EXHIBIT 10.32
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET
FORTH IN SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS
OF MARCH 11, 1998, BETWEEN FIX-CORP INTERNATIONAL, INC. (THE "COMPANY") AND
THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
No. A-13 U.S. $1,500,000
FIX-CORP INTERNATIONAL, INC.
4% CONVERTIBLE DEBENTURE DUE MARCH 11, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures
of Fix-Corp International, Inc., a Delaware corporation having a principal
place of business at 0000 Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000
(the "COMPANY"), designated as its 4% Convertible Debentures, due March 11,
2001 (the "DEBENTURES"), in an aggregate principal amount of $1,500,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC Strategic Fund
Ltd., or registered assigns (the "HOLDER"), the principal sum of One Million
Five Hundred Thousand Dollars ($1,500,000), on or prior to March 11, 2001 or
such earlier date as the Debentures are required to be repaid as provided
hereunder (the "MATURITY DATE") and to pay interest to the Holder on the
principal sum at the rate of 4% per annum, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year, commencing
March 31, 1998, and on each Conversion Date (as defined in Section 4(a)).
Interest shall accrue daily commencing on the Original Issue Date (as defined
in Section 6) until payment in full of the principal sum, together with all
accrued and unpaid interest and other amounts which may become due hereunder,
has been made. Interest shall be calculated on the basis of a 360-day year
and for the actual number of days elapsed. Interest hereunder will be paid
to the Person (as defined in Section 6) in whose name this Debenture is
registered on the records of the Company regarding registration and transfers
of the Debentures (the "DEBENTURE REGISTER").
All overdue, accrued and unpaid interest and other amounts due hereunder
shall bear interest at the rate of 18% per annum and accrue daily from the
date such interest is due hereunder through and including the date of
payment. The principal of, and interest on, this Debenture are payable in
such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts, at the
address of the Holder last appearing on the Debenture Register, except that
interest due on the principal amount (but not overdue interest) may, at the
Company's option, be paid in shares of Common Stock (as defined in Section 6)
calculated based upon the Conversion Price (as defined below) at the time
such interest becomes due. All amounts due hereunder other than interest
shall be paid in cash. Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of the Common Stock in payment of
interest on the principal amount if: (i) the number of shares of Common Stock
at the time authorized, unissued and unreserved for all purposes, or held as
treasury stock, is insufficient to pay interest hereunder in shares of Common
Stock; (ii) such shares are not either registered for resale pursuant to an
Underlying Securities Registration Statement (as defined in Section 6) or
freely transferable without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), as determined by counsel to the Company pursuant to a written opinion
letter, addressed to and in form and substance acceptable to the Company's
transfer agent or other person or entity performing similar functions
thereto; (iii) such shares are not listed on the OTC Bulletin Board (or the
American Stock Exchange, Nasdaq National Market, Nasdaq SmallCap Market or
The New York Stock Exchange) and any other exchange, market and trading
facility on which the Common Stock is then listed for trading; or (iv) the
issuance of such shares would result in the recipient thereof beneficially
owning more than 4.999% of the issued and outstanding shares of Common Stock
as determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. Payment of interest on the principal amount in shares
of Common Stock is further subject to the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of
Debentures outstanding to such Holder. No service charge will be made for
such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement
(as defined in Section 6) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due presentment to the
Company for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered
on the Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
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SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest on
or liquidated damages in respect of, this Debenture, free of any claim
of subordination, as and when the same shall become due and payable
(whether on the applicable quarterly interest payment date, the
Conversion Date or the Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, the Purchase Agreement or the Registration
Rights Agreement (as defined in Section 6), and such failure or breach
shall not have been remedied within 10 days after the date on which
written notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a
case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of
60 days; or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it or
any substantial part of its property which continues undischarged or
unstayed for a period of 60 days; or the Company or any subsidiary
thereof makes a general assignment for the benefit of creditors; or the
Company shall fail to pay, or shall state that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary thereof shall call a meeting of its creditors
with a view to arranging a composition or adjustment of its debts; or
the Company or any subsidiary thereof shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or
any subsidiary thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations or an
event shall occur, or shall fail to occur, which gives (or would give
after the passage of time or giving of notice or both) the payee of any
such obligation the right to accelerate the payment thereof under any
mortgage, credit agreement or other facility, indenture
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agreement, promissory note or other instrument under which there may be
issued, or by which there may be secured or evidenced any indebtedness
of the Company in an amount exceeding one hundred thousand dollars
($100,000), whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or
being declared due and payable prior to the date on which it would
otherwise become due and payable;
(v) the Common Stock shall be delisted from the OTC Bulletin
Board or any other national securities exchange or market on which such
Common Stock is then listed for trading or suspended from trading
thereon without being relisted or having such suspension lifted, as the
case may be, within three (3) Trading Days (if after the Original Issue
Date the Common Stock shall be listed for trading or quoted on the
Nasdaq SmallCap Market, Nasdaq National Market or any other national
securities exchange or market, this provision shall apply to any
delistings or suspensions therefrom);
(vi) the Company shall be a party to any merger or consolidation
pursuant to which the Company shall not be the surviving entity or shall
sell, transfer or otherwise dispose of all or substantially all of its
assets in one or more transactions, or shall redeem more than a de
minimis number of shares of Common Stock (other than redemptions of
Underlying Shares);
(vii) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange Commission
(the "COMMISSION") on or prior to the 70th day after the Original Issue
Date; or
(viii) an Event (as hereinafter defined) shall not have been cured
to the satisfaction of the Holder prior to the expiration of thirty (30)
days from the Event Date (as hereinafter defined) relating thereto.
(b) If any Event of Default occurs and is continuing, the Holder may,
by notice to the Company, declare the full principal amount of this Debenture
(and, at the Holder's option, all other Debentures then held by such Holder),
together with interest and other amounts owing in respect thereof, to the
date of acceleration, to be, whereupon the same shall become, immediately due
and payable in cash. The aggregate amount payable in respect of the
Debentures shall be equal to the sum of (i) the Mandatory Repayment Amount
plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions hereunder and then held by the demanding Holder and
(B) the Per Share Market Value on the date prepayment is demanded or the date
the full prepayment price is paid, whichever is greater. The demanding
Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may immediately
and without expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by the Holder
at any time prior to payment hereunder. No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent
thereon.
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SECTION 4. CONVERSION.
(a) This Debenture shall be convertible into shares of Common Stock at
the option of the Holder in whole or in part at any time and from time to
time after the Original Issue Date and prior to the close of business on the
Maturity Date. The number of shares of Common Stock as shall be issuable
upon a conversion hereunder shall be determined by dividing the outstanding
principal amount of this Debenture to be converted, plus all accrued but
unpaid interest thereon (which the Company does not elect to pay in cash), by
the Conversion Price (as defined below), each as subject to adjustment as
provided hereunder. The Holder shall effect conversions by surrendering the
Debentures (or such portions thereof) to be converted, together with the form
of conversion notice attached hereto as EXHIBIT A (the "CONVERSION NOTICE")
to the Company. Each Conversion Notice shall specify the principal amount of
Debentures to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (the "CONVERSION DATE"). If no
Conversion Date is specified in a Conversion Notice, the Conversion Date
shall be the date that the Conversion Notice is deemed delivered hereunder.
Subject to Section 4(b) hereof and Section 3.8 of the Purchase Agreement,
each Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the
Debenture(s) tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the time set forth
in Section 5(b)) a new Debenture for such principal amount as has not been
converted.
(b) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement) representing the
number of shares of the Common Stock being acquired upon the conversion of
Debentures (subject to reduction pursuant to Section 3.8 of the Purchase
Agreement), (ii) Debentures in a principal amount equal to the principal
amount of Debentures not converted; (iii) a bank check in the amount of all
accrued and unpaid interest (if the Company has elected to pay accrued
interest in cash), together with all other amounts then due and payable in
accordance with the terms hereof, in respect of Debentures tendered for
conversion and (iv) if the Company has elected to pay accrued interest in
shares of the Common Stock, certificates, which shall be free of restrictive
legends and trading restrictions (other than those required by Section 3.1(b)
of the Purchase Agreement), representing such number of shares of the Common
Stock as equals such interest divided by the Conversion Price calculated on
the Conversion Date; PROVIDED, HOWEVER, that the Company shall not be
obligated to issue certificates evidencing the shares of the Common Stock
issuable upon conversion of the principal amount of Debentures until
Debentures are delivered for conversion to the Company or the Holder notifies
the Company that such Xxxxxxxxx has been mutilated, lost, stolen or destroyed
and complies with Section 9 hereof. The Company shall, upon request of the
Holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the
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case of any Conversion Notice such certificate or certificates, including for
purposes hereof, any shares of the Common Stock to be issued on the
Conversion Date on account of accrued but unpaid interest hereunder, are not
delivered to or as directed by the applicable Holder by the third Trading Day
after the Conversion Date, the Holder shall be entitled by written notice to
the Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the
Company shall immediately return the Debentures tendered for conversion. If
the Company fails to deliver to the Holder such certificate or certificates
pursuant to this Section, including for purposes hereof, any shares of the
Common Stock to be issued on the Conversion Date on account of accrued but
unpaid interest hereunder, prior to the third Trading Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, $1,500 for each day thereafter until the
Company delivers such certificates. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section prior to the
20th day after the Conversion Date, the Company shall, at the Holder's option
(i) prepay, from funds legally available therefor at the time of such
prepayment, the aggregate of the principal amount of Debentures then held by
such Holder, as requested by such Holder, and (ii) pay all accrued but unpaid
interest on account of the Debentures for which the Company shall have failed
to issue the Common Stock certificates hereunder, in cash. The prepayment
price shall equal the Mandatory Prepayment Amount for the Debentures to be
prepaid. If the Holder has required the Company to prepay Debentures
pursuant to this Section and the Company fails for any reason to pay the
prepayment price within seven days after such notice is deemed delivered
hereunder, the Company will pay interest on the prepayment price at a rate of
18% per annum (to accrue daily), in cash to such Holder, accruing from such
seventh day until the prepayment price and any accrued interest thereon is
paid in full.
(c) (i) The conversion price (the "CONVERSION PRICE") in effect on
any Conversion Date shall be the lesser of (A) $3.31 (the "INITIAL CONVERSION
PRICE") and (B) 83% multiplied by the average of the five lowest Per Share
Market Values during the ten (10) Trading Days immediately preceding the
Conversion Date; PROVIDED THAT, (a) if an Underlying Securities Registration
Statement is not filed on or prior to the Filing Date (as such term is
defined in the Registration Rights Agreement), or (b) if the Company fails to
file with the Commission a request for acceleration in accordance with Rule
12d1-2 promulgated under the Securities Exchange Act of 1934, as amended,
within five (5) days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that an Underlying
Securities Registration Statement will not be "reviewed" or is not subject to
further review or comment by the Commission, or (c) if the Underlying
Securities Registration Statement is not declared effective by the Commission
on or prior to the Effectiveness Date (as defined in the Registration Rights
Agreement), or (d) if such Underlying Securities Registration Statement is
filed with and declared effective by the Commission but thereafter ceases to
be effective as to all Registrable Securities (as such term is defined in the
Registration Rights Agreement) at any time prior to the expiration of the
"Effectiveness Period" (as such term as defined in the Registration Rights
Agreement), without being succeeded by a subsequent Underlying Securities
Registration Statement filed with and declared effective by the Commission
within ten (10) days, or (e) if trading in the Common Stock shall be
suspended, or if the Common Stock shall be delisted from trading, on the OTC
Bulletin Board or any other national securities market or exchange on which
the Common Stock is then listed
6
or quoted for trading for any reason for more than three (3) Trading Days, or
(f) if the conversion rights of the Holder are suspended for any reason or if
the Holder is not permitted to resell Registrable Securities under the
Underlying Securities Registration Statement, or (g) if an amendment to the
Underlying Securities Registration Statement is not filed by the Company with
the Commission within ten (10) days of the Commission's notifying the Company
that such amendment is required in order for the Underlying Securities
Registration Statement to be declared effective (any such failure being
referred to as an "EVENT," and for purposes of clauses (a), (c) and (f) the
date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) days period is exceeded, or for purposes of clauses (d)
and (g) the date which such ten (10) day period is exceeded, or for purposes
of clause (e) the date on which such three (3) Trading Day period is
exceeded, being referred to as "EVENT DATE"), the Conversion Price shall be
decreased by 2.5% each month (i.e., the Conversion Price would decrease by
2.5% as of the Event Date and additional 2.5% as of each monthly anniversary
of the Event Date) until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is cured.
Commencing the second month anniversary after the Event Date, the Company
shall pay to the holders of the Debentures 2.5% of the aggregate principal
amount of Debentures then outstanding (each holder being entitled to receive
such portion of such amount as equals its pro rata portion of the Debentures
then outstanding) in cash as liquidated damages, and not as a penalty on the
first day of each monthly anniversary of the Event Date until such time as
the applicable Event, is cured. Any decrease in the Conversion Price
pursuant to this Section shall continue notwithstanding the fact that the
Event causing such decrease has been subsequently cured. The provisions of
this Section are not exclusive and shall in no way limit the Company's
obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Company, the Initial Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of the
Common Stock outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common
Stock (and not to the Holder) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share
Market Value of the Common Stock at the record date mentioned below, the
Initial Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of the Common Stock offered
for subscription or purchase, and of which the numerator shall be the number
of shares of the Common Stock (excluding treasury shares, if any)
7
outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase shares of
the Common Stock the issuance of which resulted in an adjustment in the
Initial Conversion Price pursuant to this Section, if any such right or
warrant shall expire and shall not have been exercised, the Initial
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Initial
Conversion Price made pursuant to the provisions of this Section 4 after the
issuance of such rights or warrants) had the adjustment of the Initial
Conversion Price made upon the issuance of such rights or warrants been made
on the basis of offering for subscription or purchase only that number of
shares of the Common Stock actually purchased upon the exercise of such
rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
the Holder) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; PROVIDED, HOWEVER, that
in the event of a distribution exceeding ten percent (10%) of the net assets
of the Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm
that regularly examines the financial statements of the Company) (an
"APPRAISER") selected in good faith by the holders of a majority in interest
of Debentures then outstanding; and PROVIDED, FURTHER, that the Company,
after receipt of the determination by such Appraiser shall have the right to
select an additional Appraiser, in good faith, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the holders of Debentures of the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to one
share of the Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(v) In case of any reclassification of the Common Stock or any
8
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Debenture shall
have the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture only into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of the Common Stock following such
reclassification or share exchange, and the Holder shall be entitled upon
such event to receive such amount of securities, cash or property as the
shares of the Common Stock of the Company into which the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture could have been
converted immediately prior to such reclassification or share exchange would
have been entitled or (B) require the Company to prepay, from funds legally
available therefor at the time of such prepayment, the aggregate of its
outstanding principal amount of Debentures, plus all interest and other
amounts due and payable thereon, at a price determined in accordance with
Section 3(b). The entire prepayment price shall be paid in cash. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(vi) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is adjusted pursuant
to any of Section 4(c)(ii) - (v), the Company shall promptly mail to each
Holder of Debentures a notice setting forth the Initial Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall
be required in connection with any reclassification of
the Common Stock of the Company, any consolidation or
merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of
the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other
securities, cash or property; or
9
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Debentures, and shall cause to be mailed
to the Holder at its last addresses as they shall appear upon the stock books
of the Company, at least 30 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; PROVIDED, HOWEVER,
that the failure to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action required to be
specified in such notice. The Holder is entitled to convert the Debentures
during the 30-day period commencing the date of such notice to the effective
date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of the Common Stock
solely for the purpose of issuance upon conversion of the Debentures and
payment of interest on the Debentures, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holder, not less than such number of shares of the Common
Stock as shall be required by the Purchase Agreement (taking into account the
adjustments and restrictions of Section 4(c).
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holder
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
10
paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holder, including, without limitation, any Conversion Notice,
shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to the Company, at 0000 Xxxxx
Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (facsimile number (000) 000-0000),
attention Chief Financial Officer, or such other address or facsimile number
as the Company may specify for such purposes by notice to the Holder
delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be
in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to each Holder of the Debentures at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest
of (i) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this Section
prior to 7:00 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section later than 7:00 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) four days after deposit in the United States mail,
(iv) the Business Day following the date of mailing, if send by nationally
recognized overnight courier service, or (v) upon actual receipt by the party
to whom such notice is required to be given. For purposes of Section
4(c)(i), if a Conversion Notice is delivered by facsimile prior to 7:00 p.m.
(New York City time) on any date, then the day prior to such date shall be
the last Trading Day calculated to determine the Conversion Price applicable
to such Conversion Notice, and the date of such delivery shall commence the
counting of days for purposes of Section 4(b).
SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right, exercisable at any time upon
twenty (20) Trading Days prior written notice to the Holder (the "OPTIONAL
PREPAYMENT NOTICE"), to prepay, from funds legally available therefor at the
time of such prepayment, all or any portion of the outstanding principal
amount of the Debentures which have not previously been repaid or for which
Conversion Notices have not previously been delivered hereunder, at a price
equal to the Optional Prepayment Price (as defined below). Any such
prepayment by the Company shall be in cash and shall be free of any claim of
subordination. The Holder shall have the right to tender, and the Company
shall honor, Conversion Notices delivered prior to the expiration of the
twentieth (20th) Trading Day after receipt by the Holder of an Optional
Prepayment Notice for such Debentures (such date, the "OPTIONAL PREPAYMENT
DATE").
(b) If any portion of the Optional Prepayment Price shall not be paid
by the Company by the Optional Prepayment Date, the Optional Prepayment Price
shall be increased by 18% per annum (to accrue daily) until paid (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the optional Prepayment Price
11
remains unpaid through the expiration of the Optional Prepayment Date, the
Holder subject to such prepayment may elect by written notice to the Company
to either (i) demand conversion in accordance with the formula and the time
period therefor set forth in Section 4 of any portion of the principal amount
of Debentures for which the Optional Prepayment Price (including interest
therefor), plus accrued liquidated damages thereof, has not been paid in full
(the "UNPAID PREPAYMENT PRINCIPAL AMOUNT"), in which event the applicable Per
Share Market Value shall be the lower of the Per Share Market Value
calculated on the Optional Prepayment Date and the Per Share Market Value as
of the Holder's written demand for conversion, or (ii) invalidate AB INITIO
such optional redemption, notwithstanding anything herein contained to the
contrary. If the Holder elects option (i) above, the Company shall within
three (3) Trading Days such election is deemed delivered hereunder to the
Holder the shares of Common Stock issuable upon conversion of the Unpaid
Prepayment Amount subject to such conversion demand and otherwise perform its
obligations hereunder with respect thereto; or, if the Holder elects option
(ii) above, the Company shall promptly, and in any event not later than three
Trading Days from receipt of notice of such election, return to the Holder
new Debentures for the full Unpaid Prepayment Principal Amount. If, upon an
election under option (i) above, the Company fails to deliver the shares of
Common Stock issuable upon conversion of the Unpaid Prepayment Principal
Amount within the time period set forth in this Section, the Company shall
pay to the Holder in cash, as liquidated damages and not as a penalty, $1,500
per day until the Company delivers such Common Stock to the Holder.
(c) The "OPTIONAL PREPAYMENT PRICE" for any Debentures shall equal the
sum of (i) the principal amount of Debentures to be prepaid, plus all accrued
and unpaid interest thereon, divided by the Conversion Price on (x) the
Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is less, multiplied by the Average Price on (x) the
Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is greater, and (ii) all other amounts and liquidated
damages due in respect of such principal amount.
SECTION 6. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"AVERAGE PRICE" on any date means the average Per Share Market Value for
the five (5) Trading Days immediately preceding such date.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State
of New York are authorized or required by law or other government action to
close.
"COMMON STOCK" means common stock, $.001 par value per share, of the
Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"MANDATORY REPAYMENT AMOUNT" for any Debentures shall equal the sum of
(i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is
12
demanded or (y) the date the Mandatory Prepayment Amount is paid in full,
whichever is less, multiplied by the Per Share Market Value on (x) the date
the Mandatory Prepayment Amount is demanded or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is greater, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such
Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of any
Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"PER SHARE MARKET VALUE" on any particular date means (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq SmallCap
Market or other stock exchange or quotation system on which the Common Stock
is listed for trading, or (b) if the Common Stock is not listed on the Nasdaq
SmallCap Market or any other stock exchange or market, the closing bid price
per share of the Common Stock on such date on the over-the-counter market, as
reported by the OTC Bulletin Board, or (c) if the Common Stock is not quoted
on the OTC Bulletin Board, the closing bid price per share of Common Stock on
such date on the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices), or (d) if the Common Stock is
no longer traded on the over-the-counter market and reported by the National
Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices), such closing bid price shall
be determined by reference to "Pink Sheet" quotes for the relevant conversion
period as determined in good faith by the Holder or (c) if the Common Stock
is not then publicly traded, the fair market value of a share of Common Stock
as determined by an appraiser selected in good faith by the Holders of a
majority in interest of the Debentures (the Company, after receipt of the
determination by such appraiser, shall have the right to select an additional
appraiser, in which case, the fair market value shall be equal to the average
of the determinations by each such appraiser).
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Debenture Purchase Agreement,
dated as of the Original Issue Date, among the Company and the original
Holder, as amended, modified or supplemented from time to time in accordance
with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Original Issue Date, among the Company and the original
Holder, as amended, modified or supplemented from time to time in accordance
with its terms.
"TRADING DAY" means (a) a day on which the Common Stock is traded on the
Nasdaq Stock Market or other stock exchange or market on which the Common
Stock has been listed, or (b) if the Common Stock is not then listed on the
Nasdaq Stock Market or any stock exchange or market, a day on which the
Common Stock is traded on the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on
13
the OTC Bulletin Board, a day on which the Common Stock is quoted on the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions
of reporting prices).
"UNDERLYING SHARES" means the shares of Common Stock into which the
Debentures, and interest thereon, are convertible in accordance with the
terms hereof and the Purchase Agreement.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares
and naming the Holder as a "selling stockholders" thereunder.
SECTION 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation
of the Company. This Debenture ranks PARI PASSU with all other Debentures
now or hereafter issued under the terms set forth herein. The Company may
only voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
SECTION 8. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive
any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
SECTION 9. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
SECTION 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. The Company hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by receiving a copy thereof sent to the Company at the
address in effect for notices
14
to it under this instrument and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
SECTION 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
SECTION 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
SECTION 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day (or, if such next succeeding Business Day falls
in the next calendar month, the preceding Business Day in the appropriate
calendar month).
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: President/CEO
Attest:
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Asst. Secretary
16
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-13 into shares of
Common Stock, $.001 par value per share (the "Common Stock"), of Fix-Corp
International, Inc. (the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No
fee will be charged to the holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
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Date to Effect Conversion
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Principal Amount of Debentures to be Converted
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Number of shares of Common Stock to be Issued
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Applicable Conversion Price
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Signature
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Name
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Address
