EXHIBIT 99(iii)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
6 1/4 % CONVERTIBLE DEBENTURE
COMPANY: The X-Change Corporation
COMPANY ADDRESS: 000 Xxxxxxx Xxxxxxx, Xxxxx, Xxxxx 00000
CLOSING DATE: August 29, 2007
MATURITY DATE: August 29, 2010
PRINCIPAL AMOUNT: $250,000
The X-Change Corporation, a Nevada corporation, and any successor or
resulting corporation by way of merger, consolidation, sale or exchange of all
or substantially all of the assets or otherwise (the "COMPANY"), for value
received, hereby promises to pay to the Holder (as such term is hereinafter
defined), or such other Person (as such term is hereinafter defined) upon order
of the Holder, on the Maturity Date, the Principal Amount (as such term is
hereinafter defined), as such sum may be adjusted pursuant to Article 3, and to
pay interest thereon from the Closing Date, upon each Conversion Date, at the
rate of six and one-quarter percent (6 1/4 %) per annum (the "DEBENTURE INTEREST
RATE"). All interest payable on the Principal Amount of this Debenture shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
Payment of interest on this Debenture shall be in cash or, at the option of the
Holder, in shares of Common Stock of the Company valued at the then applicable
Conversion Price (as defined herein). This Debenture is subject to prepayment by
the Company only as set forth in Section 3.1 hereof.
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. The terms defined in this Article whenever
used in this Debenture have the following respective meanings:
(i) "AFFILIATE" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.
(ii) "BANKRUPTCY CODE" means the United States Bankruptcy Code
of 1986, as amended (11 U.S.C. xx.xx. 101 ET. seq.).
(iii) "BUSINESS DAY" means a day other than Saturday, Sunday
or any day on which banks located in the State of California are authorized or
obligated to close.
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(iv) "CAPITAL SHARES" means the Common Stock and any other
shares of any other class or series of capital stock, whether now or hereafter
authorized and however designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution, liquidation or
winding-up) of the Company.
(v) "COMMON SHARES" or "COMMON STOCK" means shares of the
Company's Common Stock.
(vi) "COMMON STOCK ISSUED AT CONVERSION", when used with
reference to the securities deliverable upon conversion of this Debenture, means
all Common Shares now or hereafter Outstanding and securities of any other class
or series into which this Debenture hereafter shall have been changed or
substituted, whether now or hereafter created and however designated.
(vii) "CONVERSION" or "CONVERSION" means the repayment by the
Company of the Principal Amount of this Debenture (and, to the extent the Holder
elects as permitted by Section 3.1, accrued and unpaid interest thereon) by the
delivery of Common Stock on the terms provided in Section 3.2, and "CONVERT,"
"CONVERTED," "CONVERTIBLE" and like words shall have a corresponding meaning.
(viii) "CONVERSION DATE" means any day on which all or any
portion of the Principal Amount of this Debenture is converted in accordance
with the provisions hereof.
(ix) "CONVERSION NOTICE" means a written notice of conversion
substantially in the form annexed hereto as EXHIBIT A.
(x) "CONVERSION PRICE" on any date of determination means the
applicable price for the conversion of this Debenture into Common Shares on such
day as set forth in Section 3.1(a).
(xi) "CURRENT MARKET PRICE" on any date of determination means
the closing price of a Common Share on such day as reported in the "pink sheets"
through the Interdealer Trading Quotation System; provided, if such security is
not traded on the over the counter market via the pink sheets, then the closing
price on the NASDAQ OTCBB Exchange; PROVIDED FURTHER, that, if such security is
not listed or admitted to trading on the NASDAQ OTCBB, as reported on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing bid price of such security on the over-the-counter market on the day in
question as reported by Bloomberg LP or a similar generally accepted reporting
service, as the case may be.
(xii) "DEBENTURE" or "DEBENTURES" means this Convertible
Debenture of the Company or such other convertible debenture(s) exchanged
therefor as provided in Section 2.1.
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(xiii) "DISCOUNT MULTIPLIER" has the meaning set forth in
Section 3.1(a).
(xiv) "EVENT OF DEFAULT" has the meaning set forth in Section
6.1.
(xv) "HOLDER" means La Jolla Cove Investors, Inc., any
successor thereto, or any Person to whom this Debenture is subsequently
transferred in accordance with the provisions hereof.
(xvi) "INTEREST PAYMENT DUE DATE" has the meaning set forth in
the opening paragraph of this Debenture.
(xvii) "MARKET DISRUPTION EVENT" means any event that results
in a material suspension or limitation of trading of the Common Shares.
(xviii) "MARKET PRICE" per Common Share means the lowest price
of the Common Shares during any Trading Day as reported in the "pink sheets"
through the Interdealer Trading Quotation System; provided, if such security is
not traded on the over the counter market via the pink sheets, then the lowest
price on the NASDAQ OTCBB; PROVIDED further, that, if such security is not
listed or admitted to trading on the NASDAQ OTCBB, as reported on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the lowest
price of the Common Shares during any Trading Day on the over-the-counter market
as reported by Bloomberg LP or a similar generally accepted reporting service,
as the case may be.
(xix) "MAXIMUM RATE" has the meaning set forth in Section 6.4.
(xx) "OUTSTANDING" when used with reference to Common Shares
or Capital Shares (collectively, "SHARES") means, on any date of determination,
all issued and outstanding Shares, and includes all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; PROVIDED, HOWEVER, that any such Shares directly or
indirectly owned or held by or for the account of the Company or any Subsidiary
of the Company shall not be deemed "OUTSTANDING" for purposes hereof.
(xxi) "PERSON" means an individual, a corporation, a
partnership, an association, a limited liability company, an unincorporated
business organization, a trust or other entity or organization, and any
government or political subdivision or any agency or instrumentality thereof.
(xxii) "PRINCIPAL AMOUNT" means, for any date of calculation,
the principal sum set forth in the first paragraph of this Debenture (but only
such principal amount as to which the Holder has (a) actually advanced, and (b)
not theretofore furnished a Conversion Notice in compliance with Section 3.2).
(xxiii) "SEC" means the United States Securities and Exchange
Commission.
(xxiv) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.
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(xxv) "SECURITIES PURCHASE AGREEMENT" means that certain
Securities Purchase Agreement of even date herewith by and among the Company and
Holder, as the same may be amended from time to time.
(xxvi) "SUBSIDIARY" means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Company.
(xxvii) "TRADING DAY" means any day on which (i) purchases and
sales of securities on the principal national security exchange or quotation
system on which the Common Shares are traded are reported thereon, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, as reported by Bloomberg LP or a similar generally accepted
reporting service, as the case may be, (ii) at least one bid for the trading of
Common Shares is reported and (iii) no Market Disruption Event occurs.
(xxviii) "VOLUME WEIGHTED AVERAGE PRICE" per Common Share
means the volume weighted average price of the Common Shares during any Trading
Day as reported in the "pink sheets" through the Interdealer Trading Quotation
System; provided, if such security is not traded on the over the counter market
via the pink sheets, then the volume weighted average price on the NASDAQ OTCBB;
PROVIDED FURTHER, that, if such security is not listed or admitted to trading on
the NASDAQ OTCBB, as reported on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the volume weighted average price of
the Common Shares during any Trading Day on the over-the-counter market as
reported by Bloomberg LP or a similar generally accepted reporting service, as
the case may be.
(xxix) "WARRANT" means that certain Warrant to Purchase Common
Stock issued by the Company to Holder as of even date herewith, as the same may
be amended from time to time.
All references to "cash" or "$" herein means currency of the
United States of America.
ARTICLE 2
EXCHANGES, TRANSFER AND REPAYMENT
SECTION 2.1 REGISTRATION OF TRANSFER OF DEBENTURES. This Debenture,
when presented for registration of transfer, shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument of transfer
in form reasonably satisfactory to the Company duly executed, by the Holder duly
authorized in writing.
SECTION 2.2 LOSS, THEFT, DESTRUCTION OF DEBENTURE. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Debenture and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Debenture, the Company shall make, issue and deliver, in
lieu of such lost, stolen, destroyed or mutilated Debenture, a new Debenture of
like tenor and unpaid Principal Xxxxxx dated as of the date hereof (which shall
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accrue interest from the most recent Interest Payment Due Date on which an
interest payment was made in full). This Debenture shall be held and owned upon
the express condition that the provisions of this Section 2.2 are exclusive with
respect to the replacement of a mutilated, destroyed, lost or stolen Debenture
and shall preclude any and all other rights and remedies notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without the surrender
thereof.
SECTION 2.3 WHO DEEMED ABSOLUTE OWNER. The Company may deem the Person
in whose name this Debenture shall be registered upon the registry books of the
Company to be, and may treat it as, the absolute owner of this Debenture
(whether or not this Debenture shall be overdue) for the purpose of receiving
payment of or on account of the Principal Amount of this Debenture, for the
conversion of this Debenture and for all other purposes, and the Company shall
not be affected by any notice to the contrary. All such payments and such
conversions shall be valid and effectual to satisfy and discharge the liability
upon this Debenture to the extent of the sum or sums so paid or the conversion
or conversions so made.
SECTION 2.4 REPAYMENT AT MATURITY. At the Maturity Date, the Company
shall repay the outstanding Principal Amount of this Debenture in whole in cash,
together with all accrued and unpaid interest thereon, in cash, to the Maturity
Date.
ARTICLE 3
CONVERSION OF DEBENTURE
SECTION 3.1 CONVERSION; CONVERSION PRICE; VALUATION EVENT.
(a) Subject to the requirements set forth in this Section 3.1,
at the option of the Holder, this Debenture may be converted, either in whole or
in part, up to the full Principal Amount hereof into Common Shares (calculated
as to each such conversion to the nearest 1/100th of a share), at any time and
from time to time on any Business Day, subject to compliance with Section 3.2.
The number of Common Shares into which this Debenture may be converted is equal
to the dollar amount of the Debenture being converted multiplied by eleven,
minus the product of the Conversion Price multiplied by ten times the dollar
amount of the Debenture being converted, and the entire foregoing result shall
be divided by the Conversion Price. The "CONVERSION PRICE" shall be equal to the
lesser of (i) $1.00, or (ii) 80% of the average of the 3 lowest Volume Weighted
Average Prices during the 20 Trading Days prior to Holder's election to convert
(the percentage figure being a "DISCOUNT MULTIPLIER"). The Company reserves the
right to increase the number of Trading Days in clause (ii) above, as it deems
appropriate.
Notwithstanding the foregoing, beginning in the first full calendar month after
the date upon which the Common Stock Issued at Conversion are registered under
the Securities Act, or such shares may be sold by Holder pursuant to Rule 144
promulgated by the SEC pursuant to the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC having substantially the same effect as such Rule ("RULE 144"),
Holder shall convert at least 10% but not more than 15% of the face value of the
Debenture per calendar month into Common Shares of the Company, provided that
the Common Shares are available, registered, or exempt from registration and
Holder is able to sell such shares under Rule 144 promulgated under the
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Securities Act, or such shares are otherwise freely tradable (with the date upon
which the Common Shares are so first converted by Holder referred to herein as
the "CONVERSION COMMENCEMENT DATE"). If Holder converts more than 10% of the
face value of the Debenture in any calendar month, the excess over 10% shall be
credited against the next month's minimum conversion amount. In the event Holder
does not convert at least 10% of the Debenture's face value in any particular
calendar month, the Company's sole and exclusive remedy shall be limited to
Holder not being entitled to collect interest on the Debenture for that month
and Holder's obligation to convert such portion of the face value of the
Debenture for the following calendar month shall be increased by any such
amount, provided that Holder shall in no event be required to convert more than
15% of the face value of the Debenture in any given calendar month.
(b) If Holder does not convert an average of at least 5% of
the face value of the Debenture over a period of not less than two consecutive
calendar months during the period occurring after the Conversion Commencement
Date (such failure to convert such amount of the Debenture over such period
referred to herein as a "CONVERSION FAILURE"), then the Company shall have the
right, upon ten days' prior written notice to the Holder to prepay via cash wire
transfer to the Holder all amounts of principal and accrued and unpaid interest
outstanding under this Debenture as of such prepayment date, provided however,
that prior to the Company's exercise of its prepayment right described herein,
the Holder shall have a period of not less than 10 days from written notice by
the Company to cure the Conversion Failure through the conversion of an
additional amount of the face value of the Debenture such that the average
amount of the face value of the Debenture converted over the period in
connection with the Conversion Failure equals at least 5% of the face value of
the Debenture per month. Notwithstanding the foregoing, in no event shall a
Conversion Failure be deemed to have occurred if such Conversion Failure was due
to (i) the Company's refusal to allow such conversion under the terms of Section
3.1 (b), and/or (ii) the Holder's election to not convert any portion of the
Debenture under the terms of Section 3.1 (b).
(c) If the Holder elects to convert a portion of the Debenture
and, on the day that the election is made, the Volume Weighted Average Price is
below $0.30, the Company shall have the right to prepay that portion of the
Debenture that Holder elected to convert, plus any accrued and unpaid interest,
at 120% of such amount. In the event that the Company elects to prepay that
portion of the Debenture, Holder shall have the right to withdraw its Conversion
Notice. If, at anytime during the month, the Volume Weighted Average Price is
below $0.30, Holder shall not be obligated to convert any portion of the
Debenture during that month. If at any time during the term of this Debenture
(i) the Volume Weighted Average Price is below $0.30; (ii) the Company has not
authorized or reserved enough shares of its Common Stock to account for the
conversion of this Debenture and the exercise of the Warrant Shares (as defined
in the Warrant) and the issuance of shares of the Common Stock of the Company to
Holder in connection therewith; and/or (iii) the Holder is prohibited for any
reason, including without limitation in connection with any claim, suit, federal
or state law, regulation, order, interpretation, statute, or similar authority,
from otherwise converting this Debenture and, in connection with such conversion
of the Debenture, exercising such portion of the Warrant as is required under
the terms of the Warrant, then the Holder shall have no obligation to exercise
any portion of the Warrant, and Holder may elect in Holder's sole and absolute
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discretion to convert any portion of the outstanding Principal Amount and
accrued and unpaid interest under this Debenture into such amount of Common
Shares of the Company equal to the dollar amount of the Debenture being
converted divided by the Conversion Price.
SECTION 3.2 EXERCISE OF CONVERSION PRIVILEGE.
(a) Conversion of this Debenture may be exercised on any
Business Day by the Holder by telecopying an executed and completed Conversion
Notice to the Company. Each date on which a Conversion Notice is telecopied to
the Company in accordance with the provisions of this Section 3.2 shall
constitute a Conversion Date. The Company shall convert this Debenture and issue
the Common Stock Issued at Conversion in the manner provided below in this
Section 3.2, and all voting and other rights associated with the beneficial
ownership of the Common Stock Issued at Conversion shall vest with the Holder,
effective as of the Conversion Date at the time specified in the Conversion
Notice. The Conversion Notice also shall state the name or names (with
addresses) of the persons who are to become the holders of the Common Stock
Issued at Conversion in connection with such conversion. As promptly as
practicable after the receipt of the Conversion Notice as aforesaid, but in any
event not more than three (3) Business Days after the later to occur of (A) the
Company's receipt of such Conversion Notice, and (B) the Holder's delivery of
funds in connection with the Holder's exercise of Warrant Shares (as defined in
the Warrant) under the terms of the Warrant that is to occur pursuant to the
Warrant in connection with the conversion of this Debenture described in the
Conversion Notice, the Company shall (i) issue the Common Stock Issued at
Conversion in accordance with the provisions of this Article 3 and (ii) cause to
be mailed for delivery by overnight courier (x) a certificate or certificate(s)
representing the number of Common Shares to which the Holder is entitled by
virtue of such conversion, (y) cash, as provided in Section 3.3, in respect of
any fraction of a Common Share deliverable upon such conversion and (z) cash or
shares of Common Stock, as applicable, representing the amount of accrued and
unpaid interest on this Debenture as of the Conversion Date. Such conversion
shall be deemed to have been effected at the time at which the Conversion Notice
indicates, and at such time the rights of the Holder of this Debenture, as such
(except if and to the extent that any Principal Amount thereof remains
unconverted), shall cease and the Person and Persons in whose name or names the
Common Stock Issued at Conversion shall be issuable shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby,
and all voting and other rights associated with the beneficial ownership of such
Common Shares shall at such time vest with such Person or Persons. The
Conversion Notice shall constitute a contract between the Holder and the
Company, whereby the Holder shall be deemed to subscribe for the number of
Common Shares which it will be entitled to receive upon such conversion and, in
payment and satisfaction of such subscription (and for any cash adjustment to
which it is entitled pursuant to Section 3.4), to surrender this Debenture and
to release the Company from all liability thereon (except if and to the extent
that any Principal Amount thereof remains unconverted). No cash payment
aggregating less than $1.00 shall be required to be given unless specifically
requested by the Holder.
(b) If, at any time after the date of this Debenture, (i) the Company
challenges, disputes or denies the right of the Holder hereof to effect the
conversion of this Debenture into Common Shares or otherwise dishonors or
rejects any Conversion Notice delivered in accordance with this Section 3.2 or
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(ii) any third party who is not and has never been an Affiliate of the Holder
commences any lawsuit or legal proceeding or otherwise asserts any claim before
any court or public or governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares, then the Holder shall have
the right, but not the obligation, by written notice to the Company, to require
the Company to promptly redeem this Debenture for cash at one hundred and twenty
(120%) of the Principal Amount thereof, together with all accrued and unpaid
interest thereon to the date of redemption. Under any of the circumstances set
forth above, the Company shall be responsible for the payment of all costs and
expenses of the Holder, including reasonable legal fees and expenses, as and
when incurred in defending itself in any such action or pursuing its rights
hereunder (in addition to any other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under the Bankruptcy Code. In the
event the Company is a debtor under the Bankruptcy Code, the Company hereby
waives to the fullest extent permitted any rights to relief it may have under 11
U.S.C. ss. 362 in respect of the Holder's conversion privilege. The Company
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. ss. 362 in respect of the conversion of this Debenture. The
Company agrees, without cost or expense to the Holder, to take or consent to any
and all action necessary to effectuate relief under 11 U.S.C. ss. 362.
SECTION 3.3 FRACTIONAL SHARES. No fractional Common Shares or scrip
representing fractional Common Shares shall be delivered upon conversion of this
Debenture. Instead of any fractional Common Shares which otherwise would be
delivered upon conversion of this Debenture, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
multiplied by the Current Market Price on the Conversion Date. No cash payment
of less than $1.00 shall be required to be given unless specifically requested
by the Holder.
SECTION 3.4 ADJUSTMENTS. The Conversion Price and the number of shares
deliverable upon conversion of this Debenture are subject to adjustment from
time to time as follows:
(i) RECLASSIFICATION, ETC. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with
or into another Person (where the Company is not the survivor or where there is
a change in or distribution with respect to the Common Stock of the Company),
sell, convey, transfer or otherwise dispose of all or substantially all its
property, assets or business to another Person, or effectuate a transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of (each, a "FUNDAMENTAL CORPORATE
CHANGE") and, pursuant to the terms of such Fundamental Corporate Change, shares
of common stock of the successor or acquiring corporation, or any cash, shares
of stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("OTHER PROPERTY") are to
be received by or distributed to the holders of Common Stock of the Company,
then the Holder of this Debenture shall have the right thereafter, at its sole
option, to (x) require the Company to prepay this Debenture for cash at one
hundred and twenty percent (120%) of the Principal Amount thereof, together with
all accrued and unpaid interest thereon to the date of prepayment, (y) receive
the number of shares of common stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property as is
receivable upon or as a result of such Fundamental Corporate Change by a holder
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of the number of shares of Common Stock into which the outstanding portion of
this Debenture may be converted at the Conversion Price applicable immediately
prior to such Fundamental Corporate Change or (z) require the Company, or such
successor, resulting or purchasing corporation, as the case may be, to, without
benefit of any additional consideration therefor, execute and deliver to the
Holder a debenture with substantial identical rights, privileges, powers,
restrictions and other terms as this Debenture in an amount equal to the amount
outstanding under this Debenture immediately prior to such Fundamental Corporate
Change. For purposes hereof, "COMMON STOCK OF THE SUCCESSOR OR ACQUIRING
CORPORATION" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to prepayment and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions shall similarly apply to successive Fundamental Corporate
Changes.
SECTION 3.5 CERTAIN CONVERSION LIMITS.
The Company shall not effect any conversion of this Debenture, and a
Holder shall not have the right to convert any portion of this Debenture, to the
extent that after giving effect to the conversion, as set forth on the
applicable Conversion Notice, such Holder (together with such Xxxxxx's
Affiliates, and any other person or entity acting as a group together with such
Holder or any of such Holder's Affiliates) would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
such Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Debenture with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which are issuable upon (A) conversion of the remaining, unconverted
principal amount of this Debenture beneficially owned by such Holder or any of
its Affiliates and (B) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein (including,
without limitation, any other Debentures or warrants to purchase shares of the
Company's Common Stock) beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 3.5, beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
To the extent that the limitation contained in this Section 3.5 applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by such Holder together with any Affiliates) and of which
principal amount of this Debenture is convertible shall be in the sole
discretion of such Holder, and the submission of a Conversion Notice shall be
deemed to be such Holder's determination of whether this Debenture may be
converted (in relation to other securities owned by such Holder together with
any Affiliates) and which principal amount of this Debenture is convertible, in
each case subject to such aggregate percentage limitations. To ensure compliance
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with this restriction, each Holder will be deemed to represent to the Company
each time it delivers a Conversion Notice that such Conversion Notice 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. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 3.5, in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock provided to the Holder in
writing by the Company after Holder makes such request or in the event that the
Company files, any of the following with the Securities and Exchange Commission,
the most recent of the following: (A) the Company's most recent Form 10-QSB or
Form 10-KSB, as the case may be, (B) a more recent public announcement by the
Company; or (C) a more recent 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 a Holder, the Company shall within two Trading Days
confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding on the records of the Company as of the date of the
request. 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 such Holder or its Affiliates since
the date as of which such number of outstanding shares of Common Stock was
reported. The "BENEFICIAL OWNERSHIP LIMITATION" shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this Debenture
held by the Holder. The Beneficial Ownership Limitation provisions of this
Section 3.5 may be waived by such Holder, at the election of such Holder, upon
not less than 61 days' prior notice to the Company, to, at the sole discretion
of the Holder, either change the Beneficial Ownership Limitation to (i) 9.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon conversion of the
Debenture held by the Holder and the provisions of this Section 3.5 shall
continue to apply, or (ii) remove any Beneficial Ownership Limitation under this
Debenture. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section
3.5 to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. If any court of competent jurisdiction shall determine that
the foregoing limitation is ineffective to prevent a Holder from being deemed
the beneficial owner of more than 9.99% of the then outstanding shares of Common
Stock, then the Company shall prepay such portion of this Debenture as shall
cause such Holder not to be deemed the beneficial owner of more than 9.99% of
the then outstanding shares of Common Stock. Upon such determination by a court
of competent jurisdiction, the Holder shall have no interest in or rights under
such portion of the Debenture. Any and all interest paid on or prior to the date
of such determination shall be deemed interest paid on the remaining portion of
this Debenture held by the Holder. Such prepayment shall be for cash at a
prepayment price of one hundred and twenty percent (120%) of the Principal
Amount thereof, together with all accrued and unpaid interest thereon to the
date of prepayment. The limitations contained in this paragraph shall apply to a
successor holder of this Debenture.
SECTION 3.6 SURRENDER OF DEBENTURES. Upon any redemption of this
Debenture pursuant to Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to
Section 2.4, the Holder shall either deliver this Debenture by hand to the
Company at its principal executive offices or surrender the same to the Company
at such address by nationally recognized overnight courier. Payment of the
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redemption price or the amount due on maturity specified in Section 2.4, shall
be made by the Company to the Holder against receipt of this Debenture (as
provided in this Section 3.5) by wire transfer of immediately available funds to
such account(s) as the Holder shall specify by written notice to the Company. If
payment of such redemption price is not made in full by the redemption date, or
the amount due on maturity is not paid in full by the Maturity Date, the Holder
shall again have the right to convert this Debenture as provided in Article 3
hereof or to declare an Event of Default.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1 STATUS OF DEBENTURE. This Debenture constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms subject, as to enforceability, to general principles of equity and to
principles of bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights and remedies
generally.
SECTION 4.2 RESTRICTIONS ON TRANSFER. This Debenture, and any Common
Shares deliverable upon the conversion hereof, have not been registered under
the Securities Act. The Holder by accepting this Debenture agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Debenture or such shares may be sold pursuant to an exemption from
registration under the Securities Act or (ii) a registration statement relating
to this Debenture or such shares has been filed by the Company and declared
effective by the SEC.
Each certificate for shares of Common Stock deliverable hereunder shall
bear a legend as follows unless and until such securities have been sold
pursuant to an effective registration statement under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). The securities may not be offered for sale,
sold or otherwise transferred except (i) pursuant to an
effective registration statement under the Securities Act or
(ii) pursuant to an exemption from registration under the
Securities Act in respect of which the issuer of this
certificate has received an opinion of counsel satisfactory to
the issuer of this certificate to such effect. Copies of the
agreement covering both the purchase of the securities and
restrictions on their transfer may be obtained at no cost by
written request made by the holder of record of this
certificate to the Secretary of the issuer of this certificate
at the principal executive offices of the issuer of this
certificate."
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ARTICLE 5
COVENANTS
SECTION 5.1 CONVERSION. The Company shall cause the transfer agent, not
later than three (3) Business Days after the Company's receipt of a Conversion
Notice, to issue and deliver to the Holder the requisite shares of Common Stock
Issued at Conversion.
SECTION 5.2 NOTICE OF DEFAULT. If any one or more events occur which
constitute or which, with notice, lapse of time, or both, would constitute an
Event of Default, the Company shall forthwith give notice to the Holder,
specifying the nature and status of the Event of Default or such other event(s),
as the case may be.
SECTION 5.3 PAYMENT OF OBLIGATIONS. So long as this Debenture shall be
outstanding, the Company shall pay, extend, or discharge at or before maturity,
all its respective material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
SECTION 5.4 COMPLIANCE WITH LAWS. So long as this Debenture shall be
outstanding, the Company shall comply with all applicable laws, ordinances,
rules, regulations and requirements of governmental authorities, except for such
noncompliance which would not have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries.
SECTION 5.5 INSPECTION OF PROPERTY, BOOKS AND RECORDS. So long as this
Debenture shall be outstanding, the Company shall keep proper books of record
and account in which full, true and correct entries shall be made of all
material dealings and transactions in relation to its business and activities
and shall permit representatives of the Holder at the Holder's expense to visit
and inspect any of its respective properties, to examine and make abstracts from
any of its respective books and records, not reasonably deemed confidential by
the Company, and to discuss its respective affairs, finances and accounts with
its respective officers and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
SECTION 5.6 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
this Debenture, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of this Debenture; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of this Debenture, in addition to such other
remedies as shall be available to the holder of this Debenture, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval to file an
amendment to the charter of the Company.
SECTION 5.7 RIGHT OF FIRST REFUSAL ON OTHER FINANCING. Provided that
the Holder is not in default of any of its material obligations under this
Debenture (after having received written notice of such default from the Company
and the expiration of a period of not less than 10 Business Days during which
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time Holder shall have the opportunity to cure such default), in the event that
the Company obtains a commitment for any other financing (either debt, equity,
or a combination thereof) which is to close during the term of this Debenture,
Holder shall be entitled to a right of first refusal to enable it to, at
Holder's option, match the terms of the other financing. The Company shall
deliver to Holder, at least 10 days prior to the proposed closing date of such
transaction, written notice describing the proposed transaction, including the
terms and conditions thereof, and providing Holder an option during the 10 day
period following delivery of such notice to provide the financing being offered
in such transaction on the same terms as contemplated by such transaction.
Notwithstanding the foregoing, if the Company seeks to consummate such financing
for a lesser amount or on terms less favorable to the Company than those terms
that were provided to Holder, such financing shall again be subject to Xxxxxx's
right of first refusal set forth in this Section 5.7.
ARTICLE 6
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1 EVENTS OF DEFAULT. "EVENT OF DEFAULT" wherever used herein means any
one of the following events:
(i) the Company shall default in the payment of principal of
or interest on this Debenture as and when the same shall be due and payable and,
in the case of an interest payment default, such default shall continue for five
(5) Business Days after the date such interest payment was due, or the Company
shall fail to perform or observe any other covenant, agreement, term, provision,
undertaking or commitment under this Debenture, the Securities Purchase
Agreement, or the Warrant (as defined in the Securities Purchase Agreement) and
such default shall continue for a period of ten (10) Business Days after the
delivery to the Company of written notice that the Company is in default
hereunder or thereunder;
(ii) any of the representations, warranties, or covenants made
by the Company herein, in the Securities Purchase Agreement or in any
certificate or financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the execution and
delivery of this Debenture, the Warrant or the Securities Purchase Agreement
shall be false or misleading in a material respect on the Closing Date;
(iii) under the laws of any jurisdiction not otherwise covered
by clauses (iv) and (v) below, the Company or any Subsidiary (A) becomes
insolvent or generally not able to pay its debts as they become due, (B) admits
in writing its inability to pay its debts generally or makes a general
assignment for the benefit of creditors, (C) institutes or has instituted
against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent,
(y) liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors including any plan
of compromise or arrangement or other corporate proceeding involving or
affecting its creditors or (z) the entry of an order for relief or the
appointment of a receiver, trustee or other similar person for it or for any
substantial part of its properties and assets, and in the case of any such
official proceeding instituted against it (but not instituted by it), either the
proceeding remains undismissed or unstayed for a period of sixty (60) calendar
days, or any of the actions sought in such proceeding (including the entry of an
order for relief against it or the appointment of a receiver, trustee, custodian
or other similar official for it or for any substantial part of its properties
and assets) occurs or (D) takes any corporate action to authorize any of the
above actions;
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(iv)
the entry of a decree or order by a court having jurisdiction in the premises
adjudging the Company or any Subsidiary a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under the Bankruptcy Code or any
other applicable Federal or state law, or appointing a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the Company or
of any substantial part of its property, or ordering the winding-up or
liquidation of its affairs, and any such decree or order continues and is
unstayed and in effect for a period of sixty (60) calendar days;
(v) the institution by the Company or any Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Bankruptcy Code or any other applicable federal or state law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as and when they
become due, or the taking of corporate action by the Company in furtherance of
any such action;
(vi) a final judgment or final judgments for the payment of
money shall have been entered by any court or courts of competent jurisdiction
against the Company and remains undischarged for a period (during which
execution shall be effectively stayed) of thirty (30) days, PROVIDED that the
aggregate amount of all such judgments at any time outstanding (to the extent
not paid or to be paid, as evidenced by a written communication to that effect
from the applicable insurer, by insurance) exceeds One Hundred Thousand Dollars
($100,000);
(vii) it becomes unlawful for the Company to perform or comply
with its obligations under this Debenture, the Warrant or the Securities
Purchase Agreement in any respect;
(viii) the Common Shares shall no longer be traded in the over
the counter market via the "pink sheets" or not otherwise be listed for trading
on the NASDAQ OTCBB (the "TRADING MARKET" or, to the extent the Company becomes
eligible to list its Common Stock on any other national security exchange or
quotation system, upon official notice of listing on any such exchange or
system, as the case may be, it shall be the "TRADING MARKET") or suspended from
trading on the Trading Market, and shall not be reinstated, relisted or such
suspension lifted, as the case may be, within five (5) days;
(ix) the Company shall fail to timely file all reports
required to be filed by it with the Commission (as defined in the Securities
Purchase Agreement) pursuant to Section 13 or 15(d) of the Exchange Act (as
defined in the Securities Purchase Agreement), or otherwise required by the
Exchange Act; or
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(x) the Company shall default (giving effect to any applicable
grace period) in the payment of principal or interest as and when the same shall
become due and payable, under any indebtedness, individually or in the
aggregate, of more than One Hundred Thousand Dollars ($100,000);
SECTION 6.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default occurs and is continuing, then and in every such case the
Holder may, by a notice in writing to the Company, rescind any outstanding
Conversion Notice and declare that all amounts owing or otherwise outstanding
under this Debenture are immediately due and payable and upon any such
declaration this Debenture shall become immediately due and payable in cash at a
price of one hundred and twenty percent (120%) of the Principal Amount thereof,
together with all accrued and unpaid interest thereon to the date of payment;
PROVIDED, HOWEVER, in the case of any Event of Default described in clauses
(iii), (iv), (v) or (vii) of Section 6.1, such amount automatically shall become
immediately due and payable without the necessity of any notice or declaration
as aforesaid.
SECTION 6.3 LATE PAYMENT PENALTY. If any portion of the principal of or
interest on this Debenture shall not be paid within ten (10) days of when it is
due, the Discount Multiplier under this Debenture shall decrease by one
percentage point (1%) for all conversions of this Debenture thereafter.
SECTION 6.4 MAXIMUM INTEREST RATE. Notwithstanding anything herein to
the contrary, if at any time the applicable interest rate as provided for herein
shall exceed the maximum lawful rate which may be contracted for, charged, taken
or received by the Holder in accordance with any applicable law (the "MAXIMUM
RATE"), the rate of interest applicable to this Debenture shall be limited to
the Maximum Rate. To the greatest extent permitted under applicable law, the
Company hereby waives and agrees not to allege or claim that any provisions of
this Note could give rise to or result in any actual or potential violation of
any applicable usury laws.
SECTION 6.5 REMEDIES NOT WAIVED. No course of dealing between the
Company and the Holder or any delay in exercising any rights hereunder shall
operate as a waiver by the Holder.
SECTION 6.6 REMEDIES. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Debenture will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Debenture, that the Holder shall be entitled to all other available remedies at
law or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Debenture and to enforce specifically the terms and provisions thereof, without
the necessity of showing economic loss and without any bond or other security
being required.
SECTION 6.7 PAYMENT OF CERTAIN AMOUNTS. Whenever pursuant to this
Debenture the Company is required to pay an amount in excess of the Principal
Amount plus accrued and unpaid interest, the Company and the Holder agree that
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the actual damages to the Holder from the receipt of cash payment on this
Debenture may be difficult to determine and the amount to be so paid by the
Company represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this
Debenture and to earn a return from the sale of shares of Common Stock acquired
upon conversion of this Debenture at a price in excess of that price paid for
such shares pursuant to this Debenture. The Company and the Holder hereby agree
that such amount of stipulated damages is not disproportionate to the possible
loss to the Holder from the receipt of a cash payment without the opportunity to
convert this Debenture into shares of Common Stock.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 NOTICE OF CERTAIN EVENTS. In the case of the occurrence of
any event described in Section 3.4 of this Debenture, the Company shall cause to
be mailed to the Holder of this Debenture at its last address as it appears in
the Company's security registry, at least twenty (20) days prior to the
applicable record, effective or expiration date hereinafter specified (or, if
such twenty (20) days' notice is not possible, at the earliest possible date
prior to any such record, effective or expiration date), a notice thereof,
including, if applicable, a statement of (y) the date on which a record is to be
taken for the purpose of such dividend, distribution, issuance or granting of
rights, options or warrants, or if a record is not to be taken, the date as of
which the holders of record of Common Stock to be entitled to such dividend,
distribution, issuance or granting of rights, options or warrants are to be
determined or (z) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of Common Stock will be entitled to exchange their shares for securities, cash
or other property deliverable upon such reclassification, consolidation, merger,
sale transfer, dissolution, liquidation or winding-up.
SECTION 7.2 REGISTER. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this
Debenture. Upon any transfer of this Debenture in accordance with Articles 2 and
4 hereof, the Company shall register such transfer on the Debenture register.
SECTION 7.3 WITHHOLDING. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Debenture.
SECTION 7.4 TRANSMITTAL OF NOTICES. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally, or sent by
telecopier machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier machine or
overnight courier service as follows:
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(1) If to the Company, to:
The X-Change Corporation
000 Xxxxxxx Xxxxxxx
Xxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) If to the Holder, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 7.4.
SECTION 7.5 ATTORNEYS' FEES. Should any party hereto employ an attorney
for the purpose of enforcing or construing this Debenture, or any judgment based
on this Debenture, in any legal proceeding whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litigation, the prevailing
party shall be entitled to receive from the other party or parties thereto
reimbursement for all reasonable attorneys' fees and all reasonable costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not, and that such reimbursement shall be included in
any judgment or final order issued in that proceeding. The "prevailing party"
means the party determined by the court to most nearly prevail and not
necessarily the one in whose favor a judgment is rendered.
SECTION 7.6 GOVERNING LAW. This Debenture shall be governed by, and
construed in accordance with, the laws of the State of California (without
giving effect to conflicts of laws principles). With respect to any suit, action
or proceedings relating to this Debenture, the Company irrevocably submits to
the exclusive jurisdiction of the courts of the State of California sitting in
San Diego and the United States District Court located in the City of San Diego
and hereby waives, to the fullest extent permitted by applicable law, any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. Subject to applicable law, the Company agrees that final judgment against
it in any legal action or proceeding arising out of or relating to this
Debenture shall be conclusive and may be enforced in any other jurisdiction
within or outside the United States by suit on the judgment, a certified copy of
which judgment shall be conclusive evidence thereof and the amount of its
indebtedness, or by such other means provided by law.
SECTION 7.7 WAIVER OF JURY TRIAL. To the fullest extent permitted by
law, each of the parties hereto hereby knowingly, voluntarily and intentionally
waives its respective rights to a jury trial of any claim or cause of action
based upon or arising out of this Debenture or any other document or any
dealings between them relating to the subject matter of this Debenture and other
documents. Each party hereto (i) certifies that neither of their respective
representatives, agents or attorneys has represented, expressly or otherwise,
that such party would not, in the event of litigation, seek to enforce the
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foregoing waivers and (ii) acknowledges that it has been induced to enter into
this Debenture by, among other things, the mutual waivers and certifications
herein.
SECTION 7.8 HEADINGS. The headings of the Articles and Sections of this
Debenture are inserted for convenience only and do not constitute a part of this
Debenture.
SECTION 7.9 PAYMENT DATES. Whenever any payment hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
SECTION 7.10 BINDING EFFECT. Each Holder by accepting this Xxxxxxxxx
agrees to be bound by and comply with the terms and provisions of this
Debenture.
SECTION 7.11 NO STOCKHOLDER RIGHTS. Except as otherwise provided
herein, this Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
SECTION 7.12 FACSIMILE EXECUTION. Facsimile execution of this Debenture
shall be deemed original.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
by its duly authorized officer on the date of this Debenture.
The X-Change Corporation
By: /S/ XXXXXXXX XXXXXXX
----------------------
Name: XXXXXXXX XXXXXXX
----------------------
Title: COO
----------------------
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EXHIBIT A
DEBENTURE CONVERSION NOTICE
---------------------------
TO: The X-Change Corporation
The undersigned owner of this Convertible Debenture due August 29, 2010
(the "DEBENTURE") issued by The X-Change Corporation (the "COMPANY") hereby
irrevocably exercises its option to convert $__________ Principal Amount of the
Debenture into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert the portion
of the Debenture specified above into shares of Common Stock Issued at
Conversion in accordance with the provisions of Article 3 of the Debenture. The
undersigned directs that the Common Stock and certificates therefor deliverable
upon conversion, the Debenture reissued in the Principal Amount not being
surrendered for conversion hereby, [the check or shares of Common Stock in
payment of the accrued and unpaid interest thereon to the date of this Notice,]
together with any check in payment for fractional Common Stock, be registered in
the name of and/or delivered to the undersigned unless a different name has been
indicated below. All capitalized terms used and not defined herein have the
respective meanings assigned to them in the Debenture. The conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the
Principal Amount of the Debenture set forth above shall cease and the Person or
Persons in whose name or names the Common Stock Issued at Conversion shall be
registered shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest with
such Person or Persons.
Date and time: __________________
_______________________________
By: ___________________________
Title: ________________________
Fill in for registration of Debenture:
Please print name and address (including ZIP
code number):
_______________________________
_______________________________
_______________________________
A-1
