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Exhibit 4.2
ANNEX I
TO
SECURITIES PURCHASE AGREEMENT
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED
UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE
HARBOR THEREFROM.
NNo. 98-1 US $ 500,000
AMERICAN CHAMPION ENTERTAINMENT, INC.
7% CONVERTIBLE DEBENTURE DUE JULY 1, 2000
THIS DEBENTURE is one of a duly authorized issue of up to $1,800,000
in Debentures of AMERICAN CHAMPION ENTERTAINMENT, INC., a corporation
organized and existing under the laws of the State of Delaware (the
"Company") designated as its 7% Convertible Debentures. Such Debentures
may be issued in series, each of which may have a different maturity date,
but which otherwise have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to The Endeavour
Capital Fund S.A. , the registered holder hereof (the "Holder"), the
principal sum of Five Hundred Thousand and 00/100 Dollars (US $
500,000 ) on July 1, 2000 (the "Maturity Date") and to pay interest on
the principal sum outstanding from time to time in arrears (i) quarterly,
on the last day of March, June, September and December of each year prior
to the Maturity Date, (ii) upon conversion as provided herein or (iii) on
the Maturity Date, at the rate of 7% per annum accruing from the date of
initial issuance of this Debenture. Accrual of interest shall commence on
the first such business day to occur after the date hereof and shall
continue to accrue on a daily basis until payment in full of the principal
sum has been made or duly provided for. Subject to the provisions of
Section 4 below (the terms of which shall govern as if this sentence were
not included in this Debenture), prior to the Maturity Date, interest on
this Debenture is payable, at the option of the Company, in shares of
Common Stock of the Company, $.0001 par value ("Common Stock") at the
Conversion Rate (as defined below) in effect on the date of payment, or 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 last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. On the Maturity
Date, the Company will pay the principal of and accrued but unpaid
interest upon this Debenture as of such date, less any amounts required by
law to be deducted, to the registered holder of this Debenture as of the
tenth day prior to the Maturity Date and addressed to such holder at the
last address appearing on the Debenture Register. The forwarding of such
check for immediately available funds shall constitute a payment of
principal and interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of
the sum represented by such check plus any amounts so deducted.
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This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand
Dollars (US$10,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holder
surrendering the same. No service charge will be made for such
registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax
laws or other applicable laws at the time of such payments, and Holder
shall execute and deliver all required documentation in connection
therewith.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended
(the "Act"), and other applicable state and foreign securities laws and
the terms of the Securities Purchase Agreement (defined below). In the
event of any proposed transfer of this Debenture, the Company may require,
prior to issuance of a new Debenture in the name of such other person,
that it receive reasonable transfer documentation including legal opinions
that the issuance of the Debenture in such other name does not and will
not cause a violation of the Act or any applicable state or foreign
securities laws. Prior to due presentment 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 Company's 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 be
overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
4. A. The Holder of this Debenture is entitled, at its option,
subject to the following provisions of this Section 4, to convert this
Debenture at any time commencing the earlier of (a) one hundred twenty
(120) days after the original date of issuance (the "Issue Date") of the
Initial Debenture (as that term is defined in Securities Purchase
Agreement; such date being the same as the Initial Closing Date, as that
term is defined in the Securities Purchase Agreement), or (b) the
Effective Date of the Registration Statement filed pursuant to (and as
those terms are defined in) the Registration Rights Agreement between the
Company and the Holder (or the Holder's predecessor in interest) (the
"Registration Rights Agreement") into shares of Common Stock of the
Company at a conversion price for each share of Common Stock ("Conversion
Rate") equal to the greater of:
(x) the lower of (i) seventy-five percent (75%) of the Market
Price (as defined below) on the Conversion Date (as defined
below) or (ii) one hundred seventeen and one-half percent
(117.5%) of the Market Price on the Issue Date, or
(y) the Floor Price (as defined below).
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B. Conversion shall be effectuated by surrendering the
Debentures to be converted to the Company's transfer agent, Continental
Stock Transfer & Trust Company, ▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, telephone
(▇▇▇) ▇▇▇-▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇, accompanied by or preceded by
facsimile or other delivery of the form of conversion notice attached
hereto as Exhibit A, executed by the Holder of this Debenture evidencing
such Holder's intention to convert this Debenture or a specified portion
hereof, and accompanied, if required by the Company, by proper assignment
hereof in blank. Interest accrued or accruing from the date of issuance
to the date of conversion or to the date contemplated by clause (i) of the
second paragraph of this Debenture shall, at the option of the Holder, be
paid in cash or Common Stock at the Conversion Rate then applicable as of
the Conversion Date or the periodic interest payment date, as the case may
be. No fractional shares of Common Stock or scrip representing fractions
of shares will be issued on conversion, but the number of shares issuable
shall be rounded to the nearest whole share. The date on which notice of
conversion is given (the "Conversion Date") shall be deemed to be the date
on which the Holder faxes or otherwise delivers the conversion notice
("Notice of Conversion"), substantially in the form annexed hereto as
Exhibit A, duly executed, to the Company so that it is received by the
Company on or before such specified date, provided that the Holder shall
deliver to the Company's transfer agent or the Company the original
Debentures being converted within five (5) business days thereafter (and
if not so delivered within such time, the Conversion Date shall be the
date on which the Notice of Conversion and the original Debentures being
converted are received by the Company). Facsimile delivery of the Notice
of Conversion shall be accepted by the Company at facsimile number (510)
782-8123; Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President. Certificates representing
Common Stock upon conversion will be delivered to the Holder at the
address specified in the Notice of Conversion (which may be the Buyer's
address for notices as contemplated by Section 11of the Securities
Purchase Agreement or a different address), via express courier, by
electronic transfer or otherwise, within five (5) business days if the
address for delivery is in the United States and within seven (7) business
days if the address for delivery is outside the United States from the
date which is the later of the date the Notice of Conversion is delivered
to the Company as contemplated in the first sentence of this paragraph B
or the date the original Debenture is delivered to the Company's transfer
agent or the Company.
C. For purposes of this Debenture, the term "Market
Price" shall mean (x) the average closing bid price of the Common Stock
as reported by Bloomberg, LP or the average closing bid price on the over-
the-counter market, (i) if a period of time is specified in the relevant
provision of this Debenture, for such period, and (ii) if no period of
time is specified in the relevant provision of this Debenture, then for
the five (5) trading days ending on the trading day immediately preceding
the relevant date, or (y) if the Common Stock is listed on a stock
exchange, the lowest trade price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
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D. For purposes of this Agreement, the "Floor Price"
shall initially mean fifty per cent of the Market Price as of the Issue
Date; provided, however, that such amount shall be subject to adjustment
as provided herein.
E. (i) Any of the foregoing provisions of this Section 4
or any other provision of this Debenture to the contrary notwithstanding,
if, at any time (but at least one hundred twenty (120) days after the
Initial Closing Date) this Debenture is outstanding, the Market Price for
the Common Stock for ten (10) consecutive trading days is at a level (the
"Low Market Price") such that seventy-five percent (75%) of such Market
Price on each such day is less than the Floor Price, the Company shall pay
to the Holder the Low Market Amount (as defined below).
(ii) The obligation to pay the Low Market Amount shall
commence on the eleventh consecutive trading day (the "Low Market
Commencement Date") at which the Market Price is the Low Market Price and
shall continue until such time as the Market Price for five (5)
consecutive trading days is at a level (the "Anticipated Market Price")
such that seventy-five percent (75%) of such Market Price on each such
day is at or above the Floor Price. The last of such five (5)
consecutive trading days at which the Market Price is the Anticipated
Market Price is referred to as the "Low Market Termination Date."
(iii) The "Low Market Amount" is an amount equal to
two and one-half percent (2.5%) of the outstanding principal of this
Debenture. Subject to the provisions of subparagraph (vii) of this
Section 4(E), the Low Market Amount shall be payable for (x) the first
thirty (30) days commencing on the Low Market Commencement Date and ending
on the Low Market Termination Date (if sooner than thirty (30) days after
the Low Market Commencement Date), pro rata for each day, and (y)
thereafter for each thirty (30) day period (or part thereof).
(iv) The Low Market Amount shall be payable by the
Company to the Holder in cash within three (3) business days after the
Holder's written demand therefor to the Company. For purposes of receipt
of the Low Market Amount, the Holder shall be deemed to be a creditor of
the Company.
(v) If for any reason whatsoever, the Company does not
timely pay the Low Market Amount, the Holder will have the right to
convert this Debenture, until such Low Market Amount is paid in full, on
the terms provided herein, except that the Conversion Rate shall be
determined as if there were no Floor Price.
(vi) In addition to, and not in lieu of the provisions
of the immediately preceding subparagraph (v), the Company, in its sole
and discretion, may at any time give written notice to the Holder that the
Conversion Rate will be computed as if there were no Floor Price (x) for
all or a specified part of the then outstanding Debenture and (y) either
permanently or for a specified period of time.
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(vii) For purposes of computing the Low Market Amount,
the following guidelines shall apply. When, after a Low Market
Termination Date occurs,
(w) another Low Market Commencement Date (a "New Low Market
Commencement Date") occurs three (3) months or less after the
immediately preceding Low Market Termination Date, the
computation of the Low Market Amount shall be made based on
the provisions of subparagraph (iii) of this Section 4(E) as
if the Low Market Termination Date had not occurred (except
that no Low Market Amount shall accrue with respect to the
period from the Low Market Termination Date until the New Low
Market Commencement Date), or
(x) a New Low Market Commencement Date occurs more than three
(3) months after the immediately preceding Low Market
Termination Date, the computation of the Low Market Amount for
the period or periods commencing on the New Low Market
Commencement Date shall be made based on the provisions of
said subparagraph (iii) as if no previous Low Market
Commencement Date had occurred (provided, however, that if any
previously accrued Low Market Amounts shall not have been paid
in full by the New Low Market Commencement Date, the
provisions of clause (w) above shall apply without regard to
the timing of when the New Low Market Commencement Date
occurs).
By way of illustration and not in limitation of the foregoing, assuming in
all such cases that any Low Market Amounts with respect to prior periods
have been timely paid to the Holder, (1) if a Low Market Termination Date
occurs twenty (20) days after the first Low Market Commencement Date, and
(y) a New Low Market Commencement Date occurs within three (3)
months of such Low Market Termination Date, the Low Market
Amount for the period or periods after such New Low Market
Commencement Date shall be computed in accordance with the
provisions of clause (x) of subparagraph (iii) of Section 4(E)
for the first ten (10) days after the New Low Market
Commencement Date (when added with the first 20 days referred
to above in this example, for a total of 30 days applying such
clause (x)) and thereafter in accordance with the provisions
of clause (y) of said subparagraph (iii), or
(z) a New Low Market Commencement Date occurs three (3) months
or more after such Low Market Termination Date, the Low Market
Amount for the period or periods after such New Low Market
Commencement Date shall be computed in accordance with the
provisions of clause (x) of said subparagraph (iii) for the
first thirty (30) days after the New Low Market Commencement
Date and thereafter in accordance with the provisions of
clause (y) of said subparagraph (iii), subject to the
provisions of the immediately preceding sentence; and.
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(2) if a Low Market Termination Date occurs more than thirty (30) days
after the first Low Market Commencement Date,
(yy) a New Low Market Commencement Date occurs within three
(3) months of such Low Market Termination Date, the Low Market
Amount for the period or periods after such New Low Market
Commencement Date shall be computed in accordance with the
provisions of clause (y) of subparagraph (iii) of Section
4(E), or
(zz) a New Low Market Commencement Date occurs three (3)
months or more after such Low Market Termination Date, the Low
Market Amount for the period or periods after such New Low
Market Commencement Date shall be computed in accordance with
the provisions of clause (x) of said subparagraph (iii) for
the first thirty (30) days after the New Low Market
Commencement Date and thereafter in accordance with the
provisions of clause (y) of said subparagraph (iii), subject
to the provisions of the immediately preceding sentence.
5. A. Notwithstanding any other provision hereof to the
contrary, at any time prior to the Conversion Date, the Company shall have
the right to redeem all or any portion of the then outstanding principal
amount of the Debentures then held by the Holder in cash for an amount
(the "Redemption Amount") equal to (a) one hundred twenty-twenty-two and
one-half percent (122.5%) of such outstanding principal of the Debentures
plus (b) all accrued but unpaid interest thereon through the date the
Redemption Amount is paid to the Holder (the "Redemption Payment Date").
B. The Company shall give written notice of such redemption
to the Holder (the "Notice of Redemption"). Anything in the preceding
provisions of this Section 5 to the contrary notwithstanding, the
Redemption Amount shall, unless otherwise agreed to in writing by the
Holder after receiving the Notice of Redemption, be paid to the Holder in
good funds within three (3) business days from the date of the Notice of
Redemption. After receiving a Notice of Redemption, the Holder shall no
longer have the right to issue a Notice of Conversion. If prior to
receiving a Notice of Redemption, the Holder had issued a Notice of
Conversion, the Holder will have the right to cancel such Notice of
Conversion by written notice to the Company. If such previously given
Notice of Conversion is not so canceled, the Company shall honor such
Notice of Conversion and the Notice of Redemption shall not apply to the
principal portion of the Debenture thereby being converted.
C. In the event payment of the Redemption Amount is not
timely made, any rights of the Company to redeem outstanding Debentures
shall terminate, and the Notice of Redemption shall be null and void.
D. Any redemption contemplated by this Debenture shall be
made only in cash by the payment of immediately available good funds to
the Holder.
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6. The Holder recognizes that the Company may be limited in the
number of shares of Common Stock it may issue by virtue of (i) the number
of authorized shares or (ii) the applicable rules and regulations of the
principal securities market on which the Common Stock is listed or traded,
including, but not necessarily limited to, NASDAQ Rule
4310(c)(25)(H)(i)(d)(2) (collectively, the "Cap Regulations"). Without
limiting the other provisions hereof, (i) the Company will take all steps
reasonably necessary to be in a position to issue shares of Common Stock
on conversion of the Debentures without violating the Cap Regulations and
(ii) if, despite taking such steps, the Company still can not issue such
shares of Common Stock without violating the Cap Regulations, the Holder
of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall
have the option, exercisable in the Holder's sole and absolute discretion,
to elect any one of the following remedies:
(x) require the Company to issue shares of Common Stock
in accordance with such Holder's Notice of Conversion relating
to the Unconverted Debenture at a conversion purchase price
equal to the average of the lowest trade price per share of
Common Stock for any five (5) consecutive trading days
(subject to the equitable adjustments for certain events
occurring during such period as provided in this Debenture)
during the sixty (60) trading days immediately preceding the
date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted
Debenture for an amount (the "Cap Redemption Amount") equal
to:
V x M
CP
where:
"V" means the outstanding principal plus accrued
interest through the Cap Redemption Date (as defined below) of
an Unconverted Debenture;
"CP" means the Conversion Rate in effect on the date of
redemption (the "Cap Redemption Date") specified in the notice
from the Holder electing this remedy; and
"M" means the highest Market Price during the period
beginning on the Cap Redemption Date and ending on the date of
payment of the Cap Redemption Amount.
The holder of an Unconverted Debenture may elect one of the above remedies
with respect to a portion of such Unconverted Debenture and the other
remedy with respect to other portions of the Unconverted Debenture.
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7. Subject to the terms of the Securities Purchase Agreement,
dated July 2 , 1998 (the "Securities Purchase Agreement"), between the
Company and the Holder (or the Holder's predecessor in interest), no
provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place, and rate, and in the coin
or currency, herein prescribed. This Debenture and all other Debentures
now or hereafter issued of similar terms are direct obligations of the
Company.
8. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, shareholder,
officer or director, as such, past, present or future, of the Company or
any successor corporation, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part
of the consideration for the issue hereof, expressly waived and released.
9. The Company agrees that for as long as this Debenture remains
outstanding, the Company will not, without the consent of the Holder,
enter into a merger or consolidation with another corporation or other
entity (other than by or through a wholly-owned subsidiary of the
Company), or a sale or sale or transfer of all or substantially all of the
assets of the Company to another person (collectively, a "Sale"). If,
with such consent, the Company enters into a Sale and the holders of the
Common Stock are entitled to receive stock, securities or property in
respect of or in exchange for Common Stock, then as a condition of such
Sale, the Company and any such successor, purchaser or transferee agree
that the Debenture may thereafter be converted on the terms and subject to
the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale or
transfer by a holder of the number of shares of Common Stock into which
this Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as
nearly equivalent as may be practicable. In the event of any such
proposed Sale, (i) the Holder hereof shall have the right to convert by
delivering a Notice of Conversion to the Company within fifteen (15) days
of receipt of notice of such Sale from the Company, but (ii) in the event
the Holder hereof shall elect not to convert, the Company may prepay all
outstanding principal and accrued interest on this Debenture by paying the
Redemption Amount contemplated by Section 5 hereof, less all amounts
required by law to be deducted, upon which tender of payment following
such notice (which payment shall be made in the manner contemplated by
Section 5 hereof), the right of conversion shall terminate.
10. The Company agrees that for as long as this Debenture
remains outstanding, the Company will not, without the consent of the
Holder, spin off or otherwise divest itself of a part of its business or
operations or dispose all or of a part of its assets in a transaction (the
"Spin Off") in which the Company does not receive compensation for such
business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the
Company. If, for any reason, prior to the Conversion Date or the
Redemption Payment Date, the Company, with the consent of the Holder,
consummates a Spin Off, then the Company shall cause (i) to be reserved
Spin Off Securities equal to the number thereof which would have been
issued to the Holder had all of the Holder's Debentures outstanding on the
record date (the "Record Date") for determining the amount and number of
Spin Off Securities to be issued to security holders of the Company (the
"Outstanding Debentures") been converted as of the close of business on
the trading day immediately before the Record Date (the "Reserved Spin Off
Shares"), and (ii) to be issued to the Holder on the conversion of all or
any of the Outstanding Debentures, such amount of the Reserved Spin Off
Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a
fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is
the principal amount of the Outstanding Debentures. In addition, the
Floor Price shall be revised to be an amount equal to (q) the Floor Price
immediately prior to the Record Date, multiplied by (r) a fraction, the
numerator of which is the Market Price on the eleventh trading day after
the Record Date and the denominator of which is the Market Price on the
Record Date.
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11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split
of its Common Stock or issues a dividend on its Common Stock consisting of
shares of Common Stock, the Market Price as of the Issue Date and the
Floor Price shall be equitably adjusted to reflect such action. By way of
illustration, and not in limitation, of the foregoing (i) if the Company
effectuates a 2:1 split of its Common Stock, thereafter, with respect to
any conversion for which the Company issues the shares after the record
date of such split, the Market Price as of the Issue Date shall be deemed
to be one-half of what it had been calculated to be immediately prior to
such split and the Floor Price shall be deemed to be one-half of what it
had been immediately prior to such split; (ii) if the Company effectuates
a 1:10 reverse split of its Common Stock, thereafter, with respect to any
conversion for which the Company issues the shares after the record date
of such reverse split, the Market Price as of the Issue Date shall be
deemed to be ten times what it had been calculated to be immediately prior
to such split and the Floor Price shall be deemed to be ten times what it
had been immediately prior to such split; and (iii) if the Company
declares a stock dividend of one share of Common Stock for every 10 shares
outstanding, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such dividend, the
Market Price as of the Issue Date shall be deemed to be the amount of such
Market Price calculated immediately prior to such record date multiplied
by a fraction, of which the numerator is the number of shares (10) for
which a dividend share will be issued and the denominator is such number
of shares plus the dividend share(s) issuable or issued thereon (11) and
the Floor Price shall be deemed to be the Floor Price immediately prior to
such record date multiplied by the same fraction.
12. The Holder of the Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the Shares of
Common Stock issuable upon conversion thereof except under circumstances
which will not result in a violation of the Act or any applicable state
Blue Sky or foreign laws or similar laws relating to the sale of
securities.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware. Each of the parties
consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on
forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Holder for any reasonable legal fees and disbursements
incurred by the Holder in enforcement of or protection of any of its
rights under any of this Debenture.
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14. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture and same shall continue for
a period of five (5) business days; or
b. Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration Rights Agreement or in
any certificate or financial or other written statements heretofore or
hereafter furnished by the Company in connection with the execution and
delivery of this Debenture or the Securities Purchase Agreement shall be false
or misleading in any material respect at the time made; or
c: Subject to the terms of the Securities Purchase Agreement, the Company
fails to authorize or to cause its Transfer Agent to issue shares of Common
Stock upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to cause its
Transfer Agent to transfer any certificate for shares of Common Stock issued
to the Holder upon conversion of this Debenture and when required by this
Debenture or the Registration Rights Agreement, and such transfer is otherwise
lawful, or fails to remove any restrictive legend on any certificate or fails
to cause its Transfer Agent to remove such restricted legend, in each case
where such removal is lawful, as and when required by this Debenture, the
Agreement or the Registration Rights, and any such failure shall continue
uncured for five (5) business days; or
d. The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation of any
Debenture in this series and such failure shall continue uncured for a period
of thirty (30) days after written notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material respect,
any covenant, term, provision, condition, agreement or obligation of the
Company under the Securities Purchase Agreement or the Registration Rights
Agreement and such failure shall continue uncured for a period of thirty (30)
days after written notice from the Holder of such failure (other than a
failure to cause the Registration Statement to become effective no later than
the Required Effective Date, as defined and provided in the Registration
Rights Agreement, as to which no such cure period shall apply); or
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f. The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors
or commence proceedings for its dissolution; or (3) apply for or consent to
the appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
g. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment; or
h. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within sixty (60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar process
in excess of Two Hundred Thousand ($200,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
k. The Company shall have its Common Stock suspended or delisted from an
exchange or over-the-counter market from trading for in excess of ten (10)
trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
12
15. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or
any rights whatsoever as a shareholder of the Company, unless and to the
extent converted in accordance with the terms hereof.
16. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then ipso facto the obligation of the Company to pay interest
or perform such act or requirement shall be reduced to the limit authorized
under such law, so that in no event shall the Company be obligated to pay any
such interest, perform any such act or be bound by any requirement which would
result in the payment of interest in excess of the limit so authorized. In
the event any payment by or act of the Company shall result in the extraction
of a rate of interest in excess of a sum which is lawfully collectible as
interest, then such amount (to the extent of such excess not returned to the
Company) shall, without further agreement or notice between or by the Company
or the Holder, be deemed applied to the payment of principal, if any,
hereunder immediately upon receipt of such excess funds by the Holder, with
the same force and effect as though the Company had specifically designated
such sums to be so applied to principal and the Holder had agreed to accept
such sums as an interest-free prepayment of this Debenture. If any part of
such excess remains after the principal has been paid in full, whether by the
provisions of the preceding sentences of this Section 16 or otherwise, such
excess shall be deemed to be an interest-free loan from the Company to the
Holder, which loan shall be payable immediately upon demand by the Company.
The provisions of this Section 16 shall control every other provision of this
Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer thereunto duly authorized.
Dated: July 2 , 1998
AMERICAN CHAMPION ENTERTAINMENT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
(Print Name)
President and Chief Executive Officer
(Title)
EXHIBIT A
NOTICE OF CONVERSION
OF
7% CONVERTIBLE DEBENTURE DUE JULY 1, 2000
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(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $
________________ of the principal
amount of the above Debenture No. ___ into Shares of Common Stock of
AMERICAN CHAMPION ENTERTAINMENT, INC. (the "Company") according to the
conditions thereof, as of the date written below.
Conversion Date*
___________________________________________________________________
Applicable Conversion Price
__________________________________________________________
Signature
__________________________________________________________________________
[Name]
Address:
__________________________________________________________________________
__________________________________________________________________________
* This original Debenture must be received by the Company or its transfer
agent by the fifth business date following the Conversion Date.
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A second "Form of Debenture" was executed:
Number: ▇▇-▇
▇▇▇▇▇▇: $500,000
Register Holder: AMRO International S.A.
