EXHIBIT 10.38
TWENTIETH AMENDMENT
TO
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
THIS TWENTIETH AMENDMENT TO CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
(the "Amendment") is entered into as of March 6, 2002, by and between DISC,
Inc., a California corporation (the "Company"), and MK GVD Fund (the
"Purchaser").
R E C I T A L S:
A. WHEREAS on March 29, 1996 the Company and Purchaser entered into a
Convertible Debenture Purchase Agreement pursuant to which the Company agreed to
sell, and Purchaser agreed to purchase, an aggregate of $1,400,000 in principal
amount of Convertible Debentures, each convertible into shares of the Company's
Preferred Stock, which Agreement was amended as of December 31, 1996, April 11,
1997, December 31, 1997, March 27, 1998, June 30, 1998, September 25, 1998,
December 31, 1998, March 30, 1999, June 30, 1999, September 30, 1999, December
31, 1999, March 31, 2000, June 30, 2000, September 30, 2000, December 29, 2000,
March 30, 2001, June 29, 2001, September 28, 2001 and December 31, 2001 to
increase the aggregate amount of Convertible Debenture to be purchased
thereunder to $16,430,000.
B. The Company and Purchaser now seek to amend the Agreement to increase
the total amount of Convertible Debentures which Purchaser agrees to purchase
thereunder.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and in consideration of the mutual covenants set forth
herein, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used
in the Amendment shall have the same meanings ascribed to them in the
Convertible Debenture Purchase Agreement.
2. AMENDMENT TO CONVERTIBLE DEBENTURE PURCHASE AGREEMENT. Section 1.1(a)
of the Convertible Debenture Purchase Agreement is hereby amended to provide
that Purchaser agrees to purchase, and the Company agrees to issue and sell, an
aggregate of $16,455,000 in principal amount of Convertible Debentures, each in
the form and having the terms and conditions set forth in the amended Exhibit B
attached hereto.
3. ENTIRE AGREEMENT; AMENDMENT. The Convertible Debenture Purchase
Agreement, as amended by this Amendment, constitutes the full and complete
agreement and understanding between the parties hereto regarding the subject
matter of the Convertible Debenture Purchase Agreement and shall supersede all
prior communications, representations, understandings or agreements, if any,
whether oral or written, concerning the subject matter contained in the
Convertible Debenture Purchase Agreement, as so amended, and that no provision
of the Convertible Debenture Purchase Agreement, as so amended, may be modified,
amended, waived or discharged, in whole or in part, except in accordance with
its terms.
4. FORCE AND EFFECT. Except as modified by this Amendment, the terms and
provisions of the Convertible Debenture Purchase Agreement are hereby ratified
and confirmed and are and shall remain in full force and effect. Should any
inconsistency arise between this Amendment and the Convertible Debenture
Purchase Agreement as to the specific matters which are the subject of this
Amendment, the terms and conditions of this Amendment shall control. This
Amendment shall be construed to be part of the Convertible
Debenture Purchase Agreement and shall be deemed incorporated into the
Convertible Debenture Purchase Agreement by this reference.
5. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed
in duplicate on its behalf by its duly authorized officer and Purchaser has also
executed this Amendment in duplicate, all as of the day and year indicated
above.
DISC, INC.
a California corporation
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Chief Financial Officer
PURCHASER:
MK GVD FUND
By: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx, General Partner
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EXHIBIT B
FORM OF SUBORDINATED CONVERTIBLE DEBENTURE
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT OR REGULATION A
NOTIFICATION UNDER SUCH ACT COVERING SUCH SECURITIES OR THE ISSUER CORPORATION
RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER CORPORATION)
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
DISC, INC.
A CALIFORNIA CORPORATION
SUBORDINATED CONVERTIBLE DEBENTURE
No. ________ ____________, 20___
FOR VALUE RECEIVED, DISC, INC., a California corporation (the
"Company"), hereby promises to pay to MK GVD FUND, a California limited
partnership (hereinafter referred to as the "Holder"), or registered assigns, on
the day on which this Debenture is issued by the Company (the "Maturity Date"),
subject to conversion as described below, the principal sum of ____________
Dollars ($________), or such part thereof as then remains unpaid or unconverted.
This Debenture shall not bear interest.
1. Other Agreements.
(a) Purchase Agreement. This Debenture is issued pursuant to and
is entitled to the benefits and subject to the conditions of that certain
Convertible Debenture Purchase Agreement of even date herewith, among the
Company, Holder and other Investors as defined therein, as the same may be
amended from time to time (the "Purchase Agreement"), and Holder, and its
successors and assigns, by its acceptance hereof, agrees to be bound by the
provisions of the Purchase Agreement, a copy of which may be inspected by Holder
at the principal office of the Company.
(b) Registration Rights Agreement. This Debenture is entitled to
the benefits and subject to the conditions of that certain Registration Rights
Agreement dated March 29, 1996, among the Company and Holder, as the same may be
amended from time to time (the "Registration Rights Agreement"), and Holder, and
its successors and assigns, by its acceptance hereof, agrees to be bound by the
provisions of the Registration Rights Agreement, a copy of which may be
inspected by Holder at the principal office of the Company.
2. Conversion.
(a) Mandatory Conversion Into Preferred Stock and Warrants. This
Debenture shall be converted into Units (as hereinafter defined) on the Maturity
Date by the surrender of this Debenture in the manner specified in Section 3(c)
below. The number of Units into which this Debenture shall be converted shall
equal the principal amount of the Debenture being converted divided by the
"Conversion Price" (as hereinafter defined). Each Unit shall consist of (i) a
number of shares of the Company's Preferred Stock, of a series designated by the
Company having rights and preferences pari passu with those of the Company's
Series D, Series E, Series F, Series G, Series H, Series I, Series J, Series K,
Series L, Series M, Series N, Series O, Series P, Series Q, Series R, Series S,
Series T, Series U, Series V, Series W, Series X, Series Y, Series Z, Series AA,
Series BB, Series CC, Series DD, Series EE and Series FF Preferred Stock (the
"Shares") equal to the quotient obtained by dividing one (1) by the number of
shares of Common Stock into which each such Share is then convertible and (ii) a
warrant (the "Warrant") to purchase a number of shares of the Company's Common
Stock equal to twenty-five percent (25%) of the number of shares of Common Stock
into which each such Share is convertible, which Warrant shall has an exercise
price equal to ________% of the Conversion Price, shall be exercisable for five
(5) years following the Maturity Date and shall be substantially in the form
attached to the Purchase Agreement as Exhibit A.
(b) Conversion Price. The "Conversion Price" shall be
eighty-five percent (85%) of the average closing price per share of the
Company's Common Stock as quoted on the Nasdaq Small Cap Market for the five (5)
trading days ended three (3) days prior to the Maturity Date.
(c) Mechanics of Conversion. On or before the Maturity Date, the
holder shall surrender the certificate or certificates for this Debenture, duly
endorsed, at the Company's principal corporate office, and shall state therein
the name or names in which the certificate or certificates for shares of
Preferred Stock are to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver at such office to such Holder, or to the nominee
or nominees of such Holder, a certificate or certificates for the number of
shares of Preferred Stock to which such Holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the Maturity Date, and the person or persons entitled to receive
the shares of Preferred Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Preferred Stock
as of such date.
(d) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company but will at all times in good faith assist in the carrying out of all
the provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Debentures against impairment.
(e) Taxes in Conversion. The issue of share certificates on
conversion of this Debenture shall be made without charge to the converting
Holder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares in any name other than
that of the Holder, and the Company shall not be required to issue or deliver
any certificate in respect of such shares unless and 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.
(f) Reservation of Conversion Securities. The Company agrees
that the Company will at all times have authorized and reserved, and will keep
available, solely for issuance or delivery upon the
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conversion of this Debenture, the shares of Preferred Stock and other securities
and properties as from time to time shall be receivable upon the conversion of
this Debenture.
(g) No Rights as Stockholders. Prior to the Conversion of this
Debenture, the Holder of this Debenture shall not be entitled to any rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any pre-emptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein or in the Purchase Agreement or as otherwise
agreed.
3. Merger, Consolidation.
(a) Acceleration on Merger, Consolidation. In the event of (i)
any consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity, or any transaction or
series of related transactions by the Company in which in excess of 50% of the
Company's voting power is issued for the purpose of combining with or
acquisition by one or more corporations or other entities or persons; or (ii) a
sale, conveyance or disposition of all or substantially all of the assets of the
Company, then the principal and accrued interest on this Debenture shall be due
and payable at the closing of any such transaction.
(b) Notices. The Company shall give each Debenture holder
written notice of such impending transaction not later than twenty (20) days
prior to the stockholders' meeting called to approve such transaction, or twenty
(20) days prior to the closing of such transaction, whichever is earlier. The
first of such notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 4 and the Company shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
Company has given the first notice provided for herein or sooner than ten (10)
days after the Company has given the notice provided for herein of any material
changes, provided, however, that such periods may be shortened upon the written
consent of the holders of the majority of the principal amount of Debentures
then outstanding.
4. Transfer. Subject to the restrictions and limitations set forth in
the Purchase Agreement, upon surrender of this Debenture for transfer or
exchange, a new Debenture or new Debentures of the same tenor, dated the date to
which interest has been paid on the surrendered Debenture and in an aggregate
principal amount equal to the unpaid principal amount of the Debenture so
surrendered, will be issued to and registered in the name of the transferee or
transferees. The Company may treat the person in whose name this Debenture is
registered as the owner hereof for the purpose of receiving payments and for all
other purposes.
5. Debenture Register. This Debenture is transferable only upon the
books of the Company which it shall cause to be maintained for such purpose. The
Company may treat the registered holder of this Debenture as he or it appears on
the Company's books at any time as the Holder for all purposes.
6. Loss, Etc., of Debenture. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Debenture, and
of indemnity reasonably satisfactory to the Company if lost, stolen or
destroyed, and upon surrender and cancellation of this Debenture if mutilated,
and upon reimbursement of the Company's reasonable incidental expenses, the
Company shall execute and deliver to the Holder a new Debenture of like date,
tenor and denomination.
7. Amendment, Waiver Etc., By Holders. The terms of this Debenture may
be amended or waived upon the written consent of the Company and the Holder.
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This Debenture shall be governed by and construed in accordance with the
laws of the State of California.
The Company hereby waives presentment, demand, notice of nonpayment,
protest and all other demands and notices in connection with the delivery,
acceptance, performance or enforcement of this Debenture. If an action is
brought for collection under this Debenture, the Holder shall be entitled to
receive all costs of collection, including, but not limited to, its reasonable
attorneys' fees.
DISC, INC.
a California Corporation
By:
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Xxxxx Xxxxxx
Chief Financial Officer
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