Purchase Agreement), (ii) Debentures in a principal amount
equal to the principal amount of Debentures not converted; (iii) a bank check in
the amount of all accrued and unpaid interest (if the Company has elected to pay
accrued interest in cash), together with all other amounts then due and payable
in accordance with the terms hereof, in respect of Debentures tendered for
conversion, and (iv) if the Company has elected and is permitted hereunder to
pay accrued interest in shares of the Common Stock, certificates, which shall be
free of restrictive legends and trading restrictions (other than those required
by Section 3.1(b) of the Purchase Agreement), representing such number of shares
of the Common Stock as equals such interest divided by the Conversion Price
calculated on the Conversion
7
Date; provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of the Common Stock issuable upon conversion
of the principal amount of Debentures until Debentures are delivered for
conversion to the Company or the Holder notifies the Company that such Debenture
has been mutilated, lost, stolen or destroyed and complies with Section 10
hereof. If in the case of any Conversion Notice such certificate or
certificates, including for purposes hereof, any shares of the Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, are not delivered to or as directed by the Holder by the fourth
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 (whether subject to a
Holder or a Company Conversion Notice), in which event the Company shall
immediately return the Debentures tendered for conversion. If the Company fails
to deliver to the Holder such certificate or certificates pursuant to this
Section, including for purposes hereof, any shares of the Common Stock to be
issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the fourth Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, $1,500 for each day thereafter until the Company delivers such
certificates (such amount shall be also be due for each Trading Day after the
date that the Holder may rescind such conversion until such date as the Holder
shall have received the return of the principal amount of Debentures relating to
such rescission).
(ii) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates pursuant
to Section 6(b)(i), including for purposes hereof, any shares of Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, prior to the fourth Trading Day after the Conversion Date, and if
after such the fourth Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of 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 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 shares of Common Stock so purchased
exceeds (y) the aggregate principal amount of Debentures for which such
conversion was not timely honored. For example, if the Holder purchases shares
of Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of $10,000 aggregate principal amount of
Debentures, 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. If the Company fails to deliver to the Holder
such certificate or certificates in accordance with this Section 6(b) prior to
the 12th day after the Conversion Date or if the Company shall fail for any
reason to pay any amounts due in respect of a Buy-In within seven days after
notice thereof is deemed delivered hereunder, then the Company shall, upon
notice from the Holder, repay the aggregate principal amount of Debentures then
held by such Holder, as requested by such Holder, at a price equal to the
Mandatory Prepayment Amount, in cash. If any portion of the Mandatory
Prepayment Amount pursuant to this Section is not paid within seven days after
notice therefor is deemed delivered hereunder, the Company will pay interest on
the Mandatory Prepayment Amount
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at a rate of 15% per annum (to accrue daily), in cash to such Holder, accruing
from such seventh day until the Mandatory Prepayment Amount, plus all accrued
interest thereon, is paid in full.
(c) (i) The conversion price (the "Conversion Price") in effect on
any Conversion Date shall be the lesser of (A) 110% of the Average Price
calculated on the Original Issue Date (the "Initial Conversion Price"), and (B)
80% of the average of the five lowest sales prices for the Common Stock during
the twenty five (25) Trading Days immediately preceding the Conversion Date;
provided, that, if (a) an Underlying Securities Registration Statement is not
filed on or prior to the 20th business day after the Original Issue Date, or (b)
the Company fails to file with the Commission a request for acceleration in
accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of
1934, as amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed" or is not
subject to further review or comment by the Commission, or (c) the Underlying
Securities Registration Statement is not declared effective by the Commission on
or prior to the Effective Date (as defined under the Registration Rights
Agreement), or (d) such Underlying Securities Registration Statement is filed
with and declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities (as such term is defined in the
Registration Rights Agreement) at any time prior to the expiration of the
"Effectiveness Period" (as such term as defined in the Registration Rights
Agreement), without being succeeded by a subsequent Underlying Securities
Registration Statement filed with and declared effective by the Commission
within ten (10) days, or (e) if trading in the Common Stock shall be suspended
for more than three (3) Trading Days, or (f) the conversion rights of the
Holders of Debentures are suspended for any reason or if the Holder is not
permitted to resell Registrable Securities under the Underlying Securities
Registration Statement, or (g) an amendment to the Underlying Securities
Registration Statement is not filed by the Company with the Commission within
ten (10) days of the Commission's notifying the Company that such amendment is
required in order for the Underlying Securities Registration Statement to be
declared effective (any such failure being referred to as an "Event," and for
purposes of clauses (a), (c) and (f) the date on which such Event occurs, or for
purposes of clause (b) the date on which such five (5) day period is exceeded,
or for purposes of clauses (d) and (g) the date which such ten (10) day period
is exceeded, or for purposes of clause (e) the date on which such three (3) day
period is exceeded, being referred to as "Event Date"), the Conversion Price
shall be decreased by 2% on the Event Date and each monthly anniversary thereof
until the earlier to occur of the second month anniversary after the Event Date
and such time as the applicable Event is cured (i.e., the Conversion Price would
decrease by 2% as of the Event Date and 2% as of the one month anniversary of
such Event Date). Commencing the second month anniversary after the Event Date,
at the option of the Holder for each applicable monthly period either (a) the
Company shall pay to the Holder 2% of the product of the principal amount of
outstanding Debentures, in cash or (b) the Conversion Price shall be decreased
by 2% for each additional such month (to be effective in full on the monthly
applicable Event Date) as liquidated damages, and not as a penalty on the first
day of each monthly anniversary of the Event Date in either case until such time
as the applicable Event is cured. Any decrease in the Conversion Price pursuant
to this Section shall remain in effect notwithstanding the fact that the Event
causing such decrease has been subsequently cured and further monthly decreases
have ceased. The
9
provisions of this Section are not exclusive and shall in no way limit the
Company's obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any 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 the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the 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, the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of the 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, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common Stock
(and not to Holders of Debentures) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share Market
Value of the Common Stock at the record date mentioned below, the Initial
Conversion Price shall be multiplied by a fraction, the numerator of which shall
be the number of shares of the Common Stock (excluding treasury shares, if any)
outstanding immediately prior to the issuance of such rights or warrants plus
the number of shares of Common Stock which the aggregate offering price of the
total number of shares so offered would purchase at such Per Share Market Value
and the denominator of which shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of the Common Stock
offered for subscription or purchase. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase shares of the Common Stock the issuance of which resulted in an
adjustment in the Initial Conversion Price pursuant to this Section, if any such
right or warrant shall expire and shall not have been exercised, the Initial
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Initial Conversion
Price made pursuant to the provisions of this Section 5 after the issuance of
such rights or warrants) had the adjustment of the Initial Conversion Price made
upon the issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of the Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its
10
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Initial Conversion Price at which
Debentures shall thereafter be convertible shall be determined by multiplying
the Initial Conversion Price by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market Value
of the Common Stock 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; provided, however, that in
the event of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority in interest of Debentures then
outstanding; and provided, further, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the holders of
Debentures of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(v) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder of this Debenture shall have the
right thereafter to, at its option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 4(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vi) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is adjusted
pursuant to any of Section 5(c)(ii) - (v), the Company shall promptly mail to
each Holder of Debentures a notice setting
11
forth the Initial Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
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; or
D. the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, 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 of exchange whereby the
Common Stock is converted into other securities,
cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up
of the affairs of the Company;
then 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 of Debentures 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, consolidation, merger,
sale, transfer or share exchange; provided, however, 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.
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(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of the Common Stock solely
for the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, 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 5(c)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of the Common Stock that shall
be so issuable shall, upon issue, be duly and validly authorized, issued and
fully paid, nonassessable and, if the Underlying Securities Registration
Statement has been declared effective under the Securities Act, registered for
public sale in accordance with such Underlying Securities 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 Per Share Market Value 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 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 of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 (facsimile number (000) 000-0000, attention
President, 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. 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 or sent
by certified or registered mail, postage prepaid, addressed to each Holder of
the Debentures at the facsimile telephone number or address of such Holder
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 telephone number
specified in this Section prior to 8:00 p.m. (New York City time), (ii) the date
after the date of transmission, if such notice or communication is delivered
13
via facsimile at the facsimile telephone number specified in this Section later
than 8:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) four days after deposit in the United States
mail, (iv) the Business Day following the date of mailing, if send by nationally
recognized overnight courier service, or (v) upon actual receipt by the party to
whom such notice is required to be given.
Section 6. Optional Prepayment.
(a) The Company shall have the right to prepay, exercisable at any
time upon twenty (20) days prior written notice to the Holders of the
Debentures to be prepaid and accompanied by any waiver required by holders of
senior indebtedness of the Company for such prepayment so that such prepayment
shall be free and clear of any claims of subordination (the "Optional Prepayment
Notice"), from funds legally available therefor at the time of such prepayment,
all or any portion of the outstanding principal amount of the Debentures which
have not previously been repaid or for which Conversion Notices have not
previously been delivered hereunder, at a price equal to the Optional Prepayment
Price (as defined below). Any such prepayment by the Company shall be in cash
and shall be free of any claim of subordination. The Holders shall have the
right to tender, and the Company shall honor, Conversion Notices delivered prior
to the expiration of the thirtieth (30th) Trading Day after receipt by the
Holders of an Optional Prepayment Notice for such Debentures (such date, the
"Optional Prepayment Date").
(b) If any portion of the Optional Prepayment Price shall not be paid
by the Company by the Optional Prepayment Date, the Optional Prepayment Price
shall be increased by 15% per annum (to accrue daily) until paid (which amount
shall be paid as liquidated damages and not as a penalty). In addition, if any
portion of the optional Prepayment Price remains unpaid through the expiration
of the Optional Prepayment Date, the Holder subject to such prepayment may elect
by written notice to the Company to either (i) demand conversion in accordance
with the formula and the time period therefor set forth in Section 5 of any
portion of the principal amount of Debentures for which the Optional Prepayment
Price, plus accrued liquidated damages thereof, has not been paid in full (the
"Unpaid Prepayment Principal Amount"), in which event the applicable Per Share
Market Value shall be the lower of the Per Share Market Value calculated on the
Optional Prepayment Date and the Per Share Market Value as of the Holder's
written demand for conversion, or (ii) invalidate ab initio such optional
redemption, notwithstanding anything herein contained to the contrary. If the
Holder elects option (i) above, the Company shall within three (3) Trading Days
such election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Principal Amount subject
to such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company shall
promptly, and in any event not later than three Trading Days from receipt of
notice of such election, return to the Holder new Debentures for the full Unpaid
Prepayment Principal Amount. If, upon an election under option (i) above, the
Company fails to deliver the shares of Common Stock issuable upon conversion of
the Unpaid Prepayment Principal Amount within the
14
time period set forth in this Section, the Company shall pay to the Holder in
cash, as liquidated damages and not as a penalty, $1,500 per day until the
Company delivers such Common Stock to the Holder.
(c) The "Optional Prepayment Price" for any Debentures shall equal the
sum of (i) the principal amount of Debentures to be prepaid, plus all accrued
and unpaid interest thereon, divided by the Conversion Price on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is less, multiplied by the Average Price on (x) the Optional
Prepayment Date or (y) the date the Optional Prepayment Price is paid in full,
whichever is greater, and (ii) all other amounts, expenses, costs and liquidated
damages due in respect of such principal amount.
Section 7. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Average Price" on any date means the average Per Share Market Value
for the five (5) Trading Days immediately preceding such date.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.01 par value, of the Company
and stock of any other class into which such shares may hereafter have been
reclassified or changed.
"Mandatory Prepayment Amount" for any Debentures shall equal the sum
of (i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by
the Average Price on (x) the date the Mandatory Prepayment Amount is demanded or
(y) the date the Mandatory Prepayment Amount is paid in full, whichever is
greater, and (ii) all other amounts, costs, expenses and liquidated damages due
in respect of such Debentures.
"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.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq SmallCap or
Nasdaq National Market, as the case may be, or any other stock exchange or
quotation system on which the Common Stock is then listed or if there is no such
price on such date, then the closing bid price on such exchange or
15
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the Nasdaq Small Cap or Nasdaq National Market or
any stock exchange or quotation system, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or (c)
if the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holders in majority in
interest of the Debentures, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by an
Appraiser selected in good faith by the Holders of a majority of the aggregate
principal amount of Debentures then outstanding.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq SmallCap or Nasdaq National Market, as the case may be, or market on
which the Common Stock has been listed, or (b) if the Common Stock is not listed
on the Nasdaq Stock Market or any stock exchange or market, a day on which the
Common Stock is traded on the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted on the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"Underlying Securities Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder (which may include an
amendment to the Company's March Registration Statement (as defined in the
Purchase Agreement) satisfying the requirements of the Registration Rights
Agreement).
16
Section 8. 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 obligation of
the Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 6 hereof.
Section 9. This Debenture shall not entitle the Holder to any of
the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 10. 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.
Section 11. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holders hereby irrevocably
submit to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, 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 such suit, action or proceeding is
improper.
Section 12. 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.
Section 13. 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.
17
Section 14. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next calendar month, the preceding Business Day in the appropriate
calendar month).
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SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
GLOBAL INTELLICOM, INC.
By:
---------------------------------
Name:
Title:
Attest:
By:
---------------------------------
Name:
Title:
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-[ ] into shares of
common stock, $0.01 par value (the "Common Stock"), of Global Intellicom, Inc.
(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
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.
Conversion calculations:
------------------------------------------------------
Date to Effect Conversion
------------------------------------------------------
Principal Amount of Debentures to be Converted
------------------------------------------------------
Number of shares of Common Stock to be Issued
------------------------------------------------------
Applicable Conversion Price
------------------------------------------------------
Signature
------------------------------------------------------
Name
------------------------------------------------------
Address
