Exhibit 10.9
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.
No. 5 $350,000.00
May 9, 2001
ACCORD ADVANCED TECHNOLOGIES, INC.
12% CONVERTIBLE DEBENTURE
DUE MAY 31, 2002
THIS DEBENTURE is one of a series of duly authorized and issued debentures
of ACCORD ADVANCED TECHNOLOGIES, INC., a Nevada corporation, having a principal
place of business c/o Robson, Ferber, Frost, Chan & Xxxxx LLP, 000 Xxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, as the successor entity of the Agreement
and Plan of Reorganization between Accord Advanced Technologies, Inc. and
ENPETRO Mineral Pool dated April 30, 2001 (the "COMPANY"), designated as its 12%
Convertible Debentures, due May 31, 2002, in the aggregate principal amount of
Three Hundred Fifty Thousand and no/100 ($350,000.00) (the "DEBENTURES"). All
references to $ (dollars) shall be to US$ (United States dollars).
FOR VALUE RECEIVED, the Company promises to pay to AJW PARTNERS, LLC, or
its registered assigns (the "HOLDER"), the principal sum of Three Hundred Fifty
Thousand and no/100 ($350,000) on May 31, 2002 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"MATURITY DATE") and to pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 12% per
annum, payable on a quarterly basis on March 31, June 30, September 30 and
December 31 of each year while such Debentures are outstanding (each an
"INTEREST PAYMENT DATE") and on each Conversion Date (as defined herein)for such
principal amount, commencing on the earlier to occur of a Conversion Date for
such principal amount and June 30, 2001, in cash or shares of Common Stock (as
defined in Section 6). Subject to the terms and conditions herein, the decision
whether to pay interest hereunder in shares of Common Stock or cash shall be at
the discretion of the Company. Not less than ten Trading Days (as defined in
Section 6) prior to each Conversion Date, the Company shall provide the Holder
with written notice of its election to pay interest hereunder either in cash or
shares of Common Stock pursuant to the terms of Section 4(a)(i) (the Company may
indicate in such notice that the election contained in such notice shall
continue for later periods until revised). Failure to timely provide such
written notice shall be deemed an election by the Company to pay the interest on
such Conversion Date in shares of Common Stock pursuant to the terms of Section
4(a)(i). If interest is paid in shares of Common Stock, the number of shares of
Common Stock issuable on account of such interest shall equal the cash amount of
such interest on such Interest Payment Date divided by the Conversion Price (as
defined below) on such date. Interest shall be calculated on the basis on a
360-day year and 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 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 Debentures (the
"DEBENTURE REGISTER"). All overdue accrued and unpaid interest to be paid in
cash hereunder shall entail a late fee at the rate of 15% per annum (or such
lower maximum amount of interest permitted to be charged under applicable law)
(to accrue daily, from the date such interest is due hereunder through and
including the date of payment), payable in cash.
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. 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 (as defined in Section 6) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of, interest on
or liquidated damages in respect of, any Debentures, free of any claim
of subordination, as and when the same shall become due and payable
(whether on a Conversion Date or the Maturity Date or by acceleration
or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of any of the Transaction Documents (as defined in Section 6),
and such failure or breach shall not have been remedied within five
days after the date on which notice of such failure or breach shall
have been given;
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(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, adjustment or restructuring of its debts; or the Company
or any subsidiary thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the
foregoing; or 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 under
any other Debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount
exceeding two hundred fifty thousand dollars ($250,000), whether such
indebtedness now exists or shall hereafter be created and such default
shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable;
(v) the Common Stock shall not be eligible for quotation on and
quoted for trading on the OTC Bulletin Board ("OTC') or listed for
trading on the Nasdaq SmallCap Market, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a
"SUBSEQUENT MARKET") and shall not again be eligible for and quoted or
listed for trading thereon within five Trading Days;
(vi) the Company shall be a party to any Change of Control
Transaction (as defined in Section 6), shall agree to sell or dispose
all or in excess of 33% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction), or shall redeem or repurchase more than a de minimis
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number of shares of Common Stock or other equity securities of the
Company (other than redemptions of Underlying Shares (as defined in
Section 6));
(vii) an Underlying Shares Registration Statement (as defined in
Section 6) shall not have been declared effective by the Commission
(as defined in Section 6) on or prior to the 120th day after the
Original Issue Date;
(viii) if, during the Effectiveness Period (as defined in the
Registration Rights Agreement (as defined in Section 8)), the
effectiveness of the Underlying Shares Registration Statement lapses
for any reason or the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights
Agreement) under the Underlying Shares Registration Statement, in
either case, for more than five consecutive Trading Days or an
aggregate of eight Trading Days (which need not be consecutive Trading
Days);
(ix) an Event (as defined in the Registration Rights Agreement)
shall not have been cured to the satisfaction of the Holder prior to
the expiration of thirty days from the Event Date (as defined in the
Registration Rights Agreement) relating thereto (other than an Event
resulting from a failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to
the 120th day after the Original Issue Date, which shall be covered by
Section 3(a)(vii));
(x) the Company shall fail for any reason to deliver certificates
to a Holder prior to the third Trading Day after a Conversion Date
pursuant to and in accordance with Section 4(b) or the Company shall
provide notice to the Holder, including by way of public announcement,
at any time, of its intention not to comply with requests for
conversions of any Debentures in accordance with the terms hereof;
(xi) the Company shall fail for any reason to deliver the payment
in cash pursuant to a Buy-In (as defined herein) within five days
after notice is deemed delivered hereunder; or
(xii) there shall have occurred a breach of the Security
Agreement which shall not have been remedied prior to the tenth day
following notice thereof.
(b) During the time that any portion of this Debenture remains
outstanding, if any Event of Default occurs and is continuing, 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 shall become, immediately
due and payable in cash. The aggregate amount payable upon an Event of Default
shall be equal to the sum of (i) the Mandatory Prepayment Amount (as defined in
Section 6) plus (ii) the product of (A) the number of Underlying Shares issued
in respect of conversions hereunder within thirty (30) days of the date of a
declaration of an Event of Default and then held by the Holder and (B) the Per
Share Market Value (as defined in Section 6) on the date prepayment is due or
the date the full
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prepayment price is paid, whichever is greater. Interest shall accrue on the
prepayment amount hereunder from the seventh day after such amount is due (being
the date of an Event of Default) through the date of prepayment in full thereof
at the rate of 15% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law), to accrue daily from the date such payment is due
hereunder through and including the date of payment. All Debentures and
Underlying Shares for which the full prepayment price hereunder shall have been
paid in accordance herewith shall promptly be surrendered to or as directed by
the Company. The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Xxxxxx at any
time prior to payment hereunder. No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon.
SECTION 4. CONVERSION.
(a) (i) CONVERSION AT OPTION OF HOLDER. (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
(subject to the limitations on conversion set forth in Section 4(a)(iii)
hereof). The number of shares of Common Stock issuable upon a conversion
hereunder shall be determined by adding the sum of (i) the quotient obtained by
dividing (x) the outstanding principal amount of this Debenture to be converted
and (y) the Conversion Price (as defined herein), and (ii) the amount equal to
(I) the product of (x) the outstanding principal amount of this Debenture to be
converted and (y) the product of (1) the quotient obtained by dividing .12 by
360 and (2) the number of days for which such principal amount was outstanding,
divided by (II) the Conversion Price on the Conversion Date, PROVIDED, that if
the Company shall have timely elected to pay the interest due on a Conversion
Date in cash pursuant to the terms hereof, subsection (ii) shall not be used in
the calculation of the number of shares of Common Stock issuable upon a
conversion hereunder.
(B) Notwithstanding anything to the contrary contained herein, if on
any Conversion Date:
(1) 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;
(2) after the Interest Effectiveness Date (as defined in Section
6) such shares of Common Stock (x) are not registered for resale
pursuant to an effective Underlying Shares Registration Statement and
(y) may not be sold without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act (as defined in Section 6),
as determined by counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent in the form and
substance acceptable to the applicable Holder and such transfer agent
(if the shares of Common Stock are permitted by the Holder to be
delivered under this clause (2) prior to the Effectiveness Date (as
defined in the Registration Rights Agreement) and thereafter an
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Underlying Shares Registration Statement shall be declared effective
by the Commission, the Company shall, within five Trading Days after
the date of such declaration of effectiveness, exchange such shares
for shares of Common Stock that are free of restrictive legends of any
kind);
(3) the Common Stock is not listed or quoted for trading on the
OTC or on a Subsequent Market;
(4) the Company has failed to timely satisfy its conversion
obligations hereunder; or
(5) the issuance of such shares of Common Stock would result in a
violation of Sections 4(a)(iii),
then, at the option of the Holder, the Company, in lieu of delivering
shares of Common Stock pursuant to Section 4(a)(i)(A)(ii), shall deliver, within
three Trading Days of each applicable Conversion Date, an amount in cash equal
to the product of (a) the outstanding principal amount of the Debentures to be
converted on such Conversion Date and (b) the product of (x) the quotient
obtained by dividing .12 by 360 and (y) the number of days for which such
principal amount was outstanding.
(C) 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 (a "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 (a "CONVERSION DATE"). If no Conversion Date is specified in
a Conversion Notice, the Conversion Date shall be the date that such Conversion
Notice is deemed delivered hereunder. Subject to Section 4(b), 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 4(b)) a new Debenture for such
principal amount as has not been converted.
(ii) AUTOMATIC CONVERSION. Subject to the provisions in this
paragraph, the principal amount of Debentures for which conversion notices have
not previously been received or for which prepayment has not been made or
required hereunder shall be automatically converted on the first anniversary of
the Original Issue Date (the "AUTOMATIC CONVERSION DATE") pursuant to Section
4(a)(i), at the Conversion Price on such date. The conversion contemplated by
this paragraph shall not occur if (a) (1) an Underlying Securities Registration
Statement is not then effective that names the Holder as a selling stockholder
thereunder and (2) the Holder is not permitted to resell Underlying Shares
pursuant to Rule 144(k) promulgated under the Securities Act, without volume
restrictions, as evidenced by an opinion letter of counsel acceptable to the
6
Holder and the transfer agent for the Common Stock; or (b) there are not
sufficient shares of Common Stock authorized and reserved for issuance upon such
conversion. Notwithstanding anything herein to the contrary, the Automatic
Conversion Date shall be extended (on a day-for-day basis) for any Trading Days
that the Holder is unable to resell Underlying Shares due to (a) the Common
Stock not being listed or granted for trading on the OTC or any Subsequent
Market, (b) the failure of an Underlying Securities Registration Statement to be
declared effective by the Commission or, if so declared, to remain effective
during the Effectiveness Period as to all Underlying Shares, or (c) the
suspension of the Holder's right to resell Underlying Shares thereunder.
Notwithstanding anything to the contrary contained herein, a conversion pursuant
to this Section shall not be subject to the provisions of Section 4(a)(iii).
(iii) CERTAIN CONVERSION RESTRICTIONS.
(A) A Holder may not convert Debentures or receive shares of
Common Stock as payment of interest hereunder to the extent such conversion or
receipt of such interest payment would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange Act and the rules promulgated thereunder) in excess of
4.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of interest on, the Debentures
held by such Holder after application of this Section. Since the Holder will not
be obligated to report to the Company the number of shares of Common Stock it
may hold at the time of a conversion hereunder, unless the conversion at issue
would result in the issuance of shares of Common Stock in excess of 4.999% of
the then outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof, the
Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
principal amount of Debentures are convertible shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Conversion Notice for a
principal amount of Debentures that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall honor the conversion for the maximum principal amount
permitted to be converted on such Conversion Date in accordance with the periods
described in Section 4(b) and, at the option of the Holder, either retain any
principal amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.
(B) A Holder may not convert Debentures or receive shares of
Common Stock as payment of interest hereunder to the extent such conversion or
receipt of such interest payment would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange Act and the rules promulgated thereunder) in excess of
9.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of interest on, the Debentures
7
held by such Holder after application of this Section. Since the Holder will not
be obligated to report to the Company the number of shares of Common Stock it
may hold at the time of a conversion hereunder, unless the conversion at issue
would result in the issuance of shares of Common Stock in excess of 9.999% of
the then outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof, the
Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
principal amount of Debentures are convertible shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Conversion Notice for a
principal amount of Debentures that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall honor the conversion for the maximum principal amount
permitted to be converted on such Conversion Date in accordance with the periods
described in Section 4(b) and, at the option of the Holder, either retain any
principal amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.
(b) (i) Not later than five Trading Days after any 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 Common Stock being acquired upon the conversion of
Debentures (subject to the limitations set forth in Section 4(a)(iii) hereof),
(ii) Debentures in a principal amount equal to the principal amount of
Debentures not converted, and (iii) a bank check in the amount of accrued and
unpaid interest (if the Company has timely elected or is required to pay accrued
interest in cash), PROVIDED, that the Company shall not be obligated to issue
certificates evidencing the shares of 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 Debentures have
been lost, stolen or destroyed and provides a bond (or other adequate security)
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. The Company shall, upon request of the
Holder, if available, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. If in the case of any
Conversion Notice such certificate or certificates are not delivered to or as
directed by the applicable Holder by the fifth Trading Day after a Conversion
Date, the Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the principal amount of Debentures tendered for
conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i) by the fifth Trading Day
after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $2,500 for each Trading Day after such
8
fifth Trading Day until such certificates are delivered. Nothing herein shall
limit a Xxxxxx's right to pursue actual damages or declare an Event of Default
pursuant to Section 3 herein for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law. Further, if the Company shall not have
delivered any cash due in respect of conversions of Debentures or as payment of
interest thereon by the third Trading Day after the Conversion Date, the Holder
may, by notice to the Company, require the Company to issue shares of Common
Stock pursuant to Section 4(c), except that for such purpose the Conversion
Price applicable thereto shall be the lesser of the Conversion Price on the
Conversion Date and the Conversion Price on the date of such Holder demand. Any
such shares will be subject to the provision of this Section.
(iii) In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 4(b)(i) by the fifth Trading Day after the
Conversion Date, and if after such fifth Trading Day the Holder purchases (in an
open market transaction or otherwise) Common Stock to deliver in satisfaction of
a sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "BUY-IN"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue Debentures in
principal amount equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery requirements under
Section 4(b)(i). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.
(c) (i) The conversion price (the "CONVERSION PRICE") in effect
on any Conversion Date shall be the lesser of (1) $.23 (the "INITIAL CONVERSION
PRICE"), and (2) 60% of the average of the lowest three inter-day prices (which
need not occur on consecutive Trading Days) during the twenty Trading Days
immediately preceding the applicable Conversion Date (which may include Trading
Days prior to the Original Issue Date), PROVIDED, that such twenty Trading Day
9
period shall be extended for the number of Trading Days during such period in
which (A) trading in the Common Stock is suspended by the OTC or a Subsequent
Market on which the Common Stock is then listed, or (B) after the date declared
effective by the Commission, the Underlying Shares Registration Statement is
either not effective, the Prospectus included in the Underlying Shares
Registration Statement may not be used by the Holder for the resale of
Underlying Shares.
(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 Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) DELETED,
or (d) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then the Initial Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value at the
record date mentioned below, then the 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 Common Stock
offered for subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered would purchase at such Per Share Market Value. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
such right, option or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section, if any such right, option or warrant shall expire and shall not
have been exercised, the 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
Conversion Price made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, options 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, options or
warrants actually exercised.
10
(iv) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
Debentures are outstanding shall issue either (i) shares of Common Stock at a
price per share less than the Conversion Price (the "ISSUANCE PRICE") or (ii)
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock ("COMMON STOCK EQUIVALENTS"),
entitling any Person to acquire shares of Common Stock at an Issuance Price less
than the Conversion Price (if the holder of the Common Stock Equivalent so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise
be entitled to receive shares of Common Stock at a conversion or exercise price
less than the Conversion Price, such issuance shall be deemed to have occurred
for less than the Conversion Price), then, the Conversion Price shall be reduced
to the Issuance Price. Such adjustment shall be made whenever Common Stock or
Common Stock Equivalents are issued at a price below the Conversion Price.
However, upon the expiration of any Common Stock Equivalents the issuance of
which resulted in an adjustment in the Conversion Price pursuant to this
Section, if any such Common Stock Equivalents shall expire and shall not have
been exercised, the 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
Conversion Price made pursuant to the provisions of this Section after the
issuance of such Common Stock Equivalents) had the adjustment of the Conversion
Price made upon the issuance of such Common Stock Equivalents been made on the
basis of offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such Common Stock
Equivalents actually exercised.
(v) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Conversion
Price at which Debentures shall thereafter be convertible shall be determined by
multiplying the 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
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holders shall have the right
thereafter to, at their 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,
11
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay 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.
(vii) 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. No
adjustments in either the Conversion Price or the Initial Conversion Price shall
be required if such adjustment is less than $0.01, PROVIDED, however, that any
adjustments which by reason of this Section are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(viii) Whenever either the Initial Conversion Price or the
Conversion Price is adjusted pursuant to any of Section 4(c)(ii) - (v), the
Company shall promptly mail to each Holder a notice setting forth the Initial
Conversion Price or Conversion Price (as applicable) after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(ix) If (A) the Company shall declare a dividend (or any
other distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, PROVIDED, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
12
(x) In case of any (1) merger or consolidation of the
Company with or into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, a Holder shall have the right to (A) if permitted under
Section 3(b) hereof, exercise its rights of prepayment under Section 3(b) with
respect to such event, (B) convert its aggregate principal amount of Debentures
then outstanding into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of Debentures could have been converted immediately
prior to such merger, consolidation or sales would have been entitled, or (C) in
the case of a merger or consolidation, (x) require the surviving entity to issue
shares of convertible preferred stock or convertible debentures with such
aggregate stated value or in such face amount, as the case may be, equal to the
aggregate principal amount of Debentures then held by such Holder, plus all
accrued and unpaid interest and other amounts owing thereon, which newly issued
shares of preferred stock or debentures shall have terms identical (including
with respect to conversion) to the terms of this Debenture (except, in the case
of preferred stock, as may be required to reflect the differences between equity
and debt) and shall be entitled to all of the rights and privileges of a Holder
of Debentures set forth herein and the agreements pursuant to which the
Debentures were issued (including, without limitation, as such rights relate to
the acquisition, transferability, registration and listing of such shares of
stock other securities issuable upon conversion thereof), and (y) simultaneously
with the issuance of such convertible preferred stock or convertible debentures,
shall have the right to convert such instrument only into shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger or consolidation. In the case of
clause (C), the conversion price applicable for the newly issued shares of
convertible preferred stock or convertible debentures shall be based upon the
amount of securities, cash and property that each share of Common Stock would
receive in such transaction and the Conversion Price in effect immediately prior
to the effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holders the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(b)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
13
paid, nonassessable and, if the Underlying Shares Registration Statement has
been declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the Holder shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to the Company, c/o Robson, Ferber,
Frost, Chan & Xxxxx, LLP, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
attention: Xxxxxxx Xxxxx, Esq., 000-000-0000, fax 000-000-0000 or such other
address or facsimile number as the Company may specify for such purposes by
notice to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder 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
6:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United States mail, (iv) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
14
SECTION 5. OPTIONAL PREPAYMENT.
(a) Subject to Section 5(b) below, the Company shall have the right,
exercisable within 40 days of the date hereof, in accordance with the terms
hereof and upon ten Trading Days' prior written notice to the Holders to be
prepaid (an "OPTIONAL PREPAYMENT NOTICE"), to prepay all or any portion of the
outstanding principal amount of the Debentures which has not previously been
repaid or for which Conversion Notices have not previously been delivered. The
prepayment price applicable to prepayments under this Section 5(a) shall equal
the Prepayment Price and shall be paid in cash. Any such prepayment shall be
free of any claim of subordination. The Holders shall have the right to tender,
and the Company shall honor, Conversion Notices delivered prior to the
expiration of the tenth Trading Day after receipt by the Holders of an Optional
Prepayment Notice for such Debentures (the tenth Trading Day after receipt by
the Holders of an Optional Prepayment Notice is referred to herein as the
"OPTIONAL PREPAYMENT DATE")
(b) The Company shall not be entitled to deliver an Optional
Prepayment Notice to the Holder (and, if after delivery thereof and prior to the
Optional Prepayment Date, any of the following conditions shall cease to be met,
such notice, at the option of the Holders, shall be deemed no longer effective)
if: (i) the number of shares of Common Stock at the time authorized, unissued
and unreserved for all purposes is insufficient to satisfy the Company's
conversion obligations of the aggregate principal amount of Debentures then
outstanding, or (ii) there is neither an effective Underlying Shares
Registration Statement under which the Holders can resell all of the issued
Underlying Shares and all of the Underlying Shares as are issuable upon
conversion in full of the principal amount of Debentures subject to an Optional
Prepayment Notice nor may all of such issued and issuable Underlying Shares be
sold by the Holders subject to such prepayment without volume restrictions
pursuant to Rule 144 promulgated under the Securities Act, as determined by
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent in the form and substance acceptable to the Holders and
such transfer agent, or (iii) the Common Stock is not then listed or quoted for
trading on the OTC or on a Subsequent Market.
(c) If any portion of the Prepayment Price shall not be paid by the
Company by the fifth (5th) Trading Day following the Optional Prepayment Date,
the Prepayment Price shall be increased by 15% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to accrue daily from the
date such interest is due hereunder through and including the date of payment
(which amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the Prepayment Price remains unpaid through the
expiration of the Optional Prepayment Date, the Holder subject to such
prepayment may elect by written notice to the Company to either (x) 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
Prepayment Price, plus accrued liquidated damages and accrued interest thereon,
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 (y) invalidate AB
INITIO such optional prepayment, notwithstanding anything herein contained to
the contrary. If the Holder elects option (x) above, the Company shall, within
five Trading Days after such election is deemed delivered hereunder, deliver to
the Holder the shares of Common Stock issuable upon conversion of the Unpaid
Prepayment Principal Amount subject to such conversion demand and otherwise
15
perform its obligations hereunder with respect thereto. If the Holder elects
option (y) above, the Company shall promptly, and in any event not later than
five Trading Days from receipt of notice of such election, return to the Holder
new Debentures for the full Unpaid Prepayment Principal Amount and shall no
longer have any prepayment rights under this Debenture. If, upon an election
under option (x) above, the Company fails to deliver certificates representing
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,
$2,500 per day until the Company delivers such certificates to the Holder.
SECTION 6. DEFINITIONS. For the purposes hereof, the following terms shall
have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or Canada or a day on
which banking institutions in the State of New York or the State of Arizona are
authorized or required by law or other government action to close.
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or more of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, no par value per share, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"INTEREST EFFECTIVENESS DATE" means the earlier to occur of (x) the
Effectiveness Date and (y) the date that an Underlying Shares Registration
Statement is declared effective by the Commission.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the sum of (i)
the greater of (A) 130% of the principal amount of Debentures to be prepaid,
plus all accrued and unpaid interest thereon, and (B) the principal amount of
16
Debentures to be prepaid, plus all accrued and unpaid interest thereon, divided
by the Conversion Price on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise due 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 otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of the
Debentures under the Purchase Agreement regardless of the number of transfers of
any Debenture and regardless of the number of instruments which may be issued
(even if issued after such date) to evidence such Debenture.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing bid
price per share of Common Stock on such date on the Subsequent Market on which
the shares of Common Stock are then listed or quoted, or if there is no such
price on such date, then the closing bid price on the Subsequent Market on the
date nearest preceding such date, or (b) if the shares of Common Stock are not
then listed or quoted on a Subsequent Market, the closing bid price for a share
of Common Stock in the OTC, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the shares of
Common Stock are 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 principal amount of Debentures then
outstanding.
"PERSON" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"PREPAYMENT PRICE" for any Debentures shall equal the sum of (i) the
greater of (A) 130% of the principal amount of Debentures to be prepaid, plus
all accrued and unpaid interest thereon, and (B) the principal amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon, divided
by the Conversion Price on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise due 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 otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.
"PURCHASE AGREEMENT" means the Secured Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, as amended by that certain First
Amendment to Secured Convertible Debenture Purchase Agreement dated as of July
17, 2000, and that certain Second Amendment to Secured Convertible Debenture
17
Purchase Agreement of even date herewith )the "Second Amendment"), to which the
Company and the original Holders are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Original Issue Date, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (a) a day on which the shares of Common Stock are
traded on a Subsequent Market on which the shares of Common Stock are then
listed or quoted, or (b) if the shares of Common Stock are not listed on a
Subsequent Market, a day on which the shares of Common Stock are traded in the
over-the-counter market, as reported by the OTC, or (c) if the shares of Common
Stock are not quoted on the OTC, a day on which the shares of Common Stock are
quoted in 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); PROVIDED, that in the event that the shares of
Common Stock are not listed or quoted as set forth in (a), (b) and (c) hereof,
then Trading Day shall mean any day except a Business Day.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the Purchase
Agreement.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a "selling stockholder" thereunder.
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. As long as there are
Debentures outstanding, the Company shall not and shall cause it subsidiaries
not to, without the consent of the Holders, (i) amend its certificate of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of the Holders; (ii) repay, repurchase or offer to repay, repurchase or
otherwise acquire shares of its Common Stock or other equity securities other
than as to the Underlying Shares to the extent permitted or required under the
Transaction Documents; or (iii) enter into any agreement with respect to any of
the foregoing. The Company may only voluntarily prepay the outstanding principal
amount on the Debentures in accordance with Section 5 hereof.
18
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. No indebtedness of the Company is senior to this Debenture in
right of payment, whether with respect to interest, damages or upon liquidation
or dissolution or otherwise except for transactions pursuant to the form
Operating Agreement (as defined in the Second Amendment) in an aggregate amount
of up to $1,000,000. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any new indebtedness of any kind, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom that is senior in any respect to the
Company's obligations under the Debentures.
SECTION 11. 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 and the Holder hereby irrevocably submits to the
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. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
SECTION 12. 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.
19
SECTION 13. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
SECTION 14. 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.
SECTION 15. The payment obligations under this Debenture and the
obligations of the Company to the Holder arising upon the conversion of all or
any of the Debentures in accordance with the provisions hereof are secured
pursuant to the Security Agreement (as defined in the Purchase Agreement).
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IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to be
duly executed by a duly authorized officer as of the date first above indicated.
ACCORD ADVANCED TECHNOLOGIES, INC.
By: /s/ X. Xxxx Xxxxxx
--------------------------------
Name: X. Xxxx Xxxxxx
Title: President
No. 5
(AJW)
21
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
common stock, no par value per share (the "Common Stock"), of Accord Advanced
Technologies, 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
