EXHIBIT 4.2
ANNEX I
TO
SECURITIES PURCHASE AGREEMENT
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD,
PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM.
NNo. 00E- US $
Holder Class:
AMERICAN CHAMPION ENTERTAINMENT, INC.
7% CONVERTIBLE DEBENTURE DUE DECEMBER 31, 2002
THIS DEBENTURE is one of a duly authorized issue of up to $1,250,000 in
Debentures of AMERICAN CHAMPION ENTERTAINMENT, INC., a corporation organized
and existing under the laws of the State of Delaware (the "Company")
designated as its 7% Convertible Debentures. Such Debentures may be issued in
series, each of which may have a different maturity date, but which otherwise
have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to
, the registered holder hereof (the "Holder"), the
principal sum of and 00/100 Dollars (US
$ ) on December 31, 2002 (the "Maturity Date")
and to pay interest on the principal sum outstanding from time to time in
arrears (i) semi-annually, on the last day of June and December of each year
prior to the Maturity Date, (ii) upon conversion as provided herein or (iii)
on the Maturity Date, at the rate of 7% per annum accruing from the date of
initial issuance of this Debenture. Accrual of interest shall commence on the
first such business day to occur after the date hereof and shall continue to
accrue on a daily basis until payment in full of the principal sum has been
made or duly provided for. Subject to the provisions of Section 4 below (the
terms of which shall govern as if this sentence were not included in this
Debenture), prior to the Maturity Date, interest on this Debenture is payable,
at the option of the Company, in shares of Common Stock of the Company, $.0001
par value ("Common Stock") at the Conversion Rate (as defined below) in effect
on the date of payment, or in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, at the address last appearing on the Debenture Register of the
Company as designated in writing by the Holder from time to time.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debentures are exchangeable
for an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments, and Holder shall
execute and deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws and the terms of the Securities
Purchase Agreement (defined below). In the event of any proposed transfer of
this Debenture, the Company may require, prior to issuance of a new Debenture
in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
4. A. The Holder of this Debenture is entitled, at its option,
subject to the following provisions of this Section 4, to convert this
Debenture at any time into shares of Common Stock of the Company at a
conversion price for each share of Common Stock ("Conversion Rate") equal to
the lower of (i) eighty-two and one-half percent (82.5%) of the Market Price
(as defined below) on the Conversion Date (as defined below) or (ii) one
hundred percent (100%) of the Market Price on the Closing Date (as defined in
the Securities Purchase Agreement). B. Conversion shall be effectuated
by faxing a Notice of Conversion (as defined below) to the Company and the
Company's transfer agent, Continental Stock Transfer & Trust Company, 0
Xxxxxxxx, Xxx Xxxx, XX 00000, telephone (000) 000-0000, facsimile (212)
509-5150, executed by the Holder of this Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion hereof in the form
annexed hereto as Exhibit A. Interest accrued or accruing from the date of
issuance to the date of conversion or to the date contemplated by clause (i)
of the second paragraph of this Debenture shall, at the option of the Holder,
be paid in cash or Common Stock at the Conversion Rate then applicable as of
the Conversion Date or the periodic interest payment date, as the case may be.
No fractional shares of Common Stock or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall
be rounded to the nearest whole share. The date on which notice of conversion
is given (the "Conversion Date") shall be deemed to be the date on which the
Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion") to the Company so that it is received by the Company on or before
such specified date, provided that, if such conversion would convert the
entire remaining principal of this Debenture, the Holder shall deliver to the
Company the original Debentures being converted no later than five (5)
business days thereafter. Facsimile delivery of the Notice of Conversion
shall be accepted by the Company at facsimile number (000) 000-0000; Attn:
Xxxxxxx X. Xxxx, President. Certificates representing Common Stock upon
conversion will be delivered to the Holder at the address specified in the
Notice of Conversion (which may be the Buyer's address for notices as
contemplated by Section 11of the Securities Purchase Agreement or a different
address), via express courier, by electronic transfer or otherwise, within
five (5) business days if the address for delivery is in the United States and
within seven (7) business days if the address for delivery is outside the
United States (such fifth business day or seventh business day, as the case
may be, the "Delivery Date") after (i) the date on which the Notice of
Conversion is delivered to the Company as contemplated in this paragraph B or
(ii) the date an interest payment on this Debenture, which the Company has
elected to pay by the issuance of Common Stock, as contemplated herein, was
due.
C. For purposes of this Debenture, the term "Market Price" means the
average closing bid price of the Common Stock for the lowest three (3)
trading days (which need not be consecutive) during the ten (10) trading days
ending on the trading day immediately before the date indicated in the
relevant provision hereof (unless a different relevant period is specified in
the relevant provision), as reported by Bloomberg, LP or, if not so reported,
as reported on the over-the-counter market.
D. Any principal amount of this Debenture not previously converted or
redeemed as of the Maturity Date, shall be deemed to be automatically
converted, without further action of any kind (including, but not necessarily
limited to, the giving of a Notice of Conversion) by the Holder, as of the
Maturity Date at the Conversion Rate applicable on the Maturity Date
("Mandatory Conversion").
E. Notwithstanding any other provision hereof, of the Warrants or of any
of the other Transaction Agreements (as those terms are defined in the
Securities Purchase Agreement), in no event (except (i) with respect to an
automatic conversion, if any, of a Debenture as provided in the Debentures,
(ii) as specifically provided in this Debenture as an exception to this
provision, or (iii) while there is outstanding a tender offer for any or all
of the shares of the Company's Common Stock) shall the Holder be entitled to
convert any Debenture, or shall the Company have the obligation to convert all
or any portion of this Debenture (and the Company shall not have the right to
pay interest on this Debenture), to the extent that, after such conversion,
the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the Debentures or unexercised portion of the Warrants), and (2) the number of
shares of Common Stock issuable upon the conversion of the Debentures with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 9.99% of
the outstanding shares of Common Stock (after taking into account the shares
to be issued to the Holder upon such conversion). For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), except as otherwise provided in clause (1)
of such sentence. The Holder, by its acceptance of this Debenture, further
agrees that if the Holder transfers or assigns any of the Debentures to a
party who or which would not be considered such an affiliate, such assignment
shall be made subject to the transferee's or assignee's specific agreement to
be bound by the provisions of this Section 4(E) as if such transferee or
assignee were the original Holder hereof. Nothing herein shall preclude the
Holder from disposing of a sufficient number of other shares of Common Stock
beneficially owned by the Holder so as to thereafter permit the continued
conversion of this Debenture.
5. A. In the event the trading price of the Common Stock is below
fifty cents ($0.50) for fifteen (15) consecutive trading days (the fifteenth
trading day, the "Special Redemption Right Effective Date"), then, beginning
on the following trading day and continuing for as long as such trading price
remains below such level, the Company will have the right to redeem all or any
part of this Debenture in cash for the Special Redemption Price (as defined
below) in accordance with the terms of this Section 5.
B. The term "Special Redemption Price" means the sum of (i) the
outstanding principal of the Debenture multiplied by the Applicable Percentage
(as defined below) and (ii) the accrued interest through the Special
Redemption Payment Date (as defined below).
C. The term "Applicable Percentage" means, if the Special Redemption
Payment Date is (i) within thirty (30) days of the Special Redemption Right
Effective Date, one hundred five percent (105%); (ii) more than thirty (30)
and within sixty (60) days after the Special Redemption Right Effective Date,
one hundred ten percent (110%); (iii) more than sixty (60) and within ninety
(90) days after the Special Redemption Right Effective Date, one hundred
fifteen percent (115%); and (iv) after ninety (90) days after the Special
Redemption Right Effective Date, one hundred twenty percent (120%).
D. The Company shall give at least ten (10) business days' written notice
of such redemption to the Holder (the "Special Notice of Redemption"). The
date so specified in such Special Notice of Redemption shall be the Special
Redemption Payment Date. Anything in the preceding provisions of this Section
5 to the contrary notwithstanding, the Special Redemption Price shall, unless
otherwise agreed to in writing by the Holder after receiving the Special
Notice of Redemption, be paid to the Holder in good funds at least five (5)
but not more than ten (10) business days from the date of the Special Notice
of Redemption, except that, with respect to any Debentures for which a
Special Notice of Redemption is given, the Holder shall have the right,
exercisable by giving a Notice of Conversion is submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Special
Notice of Redemption, to convert any or all of the Debentures sought to be
redeemed (a "Special Redemption Notice Conversion") and the Special
Redemption Notice Conversion shall take precedence over the redemption
contemplated by the Special Notice of Redemption. Such Debentures shall be
converted in accordance with the terms hereof, except that Section 4(E) shall
not apply to a Special Redemption Notice Conversion. Furthermore, in the
event such Special Redemption Price payment is not timely made, the Special
Notice of Redemption shall be null and void and any rights of the Company to
redeem outstanding Debentures under this Section 5 shall terminate. Any
redemption contemplated by this Debenture shall be made only in cash by the
payment of immediately available good funds to the Holder.
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue (a) by virtue of (i) the number of
authorized shares, or (ii) the applicable rules and regulations of the
principal securities market on which the Common Stock is listed or traded,
including, but not necessarily limited to, NASDAQ Rule 4310(c)(25)(H)
(collectively, the "Cap Regulations") or (b) the provisions of Section 4(j) of
the Securities Purchase Agreement (collectively, with the Cap Regulations, the
"Issuance Limitations"). Without limiting the other provisions hereof, (w)
the Company will take all steps reasonably necessary to be in a position to
issue shares of Common Stock on conversion of the Debentures without violating
the Cap Regulations and (x) if, despite taking such steps, the Company still
can not issue such shares of Common Stock without violating the Issuance
Regulations, the Holder of this Debenture (to the extent the same can not be
converted in compliance with the Issuance Regulations (an "Unconverted
Debenture"), shall have the right to require the Company to redeem each
Unconverted Debenture for an amount (the "Cap Redemption Amount"), payable in
cash, equal to (y) one hundred twenty-five and 00/100 percent (125.0%) of the
principal of the Unconverted Debenture, plus (z) all accrued but unpaid
interest on the Debenture through the date of redemption (the "Cap Redemption
Date") specified in the notice from the Holder electing this remedy.
7. Subject to the terms of the Securities Purchase Agreement, dated
January , 2000 (the "Securities Purchase Agreement"), between the Company
and the Holder (or the Holder's predecessor in interest), no provision of this
Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued
of similar terms are direct obligations of the Company.
8. A. The obligations of the Company under this Debenture are
secured under the terms of the Securities Purchase Agreement.
B. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
9. A. The Company agrees that for as long as this Debenture remains
outstanding, the Company will not, without the consent of the Holder, enter
into a merger (other than where the Company is the surviving entity) or
consolidation with another corporation or other entity or a sale or transfer
of all or substantially all of the assets of the Company to another person
(collectively, a "Sale"). If, with such consent, the Company enters into a
Sale and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as
a condition of such Sale, the Company and any such successor, purchaser or
transferee will agree that the Debenture may thereafter be converted on the
terms and subject to the conditions set forth above into the kind and amount
of stock, securities or property receivable upon such merger, consolidation,
sale or transfer by a holder of the number of shares of Common Stock into
which this Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as
nearly equivalent as may be practicable. In the event of any such proposed
Sale, (i) the Holder hereof shall have the right to convert by delivering a
Notice of Conversion to the Company within fifteen (15) days of receipt of
notice of such Sale from the Company, but (ii) in the event the Holder hereof
shall elect not to convert, the Company may, on three days' advance written
notice to the Holder, prepay all outstanding principal and accrued interest on
this Debenture by paying to the Holder an amount (the "Redemption Amount", in
available good funds, equal to the sum of (a) one hundred twenty-five and
00/100 percent (125.0%) of the outstanding principal of this Debenture plus
(b) all accrued but unpaid interest thereon through the date such payment is
paid to the Holder, less all amounts required by law to be deducted, upon
which tender of payment following such notice, the right of conversion shall
terminate.
B. The Company shall give written notice of such redemption to the Holder
(the "Notice of Redemption"). Anything in the preceding provisions of this
Section 9 to the contrary notwithstanding, the Redemption Amount shall, unless
otherwise agreed to in writing by the Holder after receiving the Notice of
Redemption, be paid to the Holder in good funds within three (3) business days
from the date of the Notice of Redemption. After receiving a Notice of
Redemption, the Holder shall no longer have the right to issue a Notice of
Conversion without the consent of the Issuer. If prior to receiving a Notice
of Redemption, the Holder had issued a Notice of Conversion, the Holder will
have the right to cancel such Notice of Conversion by written notice to the
Company. If such previously given Notice of Conversion is not so canceled,
the Company shall honor such Notice of Conversion and the Notice of Redemption
shall not apply to the principal portion of the Debenture thereby being
converted.
C. In the event payment of the Redemption Amount is not timely made, any
rights of the Company to redeem outstanding Debentures shall terminate, and
the Notice of Redemption shall be null and void.
10. The Company agrees that for as long as this Debenture remains
outstanding, the Company will not, without the consent of the Holder, spin off
or otherwise divest itself of a part of its business or operations or dispose
all or of a part of its assets in a transaction (the "Spin Off") in which the
Company does not receive compensation for such business, operations or assets,
but causes securities of another entity (the "Spin Off Securities") to be
issued to security holders of the Company. If, for any reason, prior to the
Conversion Date or the Redemption Payment Date, the Company, with the consent
of the Holder, consummates a Spin Off, then the Company shall cause (i) to be
reserved Spin Off Securities equal to the number thereof which would have been
issued to the Holder had all of the Holder's Debentures outstanding on the
record date (the "Record Date") for determining the amount and number of Spin
Off Securities to be issued to security holders of the Company (the
"Outstanding Debentures") been converted as of the close of business on the
trading day immediately before the Record Date (the "Reserved Spin Off
Shares"), and (ii) to be issued to the Holder on the conversion of all or any
of the Outstanding Debentures, such amount of the Reserved Spin Off Shares
equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of
which (I) the numerator is the principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of
its Common Stock or issues a dividend on its Common Stock consisting of shares
of Common Stock, the Market Price as of the Closing Date shall be equitably
adjusted to reflect such action. By way of illustration, and not in
limitation, of the foregoing (i) if the Company effectuates a 2:1 split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such split, the Market Price as of
the Closing Date shall be deemed to be one-half of what it had been calculated
to be immediately prior to such split; (ii) if the Company effectuates a 1:10
reverse split of its Common Stock, thereafter, with respect to any conversion
for which the Company issues the shares after the record date of such reverse
split, the Market Price as of the Closing Date shall be deemed to be ten times
what it had been calculated to be immediately prior to such split; and (iii)
if the Company declares a stock dividend of one share of Common Stock for
every 10 shares outstanding, thereafter, with respect to any conversion for
which the Company issues the shares after the record date of such dividend,
the Market Price as of the Closing Date shall be deemed to be the amount of
such Market Price calculated immediately prior to such record date multiplied
by a fraction, of which the numerator is the number of shares (10) for which a
dividend share will be issued and the denominator is such number of shares
plus the dividend share(s) issuable or issued thereon (11).
12. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common
Stock issuable upon conversion thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky or
foreign laws or similar laws relating to the sale of securities.
13. This Debenture shall be governed by and construed in accordance with
the laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Wilmington or the state courts of the State of Delaware sitting in the
City of Wilmington in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing of any
such proceeding in such jurisdictions. To the extent determined by such court,
the Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Holder in enforcement of or protection of any of
its rights under any of this Debenture.
14. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest on
this Debenture and same shall continue for a period of five (5) business days;
or
b. Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration Rights Agreement (as
defined in the Securities Purchase Agreement) or in any certificate or
financial or other written statements heretofore or hereafter furnished by the
Company in connection with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading in any material
respect at the time made; or
c: Subject to the terms of the Securities Purchase Agreement, the Company
fails to authorize or to cause its Transfer Agent to issue shares of Common
Stock upon exercise by the Holder of the conversion rights of the Holder in
accordance with the terms of this Debenture, fails to transfer or to cause its
Transfer Agent to transfer any certificate for shares of Common Stock issued
to the Holder upon conversion of this Debenture and when required by this
Debenture or the Registration Rights Agreement, and such transfer is otherwise
lawful, or fails to remove any restrictive legend on any certificate or fails
to cause its Transfer Agent to remove such restricted legend, in each case
where such removal is lawful, as and when required by this Debenture, the
Agreement or the Registration Rights Agreement, and any such failure shall
continue uncured for five (5) business days; or
d. The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation of any
Debenture in this series and such failure shall continue uncured for a period
of thirty (30) days after written notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material respect,
any covenant, term, provision, condition, agreement or obligation of the
Company under the Securities Purchase Agreement or the Registration Rights
Agreement and such failure shall continue uncured for a period of thirty (30)
days after written notice from the Holder of such failure (other than a
failure to cause the Registration Statement to become effective no later than
the Required Effective Date, as defined and provided in the Registration
Rights Agreement, as to which no such cure period shall apply); or
f. The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors
or commence proceedings for its dissolution; or (3) apply for or consent to
the appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
g. A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment; or
h. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within sixty (60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar process
in excess of Two Hundred Thousand ($200,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
k. The Company shall have its Common Stock suspended or delisted from an
exchange or over-the-counter market from trading for in excess of ten (10)
trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
15. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or
any rights whatsoever as a shareholder of the Company, unless and to the
extent converted in accordance with the terms hereof.
16. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then ipso facto the obligation of the Company to pay interest
or perform such act or requirement shall be reduced to the limit authorized
under such law, so that in no event shall the Company be obligated to pay any
such interest, perform any such act or be bound by any requirement which would
result in the payment of interest in excess of the limit so authorized. In
the event any payment by or act of the Company shall result in the extraction
of a rate of interest in excess of a sum which is lawfully collectible as
interest, then such amount (to the extent of such excess not returned to the
Company) shall, without further agreement or notice between or by the Company
or the Holder, be deemed applied to the payment of principal, if any,
hereunder immediately upon receipt of such excess funds by the Holder, with
the same force and effect as though the Company had specifically designated
such sums to be so applied to principal and the Holder had agreed to accept
such sums as an interest-free prepayment of this Debenture. If any part of
such excess remains after the principal has been paid in full, whether by the
provisions of the preceding sentences of this Section 16 or otherwise, such
excess shall be deemed to be an interest-free loan from the Company to the
Holder, which loan shall be payable immediately upon demand by the Company.
The provisions of this Section 16 shall control every other provision of this
Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
Dated: __________________, 2000
AMERICAN CHAMPION ENTERTAINMENT, INC.
By: __________________________
Xxxxxxx X. Xxxx
(Print Name)
President & CEO
(Title)
EXHIBIT A
NOTICE OF CONVERSION
OF
7% CONVERTIBLE DEBENTURE DUE DECEMBER , 2002
(To be Executed by the Registered Holder in order to Convert the
Debenture)
The undersigned hereby irrevocably elects to convert $
________________ of the principal
amount of the above Debenture No. ___ into Shares of Common Stock of
AMERICAN CHAMPION ENTERTAINMENT, INC. (the "Company") according to the
conditions thereof, as of the date written below.
Conversion Date*
___________________________________________________________________
Applicable Conversion Price
__________________________________________________________
Signature
__________________________________________________________________________
[Name]
__________________________________________
Address:
__________________________________________________________________________
__________________________________________________________________________
* If this Notice of Conversion represents conversion of the outstanding
principal balance of the Debenture, the original Debenture must be received by
the Company or its transfer agent by the fifth business date following the
Conversion Date.
