NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: November 9, 2004
Original Conversion Price (subject to adjustment herein): $4.05
$---------------
VARIABLE RATE CONVERTIBLE DEBENTURE
DUE NOVEMBER 9, 2009
THIS DEBENTURE is one of a series of duly authorized and issued Variable
Rate Convertible Debentures of Medialink Worldwide Incorporated, a Delaware
corporation, having a principal place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (the "Company"), designated as its Variable Rate Convertible
Debenture, due November 9, 2009 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to ___________________ or
its registered assigns (the "Holder"), the principal sum of $_______________ on
November 9, 2009 or such earlier date as the Debentures are required or
permitted to be repaid as provided hereunder (the "Maturity Date"), and to pay
interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture in accordance with the provisions hereof.
This Debenture is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in Section
5(e)(ii).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States 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.
"Change of Control Transaction" means the occurrence after the date hereof
of any of (i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Company, by contract or otherwise) of in
excess of 33% of the voting securities of the Company (other than the Holders of
the Debentures), or (ii) a replacement at one time or within a three year period
of more than one-half of the members of the Company's board of directors which
is not approved by a majority of those individuals who are members of the board
of directors on the date hereof (or by those individuals who are serving as
members of the board of directors on any date whose nomination to the board of
directors was approved by a majority of the members of the board of directors
who are members on the date hereof), or (iii) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i) or (ii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Conversion Date" shall have the meaning set forth in Section 4(a)(i)
hereof.
"Dilutive Issuance" shall have the meaning set forth in Section 5(b)
hereof.
"Effectiveness Period" shall have the meaning given to such term in the
Registration Rights Agreement.
"Equity Conditions" shall mean, during the period in question, (i) the
Company shall have duly honored all conversions and redemptions which have been
requested by virtue of one or more Conversion Notices, if any, unless the
failure to so honor a conversion or redemption is due to a conversion or
exercise limitation set forth in Sections 4(c)(i) or 4(c)(ii) hereof (ii) all
liquidated damages and other amounts owing in respect of the Debentures shall
have been paid; (iii) there is, during the Effectiveness Period, an effective
Registration Statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the shares issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (iv) the
Common Stock is trading on the Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed for trading on a Trading Market
(and the Company believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable future), (v)
there is a sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the shares issuable pursuant
to the Transaction Documents, (vi) there is then existing no Event of Default or
event which, with the passage of time or the giving of notice, would constitute
an Event of Default, (vii) all of the shares issued or issuable pursuant to the
transaction documents in full, ignoring for such purposes any conversion or
exercise limitation therein, would not violate the limitations set forth in
Section 4(c)(ii) and (ix) no public announcement of a pending or proposed
Fundamental Transaction which has not yet been consummated (unless such
announcement has occurred after the second anniversary of the date hereof) or
Change of Control Transaction has occurred that has not been consummated.
-2-
"Event of Default" shall have the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fundamental Transaction" shall have the meaning set forth in Section
5(e)(ii) hereof.
"Force Majeure" shall mean any act or omission that is beyond the direct
control of the Company, including, but not limited to, an act of god, an act of
war, terrorism, natural disaster, failure of communication or electrical
services.
"Forced Conversion Notice" shall have the meaning set forth in Section
6(d).
"Force Conversion Notice Date" shall have the meaning set forth in Section
6(d).
"Late Fees" shall have the meaning set forth in the second paragraph to
this Debenture.
"Mandatory Prepayment Amount" for any Debentures shall equal the sum of
(i) the greater of: (A) the then applicable Optional Redemption Amount (assuming
for such purposes the first anniversary of the Effective Date is the Original
Issue Date), or (B) the principal amount of Debentures to be prepaid, plus all
other accrued and unpaid interest hereon, divided by the Set 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 VWAP 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 greater, and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of such Debentures.
"Mandatory Redemption" shall mean the redemption of the Debenture pursuant
to Section 6(b).
"Mandatory Redemption Notice" shall have the meaning set forth in Section
6(b).
-3-
"Mandatory Redemption Notice Date" shall have the meaning set forth in
Section 6(b).
"Xxxxxxx" shall mean Xxxxxxx Xxxxx Business Financial Services Inc.
"Optional Redemption" shall have the meaning set forth in Section 6(a).
"Optional Redemption Amount" shall mean (a) from the 12-month anniversary
of the Effective Date until the 24-month anniversary of the Effective Date, the
sum of (i) 115% of the principal amount of the Debenture then outstanding and
(ii) accrued but unpaid interest, (b) from the 24-month anniversary of the
Effective Date until the 36-month anniversary of the Effective Date, the sum of
(i) 110% of the principal amount of the Debenture then outstanding and (ii)
accrued but unpaid interest and (c) thereafter, the sum of (i) 100% of the
principal amount of the Debenture then outstanding and (ii) accrued but unpaid
interest.
"Optional Redemption Notice" shall have the meaning set forth in Section
6(a).
"Optional Redemption Notice Date" shall have the meaning set forth in
Section 6(a).
"Optional Redemption Price" shall have the meaning set forth in Section
6(a).
"Original Issue Date" shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and regardless
of the number of instruments which may be issued to evidence such Debenture.
"Permitted Liens" means (i) Liens for taxes, assessments or other
governmental charges (including without limitation in connection with workers
compensation and unemployment insurance) that are not delinquent or which are
being contested in good faith and for which a reserve shall have been
established in accordance with GAAP, (ii) Liens of mechanics, material men,
warehousemen, carriers, landlords or other similar statutory Liens securing
obligations that are not yet due and are incurred in the ordinary course of
business or which are being contested in good faith and for which a reserve
shall have been established in accordance with GAAP, (iii) purchase money Liens
to finance property or assets of the Company or any Subsidiary of the Company
acquired in the ordinary course of business, (iv) judgment Liens not giving rise
to an Event of Default, (v) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Subsidiaries, and (vi) other Liens
incidental to the conduct of the Company's or any of its Subsidiaries'
businesses or the ownership of their property and assets which were not incurred
in connection with the borrowing of money or the obtaining of advances or credit
and which do not materially impair the use thereof in the operation of their
business.
-4-
"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 Securities Purchase Agreement, dated as of
November 8, 2004, to which the Company and the original Holder are parties, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement, covering among
other things the resale of the Underlying Shares and naming the Holder as a
"selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Set Price" shall have the meaning set forth in Section 4(b).
"Shareholder Approval" shall have the meaning given to such term in the
Purchase Agreement.
"Subsidiary" shall have the meaning given to such term in the Purchase
Agreement.
"Threshold Period" shall have the meaning given to such term in Section
6(d).
"Trading Day" means a day on which the Common Stock is traded on a Trading
Market.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq
SmallCap Market, the American Stock Exchange, the New York Stock Exchange or the
Nasdaq National Market.
"Transaction Documents" shall have the meaning set forth in the Purchase
Agreement.
-5-
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Debentures.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the "Pink Sheets" published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected in good
faith by the Purchasers and reasonably acceptable to the Company.
Section 2. Interest.
a) Payment of Interest in Cash. Prior to the 36 month anniversary of the
Original Issue Date, the Company shall pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture at
the rate of the greater of (i) 450 basis points plus the most recent 6-month
LIBOR (London Interbank Offered Rate) and (ii) 7%, and after the 36 month
anniversary of the Original Issue Date, if applicable, pursuant to Section
6(b)(ii) or (iii), payable quarterly on March 31, June 30, September 30 and
December 31, beginning on the first such date after the Original Issue Date and
on each Conversion Date (as to that principal amount then being converted) and
on the Maturity Date (except that, if any such date is not a Business Day, then
such payment shall be due on the next succeeding Business Day) (each such date,
an "Interest Payment Date"), in cash.
b) Intentionally Omitted.
c) Interest Calculations. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date until
payment in full of the principal sum, together with all accrued and unpaid
interest and other amounts which may become due hereunder, has been made.
Interest hereunder will be paid to the Person in whose name this Debenture is
registered on the records of the Company regarding registration and transfers of
Debentures (the "Debenture Register").
d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at the rate of 15% per annum (or such lower maximum
amount of interest permitted to be charged under applicable law) ("Late Fee")
which will accrue daily, from the date such interest is due hereunder through
and including the date of payment.
-6-
e) Prepayment. Except as otherwise set forth in Sections 6 or 8 of this
Debenture, the Company may not prepay any portion of the principal amount of
this Debenture without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
b) Investment Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the
Purchase Agreement and may be transferred or exchanged only in compliance with
the Purchase Agreement and applicable federal and state securities laws and
regulations.
c) Reliance on Debenture Register. 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. Conversion.
a) Conversion at Holder's Option. At any time after the Original Issue
Date until this Debenture is no longer outstanding, this Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any time and from time to time (subject to the limitations on
conversion set forth in Section 4(c)(i) hereof). The Holder shall effect
conversions by delivering to the Company the form of Notice of Conversion
attached hereto as Annex A (a "Notice of Conversion"), specifying therein the
principal amount of Debentures to be converted and the date on which such
conversion is to be effected (a "Conversion Date"). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date that
such Notice of Conversion is provided hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender Debentures
to the Company unless the entire principal amount of this Debenture plus all
accrued and unpaid interest thereon has been so converted. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this
Debenture in an amount equal to the applicable conversion. The Holder and the
Company shall maintain records showing the principal amount converted and the
date of such conversions. The Company shall deliver any objection to any Notice
of Conversion within 1 Business Day of receipt of such notice. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee, by
acceptance of this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this
Debenture, the unpaid and unconverted principal amount of this Debenture may be
less than the amount stated on the face hereof.
-7-
b) Set Price. The conversion price in effect on any Conversion Date shall
be equal to $4.05 (subject to adjustment herein)(the "Set Price").
c) Conversion Limitations.
i. Holder's Restriction on Conversion. The Company shall not effect
any conversion of this Debenture, and the Holder shall not have the right to
convert any portion of this Debenture, pursuant to Section 4(a) or otherwise, to
the extent that after giving effect to such conversion, the Holder (together
with the Holder's affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of 4.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to such conversion.
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Debenture with respect
to which the determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (A) conversion of
the remaining, nonconverted portion of this Debenture beneficially owned by the
Holder or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Debentures or the Warrants) subject to
a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 4(c)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act. To the extent that the limitation contained in this section
applies, the determination of whether this Debenture is convertible (in relation
to other securities owned by the Holder) and of which a portion of this
Debenture is convertible shall be in the sole discretion of such Holder. To
ensure compliance with this restriction, the Holder will be deemed to represent
to the Company each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 4(c)(i), in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company's Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this
Debenture, by the Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.
-8-
ii. Company's Restriction on Conversion. The Company shall not
effect any conversion of this Debenture, and the Holder shall not have the right
to convert any portion of this Debenture, pursuant to Section 4(a) or otherwise,
to the extent that after giving effect to such conversion, the Holder (together
with the Holder's affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to such conversion.
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Debenture with respect
to which the determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (A) conversion of
the remaining, nonconverted portion of this Debenture beneficially owned by the
Holder or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Debentures or the Warrants) subject to
a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 4(c)(ii),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act. To the extent that the limitation contained in this section
applies, the determination of whether this Debenture is convertible (in relation
to other securities owned by the Holder) and of which a portion of this
Debenture is convertible shall be in the sole discretion of such Holder. To
ensure compliance with this restriction, the Holder will be deemed to represent
to the Company each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 4(c)(ii), in determining the number
of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company's Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this
Debenture, by the Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.
-9-
d) Mechanics of Conversion
i. Underlying Shares Issuable Upon Conversion. The number of shares
of Common Stock issuable upon any conversion hereunder shall be determined by
the quotient obtained by dividing (x) the outstanding principal amount of this
Debenture to be converted by (y) the Set Price.
-10-
ii. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after any Conversion Date, the Company will deliver to the Holder a
certificate or certificates representing the Underlying Shares which shall be
free of restrictive legends and trading restrictions (other than those required
by the Purchase Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of Debentures and (B) a bank check in the
amount of accrued and unpaid interest. The Company shall, if available and if
allowed under applicable securities laws, 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.
iii. Failure to Deliver Certificates. If in the case of any Notice
of Conversion such certificate or certificates are not delivered to or as
directed by the applicable Holder by the seventh Trading Day after a Conversion
Date, the Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the principal amount of Debentures tendered for
conversion.
iv. Partial Liquidated Damages. If the Company fails for any reason
(other than as a result of Force Majeure, provided the Company continues to use
commercially reasonable efforts to ultimately perform its obligations hereunder)
to deliver to the Holder such certificate or certificates pursuant to Section
4(d)(ii) by the fifth Trading Day after the Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a penalty, for
each $1,000 of principal amount being converted, $5 per Trading Day for each
Trading Day after such third Trading Day until such certificates are delivered;
provided, however, partial liquidated damages on the principal amount being
converted shall cease to accrue (but still be payable) upon the date the Holder
notifies the Company it elects to exercise its right to accelerate pursuant to
Section 8; provided, further, subsequent conversions and the applicable
principal amount being converted shall be subject to liquidated damages
hereunder. The Company's obligations to issue and deliver the Underlying Shares
upon conversion of this Debenture in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Underlying Shares; provided, however, such delivery shall not
operate as a waiver by the Company of any such action the Company may have
against the Holder. In the event a Holder of this Debenture shall elect to
convert any or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or any one associated
or affiliated with the Holder of has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of this Debenture
shall have been sought and obtained and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the principal amount of this
Debenture outstanding, which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Holder to the extent it
obtains judgment. In the absence of an injunction precluding the same, the
Company shall issue Conversion Shares or, if applicable, cash, upon a properly
noticed conversion. Nothing herein shall limit a Xxxxxx's right to pursue actual
damages or declare an Event of Default pursuant to Section 8 herein for the
Company's failure to deliver Conversion Shares within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
-11-
v. Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section
4(d)(ii) by the fifth Trading Day after the Conversion Date, and if after such
fifth Trading Day the Holder is required by its brokerage firm to purchase (in
an open market transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the actual
sale price of the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation and (B) at the
option of the Holder, either reissue Debentures in principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Company timely
complied with its delivery requirements under Section 4(d)(ii). For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of Debentures with
respect to which the actual sale price of the Underlying Shares at the time of
the sale (including brokerage commissions, if any) giving rise to such purchase
obligation was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In. Notwithstanding anything contained herein to
the contrary, if a Holder requires the Company to make payment in respect of a
Buy-In for the failure to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company shall not be required to pay such
Holder liquidated damages under Section 4(d)(iv) in respect of the certificates
resulting in such Buy-In.
vi. Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock solely for the purpose of issuance upon
conversion of the Debentures, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holders, not less than such
number of shares of the Common Stock as shall (subject to any additional
requirements of the Company as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 4(d)) upon the conversion of the outstanding principal
amount of the Debentures. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly authorized,
issued and fully paid, nonassessable and, if the Registration Statement is then
effective under the Securities Act, registered for public sale in accordance
with such Registration Statement.
-12-
vii. Fractional Shares. Upon a conversion hereunder the Company shall not
be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the VWAP at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole share
of Common Stock.
viii. Transfer Taxes. 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.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any time while the
Debentures are outstanding: (A) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Debenture), (B) subdivide outstanding shares of Common
Stock into a larger number of shares, (C) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (D) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then the Set Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
-13-
b) Subsequent Equity Sales. At any time after Shareholder Approval has
been obtained, if the Company or any Subsidiary thereof, as applicable, at any
time while Debentures are outstanding, shall offer, sell, grant any option to
purchase or offer, sell or grant any right to reprice its securities, or
otherwise dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share (the "Base Price") less than the then Set Price ("Dilutive Issuance"),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at
an effective price per share which is less than the Set Price, such issuance
shall be deemed to have occurred for less than the Set Price), then the Set
Price shall be reduced to equal the sum of (i) such Base Price and (ii) 15% of
the difference between the Set Price in effect immediately prior to such
adjustment and such Base Price. Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued. The Company shall notify
the Holder in writing, no later than the business day following the issuance of
any Common Stock or Common Stock Equivalents subject to this section, indicating
therein the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms.
c) Pro Rata Distributions. If the Company, at any time while Debentures
are outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Set Price
shall be determined by multiplying such Set 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 VWAP determined
as of the record date mentioned above, and of which the numerator shall be such
VWAP on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a
statement provided to the Holders of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
-14-
d) Calculations. 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. For
purposes of this Section 5, the number of shares of Common Stock outstanding as
of a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) outstanding.
e) Notice to Holders.
i. Adjustment to Set Price. Whenever the Set Price is adjusted
pursuant to any of this Section 5, the Company shall promptly mail to each
Holder a notice setting forth the Set Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. If the Company
issues a variable rate security, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement), or the lowest possible
adjustment price in the case of an MFN Transaction (as defined in the Purchase
Agreement).
ii. Notice to Allow Conversion by Xxxxxx. If (A) the Company shall
declare a dividend (or any other distribution) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock; (C) the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holders at their last addresses as they shall appear upon the
Debenture Register 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, 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.
-15-
iii. Fundamental Transaction. If, at any time while this Debenture
is outstanding, (A) the Company effects any merger or consolidation of the
Company with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Underlying Share
that would have been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of one share of Common Stock (the "Alternate Consideration"). For
purposes of any such conversion, the determination of the Set Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the Set
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor to the
Company or surviving entity in such Fundamental Transaction shall issue to the
Holder a new debenture consistent with the foregoing provisions and evidencing
the Holder's right to convert such debenture into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (c) and insuring that this Debenture (or
any such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
iv. Exempt Issuance. Notwithstanding the foregoing, no adjustments,
Alternate Consideration nor notices shall be made, paid or issued under this
Section 5 in respect of (A) an Exempt Issuance or (B) issuances of up to, in the
aggregate, 75,000 shares of Common Stock in any 12-month period.
Section 6. Redemption.
-16-
a) Optional Redemption at Election of Company. Subject to the provisions
of this Section 6, at any time after the earlier of (i) the 12-month anniversary
of the Effective Date and (ii) the expiration of the Effectiveness Period, the
Company may deliver a notice to the Holders (an "Optional Redemption Notice" and
the date such notice is deemed delivered hereunder, the "Optional Redemption
Notice Date") of its irrevocable election to redeem some or all of the then
outstanding Debentures, for an amount, in cash, equal to the Optional Redemption
Amount on the 20th Trading Day following the Optional Redemption Notice Date
(such date, the "Optional Redemption Date" and such redemption, the "Optional
Redemption"). The Optional Redemption Amount is due in full on the Optional
Redemption Date and the Holders shall accept such Optional Redemption in full or
partial satisfaction, as the case may be, of this Debenture. The Company may
only effect an optional redemption if during the period commencing on the
Optional Redemption Notice Date through to the Optional Redemption Date, each of
the Equity Conditions shall have been met. If any of the Equity Conditions shall
cease to be satisfied at any time during the required period, then the Holder
may elect to nullify the Optional Redemption Notice by notice to the Company
within 3 Trading Days after the first day on which any such Equity Condition has
not been met (provided that if, by a provision of the Transaction Documents the
Company is obligated to notify the Holder of the non-existence of an Equity
Condition, such notice period shall be extended to the third Trading Day after
proper notice from the Company) in which case the Optional Redemption Notice
shall be null and void, ab initio. The Company covenants and agrees that it will
honor all Conversion Notices tendered from the time of delivery of the Optional
Redemption Notice through the date all amounts owing thereon are due and paid in
full.
b) Mandatory Redemption. Subject to the provisions of this Section 6, on
the 36th month anniversary of the Original Issue Date (the "Mandatory Redemption
Notice Date"), the Company shall deliver notice to the Holders (a "Mandatory
Redemption Notice") that one of the following shall occur with respect to all
Holders:
-17-
i. on the 37th month anniversary of the Original Issue Date, the
Company shall redeem in cash the entire outstanding principal amount of this
Debenture at a redemption price equal to 100% of such principal amount and all
accrued but unpaid interest (and prior to such 37th month anniversary, interest
shall continue to accrue at the rate determined prior to the 36th month
anniversary);
ii. both (A) the interest rate shall increase to the greater of (1)
450 basis points over the London interbank offered rate (as calculated during
the 3 months prior to the Mandatory Redemption Notice Date) ("3 Month LIBOR" or
(2) 8% per annum and (B) beginning on the 37th month anniversary of the Original
Issue Date and every 3 month anniversary thereafter (each date a redemption
payment is required under this Section 6, including Section 6(b)(i), shall be
deemed a "Mandatory Redemption Date"), redeem in cash an amount equal to 1/8th
of the principal amount of this Debenture outstanding on the Mandatory
Redemption Notice Date (or such lesser amount as is then outstanding) at a
redemption price equal to 100% of such principal amount and all accrued but
unpaid interest; or
iii. the interest rate shall increase to the greater of (A) 500
basis points over 3 Month LIBOR (as calculated during the 3 months prior to the
Mandatory Redemption Notice Date) or (B) 9% per annum.
iv. If the Company fails to notify the Holder on or before the
Mandatory Redemption Notice Date, the Company shall be deemed to have
irrevocably elected clause (iii) above to all Holders.
c) Redemption Procedure. The payment of cash pursuant to the Mandatory
Redemption or an Optional Redemption shall be made on the Mandatory Redemption
Date or the Optional Redemption Date, as applicable. If any portion of the cash
payment for a Mandatory Redemption or an Optional Redemption, as applicable
shall not be paid by the Company by the respective due date, interest shall
accrue thereon at the rate of 15% per annum (or the maximum rate permitted by
applicable law, whichever is less) until the payment of the Mandatory Redemption
Amount or the Optional Redemption Amount, as applicable, plus all amounts owing
thereon is paid in full. Alternatively, if any portion of the Mandatory
Redemption Amount or the Optional Redemption Amount, as applicable, remains
unpaid after such date, the Holders subject to such redemption may elect, by
written notice to the Company given at any time thereafter, to invalidate ab
initio such redemption, notwithstanding anything herein contained to the
contrary, and, with respect the failure to honor the Optional Redemption as
applicable, the Company shall have no further right to exercise such Optional
Redemption. Notwithstanding anything to the contrary in this Section 6, the
Company's determination to redeem in cash or its elections under Section 6(b)
shall be applied among the Holders of Debentures ratably. The Holder may elect
to convert the outstanding principal amount of the Debenture pursuant to Section
4 prior to actual payment in cash for any redemption under this Section 6 by fax
delivery of a Notice of Conversion to the Corporation.
-18-
d) Forced Conversion. Notwithstanding anything herein to the contrary, if
after the 12 month anniversary of the Effective Date (A) each of the VWAPs for
any 20 consecutive Trading Days (such period commencing only after the Effective
Price, such period the "Threshold Period")) exceeds 175% of the then Set Price
and (B) the average daily trading volume of the Common Stock during the
Threshold Period is greater than or equal to 45,000 (subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the Original Issue
Date), the Company may, within 2 Trading Days of the end of any such period,
deliver a notice to the Holder (a "Forced Conversion Notice" and the date such
notice is received by the Holder, the "Forced Conversion Notice Date") to cause
the Holder to immediately convert all or part of the then outstanding principal
amount of Debentures pursuant to Section 4(a). The Company may only effect a
Forced Conversion Notice if all of the Equity Conditions are met through the
applicable Threshold Period until the date of the applicable Forced Conversion.
Any Forced Conversion shall be applied ratably to all Holders based on their
initial purchases of Debentures pursuant to the Purchase Agreement.
Section 7. Negative Covenants. So long as at least $500,000 principal
amount of Debentures, in the aggregate among all Debentures, are outstanding,
the Company will not and will not permit any of its Subsidiaries to directly or
indirectly:
a) enter into, create, incur, assume or suffer to exist any indebtedness
or liens of any kind, on or with respect to any of its property or assets now
owned or hereafter acquired or any interest therein or any income or profits
therefrom, whether senior to or pari passu with the Company's obligations under
this Debenture, but excluding (i) Permitted Liens, (ii) any Debentures and (iii)
up to $3,000,000 of aggregate indebtedness to Xxxxxxx (or any reputable,
commercial replacement lender to Xxxxxxx); provided that, to the extent the
aggregate indebtedness of the Company to Xxxxxxx exceeds $3,000,000 on the
Original Issue Date, the Company shall have 60 days from the Original Issue Date
to reduce such indebtedness to meet the aggregate indebtedness requirement under
this Section 7(a);
-19-
b) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holder;
c) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than 150,000 shares of Common Stock in any 12-month period, or other equity
securities other than as to the Underlying Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents; or
d) enter into any agreement with respect to any of the foregoing.
Section 8. 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 (A) the principal of amount of any
Debenture, or (B) interest (including Late Fees) on, or liquidated damages in
respect of, any Debenture, in each case free of any claim of subordination, as
and when the same shall become due and payable (whether on a Conversion Date or
the Maturity Date or by acceleration or otherwise) which default, solely in the
case of an interest payment or other default under clause (B) above, is not
cured, within 3 Trading Days;
ii. the Company shall materially fail to observe or perform any
other covenant or agreement contained in this Debenture or any of the other
Transaction Documents (other than a breach by the Company of its obligations to
deliver shares of Common Stock to the Holder upon conversion which breach is
addressed in clause (xii) below) which failure is not cured, if possible to
cure, within the earlier to occur of 7 Trading Days after notice of such default
sent by the Holder or by any other Holder;
iii. a material default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents other than the
Debentures, or (B) any other material agreement, lease, document or instrument
to which the Company or any Subsidiary is bound (other than those agreements
covered by Section 8(a)vi);
iv. any representation or warranty made herein or in the Purchase
Agreement to the Holder shall be untrue or incorrect in any material respect as
of the date when made;
-20-
v. (i) the Company or any of its Subsidiaries shall commence, a case
under any applicable bankruptcy or insolvency laws as now or hereafter in effect
or any successor thereto, or the Company or any Subsidiary commences any other
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 (ii) 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 (iii) the Company or any
Subsidiary thereof is adjudicated by a court of competent jurisdiction insolvent
or bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iv) 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
(v) the Company or any Subsidiary thereof makes a general assignment for the
benefit of creditors; or (vi) 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 (vii) the Company or any Subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any Subsidiary thereof
shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) any corporate or other
action is taken by the Company or any Subsidiary thereof for the purpose of
effecting any of the foregoing;
vi. the Company or any Subsidiary shall default (subject to any
applicable grace or cure period provided for in the applicable agreement or
instrument or any written forbearance or waiver) in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement of the Company in an amount
exceeding $250,000, 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; provided that any events of default under the indebtedness to
Xxxxxxx shall not be deemed an Event of Default hereunder to the extent the
Company uses best efforts to cure any such defaults and such defaults are cured
to the satisfaction of Xxxxxxx within 60 days of the occurrence of any such
default such that an event of default thereunder no longer exists in the opinion
of Xxxxxxx;
vii. the Common Stock shall not be eligible for quotation on or
quoted for trading on a Trading Market and shall not again be eligible for and
quoted or listed for trading thereon within five Trading Days unless such
failure to be quoted for trading is due to a Force Majeure and the Company uses
commercially reasonable efforts to be re-listed or re-quoted as promptly as
practicable;
-21-
viii. the Company shall be a party to any Change of Control
Transaction, shall agree to sell or dispose of all or in excess of 40% of its
assets in one or more transactions (whether or not such sale would constitute a
Change of Control Transaction);
ix. a Registration Statement shall not have been declared effective
by the Commission on or prior to the 210th calendar day after the Closing Date;
x. if, during the Effectiveness Period (as defined in the
Registration Rights Agreement), the effectiveness of the Registration Statement
lapses for any reason or the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Registration Statement, in either case, for more than 30 consecutive Trading
Days or 60 non-consecutive Trading Days during any 12 month period; provided,
however, that in the event that the Company is negotiating a merger,
consolidation, acquisition or sale of all or substantially all of its assets or
a similar transaction and in the written opinion of counsel to the Company, the
Registration Statement, would be required to be amended to include information
concerning such transactions or the parties thereto that is not available or may
not be publicly disclosed at the time, the Company shall be permitted an
additional 10 consecutive Trading Days and 20 non-consecutive Trading Days
during any 12 month period relating to such an event;
xi. an Event (as defined in the Registration Rights Agreement) shall
not have been cured to the satisfaction of the Holder prior to the expiration of
thirty days from the Event Date (as defined in the Registration Rights
Agreement) relating thereto (other than an Event resulting from a failure of an
Registration Statement to be declared effective by the Commission on or prior to
the Effectiveness Date (as defined in the Registration Rights Agreement), which
shall be covered by Section 8(a)(ix) and other than the failure to keep the
Registration Statement continuously effective, which shall be covered by Section
8(a)(x));
xii. the Company shall fail for any reason to deliver certificates
to a Holder prior to the seventh Trading Day after a Conversion Date pursuant to
and in accordance with Section 4(d) unless such failure is due to a Force
Majeure provided the Company uses its best efforts to cause such delivery to
occur, notwithstanding the Force Majeure, or the Company shall provide notice to
the Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of any Debentures in
accordance with the terms hereof (other than a result of the limitation on
conversion or exercise set forth in Section 4(c); or
-22-
xiii. the Company shall fail for any reason to deliver the payment
in cash pursuant to a Buy-In (as defined herein) within ten Trading Days after
notice thereof is delivered hereunder.
b) Remedies Upon Event of Default. If any Event of Default occurs, the
full principal amount of this Debenture, together with interest and other
amounts owing in respect thereof, to the date of acceleration shall become, at
the Holder's election, immediately due and payable in cash. The aggregate amount
payable upon an Event of Default shall be equal to the Mandatory Prepayment
Amount. Commencing 5 days after the occurrence of any Event of Default that
results in the eventual acceleration of this Debenture, the interest rate on
this Debenture shall accrue at the rate of 15% per annum, or such lower maximum
amount of interest permitted to be charged under applicable law. All Debentures
for which the full Mandatory Prepayment Amount hereunder shall have been paid in
accordance herewith shall promptly be surrendered to or as directed by the
Company. The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately 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 and the
Holder shall have all rights as a Debenture holder until such time, if any, as
the full payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
-23-
Section 9. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to
be provided by the Holders hereunder, including, without limitation, any Notice
of Conversion, shall be in writing and delivered personally, by facsimile, sent
by a nationally recognized overnight courier service, addressed to the Company,
at the address set forth above, facsimile number (000) 000 0000, Attn: Chief
Financial Officer with a copy to Xxxxxxx, Kreutzer, Goldwyn & Xxxxxxxx P.C., 00
Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxx Xxxx, Xxx Xxxx 00000, facsimile number
000-000-0000, Attn: Xxxxxxxx Xx. Xxxxxxx, Esq. 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 addressed to each Holder at the facsimile telephone
number or address of such Xxxxxx appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:30 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 5:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
-24-
b) Absolute Obligation. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct debt obligation
of the Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein.
c) Lost or Mutilated Debenture. 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.
d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
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e) Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
f) Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
g) Next Business Day. 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.
h) Headings. The headings contained herein are for convenience only, do
not constitute a part of this Debenture and shall not be deemed to limit or
affect any of the provisions hereof.
*********************
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IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to
be duly executed by a duly authorized officer as of the date first above
indicated.
MEDIALINK WORLDWIDE INCORPORATED
By:___________________________________
Name:
Title:
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ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Variable Rate
Convertible Debenture of Medialink Worldwide Incorporated, a Delaware
corporation (the "Company"), due on November 9, 2009, into shares of common
stock, par value $0.01 per share (the "Common Stock"), of the Company according
to the conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Company's Common Stock
does not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery requirements
under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
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Schedule 1
CONVERSION SCHEDULE
Variable Rate Convertible Debentures due on November 9, 2009, in the aggregate
principal amount of $____________ issued by Medialink Worldwide Incorporated
This Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.
Dated:
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Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to
(or for first entry, Original Conversion
Issue Date) Amount of Conversion (or original Company Attest
Principal Amount)
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