Exhibit 29
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 JANUARY 22, 1998, AMONG FIX-CORP INTERNATIONAL, INC. (THE "COMPANY") AND
THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS AS SET FORTH IN A
SUBORDINATION AGREEMENT, DATED AS OF JANUARY 22, 1998. A COPY OF THAT
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
No. A-11 U.S. $2,000,000
FIX-CORP INTERNATIONAL, INC.
4% CONVERTIBLE DEBENTURE DUE JANUARY 22, 2001
THIS DEBENTURE is one of a series of duly authorized issued
debentures of Fix-Corp International, Inc., a Delaware corporation having a
principal place of business at 0000 Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx,
XX 00000 (the ?COMPANY?), designated as its 4% Convertible Debentures, due
January 22, 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 Two
Million Dollars ($2,000,000), on or prior to January 22, 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 4% per annum, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing March 31, 1998, and on
each Conversion Date (as defined in Section 4(a)(i)). Interest shall accrue
daily commencing on the Original Issue Date (as defined in Section 6) 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 6) in
whose name this Debenture is registered on the records of the Company
regarding registration and transfers of the Debentures (the ?DEBENTURE
REGISTER?). All overdue, accrued and unpaid interest and other amounts due
hereunder shall bear interest at the rate of 18% per annum and 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 6)
calculated based upon the Conversion Price (as defined below) at the time
such interest becomes due. All amounts due hereunder other than interest
shall be paid in cash. Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of the 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 6) 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 to and in form and substance acceptable to the Company's
transfer agent or other person or entity performing similar functions
thereto; (iii) such shares are not listed on the OTC Bulletin Board (or the
American Stock Exchange, Nasdaq National Market, Nasdaq SmallCap Market or
The New York Stock Exchange) and any other exchange, market and trading
facility on which the Common Stock is then listed for trading; 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 4(a)(ii).
This Debenture is subject to the following additional provisions:
SECTION 1. 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 2. 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 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest
on or liquidated damages in respect of, this Debenture, free of any
claim of subordination, as and when the same shall become due and
payable (whether on the applicable quarterly interest payment date,
the Conversion Date or the Maturity Date or by acceleration or
otherwise);
(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 10 days after the date on which written
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, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or any
subsidiary thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or
the Company or any subsidiary thereof is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company or
any subsidiary thereof makes a general assignment for the benefit
of creditors; or the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or the Company or any subsidiary thereof shall
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 or an
event shall occur, or shall fail to occur, which gives (or would
give after the passage of time or giving of notice or both) the
payee of any such obligation the right to accelerate the payment
thereof under any mortgage, credit agreement or other facility,
indenture agreement, promissory note 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 OTC Bulletin
Board or any other national securities exchange or market on which
such Common Stock is then listed for trading or suspended from
trading thereon without being relisted or having such suspension
lifted, as the case may be, within three (3) Trading Days (if after
the Original Issue Date the Common Stock shall be listed for
trading or quoted on the Nasdaq SmallCap Market, Nasdaq National
Market or any other national securities exchange or market, this
provision shall apply to any delistings or suspensions therefrom);
(vi) the Company shall be a party to any merger or
consolidation pursuant to which the Company shall not be the
surviving entity or shall sell, transfer or otherwise dispose of
all or substantially all 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);
(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 50th day
after the Original Issue Date; or
(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.
(b) If any Event of Default occurs and is continuing, the
Holder may, by notice to the Company, declare the full principal amount of
this Debenture (and, at such 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, to be, whereupon the same shall become,
immediately due and payable in cash. The aggregate amount payable in respect
of the Debentures shall be equal to the sum of (i) the Mandatory Repayment
Amount plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions hereunder and then held by the demanding Holder and
(B) the Per Share Market Value on the date prepayment is demanded or the date
the full prepayment price is paid, whichever is greater. The demanding
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 4. CONVERSION.
(a) 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 Original Issue Date and prior to the close of business
on the Maturity Date. The number of shares of Common Stock as shall be
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
(which the Company does not elect to pay in cash), 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 (the "CONVERSION 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 (the "CONVERSION DATE"). If no Conversion Date is
specified in a Conversion Notice, the Conversion Date shall be the date that
the Conversion Notice is deemed delivered hereunder. Subject to Section 4(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.
(b) Not later than three Trading Days after the Conversion
Date, the Company will deliver 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 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 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 Xxxxxxxxx has been mutilated, lost, stolen or destroyed
and complies with Section 9 hereof. The Company shall, upon request of the
Holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any 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 applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
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 third 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. If the
Company fails to deliver to the Holder such certificate or certificates
pursuant to
this Section prior to the 20th day after the Conversion Date, the Company
shall, at the Holder's option (i) prepay, from funds legally available
therefor at the time of such prepayment, the aggregate of the principal
amount of Debentures then held by such Xxxxxx, as requested by such Holder,
and (ii) pay all accrued but unpaid interest on account of the Debentures for
which the Company shall have failed to issue the Common Stock certificates
hereunder, in cash. The prepayment price shall equal the Mandatory
Prepayment Amount for the Debentures to be prepaid. If the Holder has
required the Company to prepay Debentures pursuant to this Section and the
Company fails for any reason to pay the prepayment price within seven days
after such notice is deemed delivered hereunder, the Company will pay
interest on the prepayment price at a rate of 18% per annum (to accrue
daily), in cash to such Holder, accruing from such seventh day until the
prepayment price and any 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) $3.34 (the "INITIAL
CONVERSION PRICE") and (B) 83% multiplied by the average of the five lowest
Per Share Market Values during the ten (10) Trading Days immediately
preceding the Conversion Date; PROVIDED THAT, (a) if an Underlying Securities
Registration Statement is not filed on or prior to the Filing Date (as such
term is defined in the Registration Rights Agreement), or (b) if 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) if the
Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date (as defined in the
Registration Rights Agreement), or (d) if 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, or if the Common Stock shall be delisted
from trading, on the OTC Bulletin Board or any other national securities
market or exchange on which the Common Stock is then listed or quoted for
trading for any reason for more than three (3) Trading Days, or (f) if 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) if 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) days 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) Trading Day period is
exceeded, being referred to as "EVENT DATE"), the Conversion Price shall be
decreased by 2.5% each month (i.e., the Conversion Price would decrease by
2.5% as of the Event Date and additional 2.5% as of each monthly anniversary
of the Event Date) until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is cured.
Commencing the second month anniversary after the Event Date, the Company
shall pay to the holders of the Debentures 2.5% of the aggregate principal
amount of Debentures then
outstanding (each holder being entitled to receive such portion of such
amount as equals its pro rata portion of the Debentures then outstanding) in
cash as liquidated damages, and not as a penalty on the first day of each
monthly anniversary of the Event Date until such time as the applicable
Event, is cured. Any decrease in the Conversion Price pursuant to this
Section shall continue notwithstanding the fact that the Event causing such
decrease has been subsequently cured. The 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, of which the
denominator 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, and of which the numerator 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 shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. 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 4 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
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 in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution
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, from funds legally available therefor at the time of
such prepayment, 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 3(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 4 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 4(c)(ii) - (v), the Company shall
promptly mail to each Holder of Debentures a notice setting 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 30 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 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(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 be required by the Purchase Agreement (taking into account the
adjustments and restrictions of Section 4(c).
(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 0000 Xxxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000
(facsimile number (000) 000-0000), attention Chief Financial Officer, 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 7:00 p.m. (New York City time),
(ii) the date after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section later than 7:00 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. For purposes of Section 4(c)(i), if a Conversion Notice is delivered
by facsimile prior to 7:00 p.m. (New York City time) on any date, then the
day prior to such date shall be the last Trading Day calculated to determine
the Conversion Price applicable to such Conversion Notice, and the date of
such delivery shall commence the counting of days for purposes of Section
4(b).
SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right, exercisable at any time
upon twenty (20) Trading Days prior written notice to the Holders of the
Debentures to be prepaid (the "OPTIONAL PREPAYMENT NOTICE"), to prepay, 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 twentieth (20th)
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 18% 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 4 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 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
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 and
liquidated damages due in respect of such principal amount.
SECTION 6. 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.
"COMMON STOCK" means common stock, $.001 par value per share,
of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"MANDATORY REPAYMENT 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 (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by
the Per Share Market Value 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 any 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" on any particular date means (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
SmallCap Market or other stock exchange or quotation system on which the
Common Stock is listed for trading, or (b) if the Common Stock is not listed
on the Nasdaq SmallCap Market or any other stock exchange or market, the
closing bid price per share of the Common Stock on such date 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, the closing bid price
per share of Common Stock on such date 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), or (d)
if the Common Stock is no longer traded on the over-the-counter market and
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices), such
closing bid price shall be determined by reference to "Pink Sheet" quotes for
the relevant conversion period as determined in good faith by the Holder or
(c) 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 in interest of the Debentures (the Company,
after receipt of the determination by such appraiser, shall have the right to
select an additional appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such appraiser).
"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, among the Company and the
original Holders 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, among the Company and the
original Holders 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 Stock Market or other stock exchange or market on which
the Common Stock has been listed, or (b) if the Common Stock is not then
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 into
which the Debentures, and interest thereon, are convertible in accordance
with the terms hereof and the Purchase Agreement.
"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 Holders as a "selling stockholders" thereunder.
SECTION 7. 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 5 hereof.
SECTION 8. 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 9. 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 10. 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 hereby irrevocably
submits to the non-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. The Company hereby irrevocably
waives personal service of process and consents to process being served in
any such suit, action or proceeding by receiving a
copy thereof sent to the Company at the address in effect for notices to it
under this instrument and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
SECTION 11. 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 12. 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.
SECTION 13. 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).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: President/CEO
Attest:
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Assistant Secretary
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-11 into shares of
Common Stock, $.001 par value per share (the "Common Stock"), of Fix-Corp
International, 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
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Principal Amount of Debentures to be Converted
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Number of shares of Common Stock to be Issued
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Applicable Conversion Price
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Signature
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Name
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Address
