4% CONVERTIBLE 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 "ACT"). THE
SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR
TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
No. S-1 US $50,000
Famous Fixins, Inc.
4% CONVERTIBLE DEBENTURE DUE JULY 30, 2003
THIS DEBENTURE is issued by Famous Fixins, Inc., a corporation
organized and existing under the laws of the State of New York (the "Company")
and is designated as its 4% Convertible Debenture Due July 30, 2003.
FOR VALUE RECEIVED, the Company promises to pay to Alpha Capital A.G.
or permitted assigns (the "Holder"), the principal sum of Fifty Thousand Dollars
and 00/100 (US $50,000) Dollars on July 30, 2003 (the "Maturity Date") and to
pay interest on the principal sum outstanding from time to time semi-annually in
arrears at the rate of 4% per annum accruing from the date of initial issuance.
Accrual of interest shall commence on the first business day to occur after the
date of initial issuance and continue until payment in full of the principal sum
has been made or duly provided for. Semi-annual interest payments shall be due
and payable on December 1 and June 1 of each year, commencing with December 1,
2002. If any interest payment date or the Maturity Date is not a business day in
the State of New York, then such payment shall be made on the next succeeding
business day. The Company will pay the principal of, and any accrued but unpaid
interest due upon this Debenture on the Maturity Date, by check or wire transfer
to the person who is the registered holder of this Debenture as of the tenth day
prior to the Maturity Date and addressed to such holder at the last address
appearing on the Debenture Register. The forwarding of such check or money order
shall constitute a payment of principal and interest hereunder and shall satisfy
and discharge the liability for principal and interest on this Debenture to the
extent of the sum represented by such check or wire transfer plus any amounts so
deducted.
This Debenture is subject to the following additional provisions:
1. The Company shall be entitled to withhold from all payments of
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.
2. 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. The Holder shall deliver written
notice to the Company of any proposed transfer of this Debenture. 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. This Debenture shall have the same rights
and privileges, including registration rights, accorded the debentures executed
and delivered pursuant to the Convertible Debenture and Warrants Purchase
Agreement dated as of October 27, 2000 between the Company and the original
Holder (the "Purchase Agreement"). Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.
3. Provided that (i) a registration statement registering shares of
Common Stock issuable pursuant to the Equity Line (the "Equity Line Registration
Statement") is not effective on the Maturity Date, or (ii) the Equity Line
Registration Statement is effective and the Company does not draw down the
maximum amount permitted pursuant to the Equity Line during each month after the
date the Equity Line Registration Statement is declared effective by the SEC,
the Holder of this Debenture is entitled, at its option, to convert at any time
commencing on or after the Maturity Date, the principal amount of this Debenture
or any portion thereof, plus, at the Holder's election, any accrued and unpaid
interest, into shares of Common Stock of the Company ("Conversion Shares") at a
conversion price for each share of Common Stock ("Conversion Price") equal to
the lesser of (i) $0.05 (the "Set Price") (subject to adjustment for stock
splits and the like), and (ii) 85% of the average of the five (5) lowest closing
bid prices of the Common Stock during the twenty-two (22) Trading Days preceding
the applicable Conversion Date (as reported by Bloomberg L.P.)(and, at each
Investor's option, if not listed on the Principal Market, on the pink sheets or
any other trading market). If, upon any conversion of this Debenture, the
Company's issuance of Conversion Shares would cause it to violate any listing
requirement of the Principal Market, then in lieu of such stock issuance, the
Company shall pay the Holder cash in an amount equal to the closing price of the
Common Stock on the Conversion Date multiplied by the number of shares which
would otherwise have been issuable upon such conversion within five (5) calendar
days. Additionally, except for sales of its securities (i) pursuant to the
exercise of options granted or to be granted under an employee benefit plan
which plan has been approved by the Company's stockholders, (ii) pursuant to any
compensatory plan for a full-time employee or key consultant, or (iii) in
connection with a strategic partnership or other business transaction, the
principal purpose of which is not simply to raise money, if during the period
beginning on the date hereof and ending when the Holder no longer holds any of
the principal amount of this Debenture or any accrued but unpaid interest of
this Debenture (the "MFN Period"), the Company sells any shares of its Common
Stock at a per share selling price ("Per Share Selling Price") lower than the
Set Price per share, then the Set Price shall be adjusted downward to equal such
lower Per Share Selling Price. The Company shall give to each Investor written
notice of any such sale within 24 hours of the closing of any such sale.
(a) For the purpose of this Section 3, the term "Per Share Selling
Price" shall mean the amount actually paid by third parties for each share of
Common Stock. A sale of shares of Common Stock shall include the sale or
issuance of rights, options, warrants or convertible securities ("derivative
securities") under which the Company is or may become obligated to issue shares
of Common Stock, and in such circumstances the sale of Common Stock shall be
deemed to have occurred at the time of the issuance of the derivative securities
and the Per Share Selling Price of the Common Stock covered thereby shall also
include the exercise or conversion price thereof (in addition to the
consideration per underlying share of Common Stock received by the Company upon
such sale or issuance of the derivative security). In case of any such security
issued within the MFN Period in a "Variable Rate Transaction" or an "MFN
Transaction" (each as defined below), the Per Share Selling Price shall be
deemed to be the lowest conversion or exercise price at which such securities
are converted or exercised in the case of a Variable Rate Transaction, or the
lowest adjustment price in the case of an MFN Transaction. If shares are issued
for a consideration other than cash, the per share selling price shall be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company.
(b) For the purpose of Section 3(a), the term "Variable Rate
Transaction" shall mean a transaction in which the Company issues or sells (a)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (x) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
Common Stock at any time after the initial issuance of such debt or equity
securities, or (y) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (but excluding standard stock split anti-dilution provisions),
or (b) any securities of the Company pursuant to an "equity line" structure
which provides for the sale, from time to time, of securities of the Company
which are registered for resale pursuant to the Securities Act.
(c) For the purposes of Section 4(a), the term "MFN Transaction" shall
mean a transaction in which the Company issues or sells any securities in a
capital raising transaction or series of related transactions (the "New
Offering") which grants to an investor (the "New Investor") the right to receive
additional shares based upon future transactions of the Company on terms more
favorable than those granted to the New Investor in the New Offering.
(d) In case of any stock split or reverse stock split, stock dividend,
reclassification of the common stock, recapitalization, merger or consolidation,
or like capital adjustment affecting the Common Stock of the Company, the
provisions of this Section 3 shall be applied in a fair, equitable and
reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof.
4. The rate of interest on this Debenture shall be four percent (4%),
per annum, on the outstanding principal until paid or converted. The Holder
shall have the right to cause the Company to issue Common Stock in exchange for
interest otherwise payable in cash pursuant to this Debenture. The exact number
of shares of Common Stock into which such interest payment is convertible shall
be based on the average of the five (5) lowest closing bid prices of the Common
Stock over the twenty-two (22) Trading Days immediately prior to the interest
payment date.
5. At the election of the Holder, the Company shall use (i) up to 50%
of the net proceeds received pursuant to (A) the equity line of credit type of
financing arranged by Union Atlantic, L.C., and (B) any other equity financing
permitted pursuant to the exceptions to the general prohibition on future
financing in Section 6.9 of the Purchase Agreement, and (ii) all of the proceeds
received pursuant to any equity financing entered into in violation of the
general prohibition on future financing in Section 6.9 of the Purchase Agreement
(each a "Subsequent Sale") to redeem this Debenture, plus all accrued but unpaid
interest and the applicable Payment Premium. The Payment Premium shall be 30% of
the outstanding principal balance plus any accrued but unpaid interest. The
Company shall give the Holder at least five (5) Trading Days' notice prior to
the closing date of a Subsequent Sale (each a "Subsequent Sale Closing Date")
and the Holder shall give the Company one (1) Trading Day's notice prior to any
such Subsequent Sale Closing Date that this Debenture or any portion hereof
shall be redeemed pursuant to this Section. The Company shall make redemption
payments to the Holder on such Subsequent Sale Closing Date out of the proceeds
of any such Subsequent Sale.
6. Intentionally omitted.
7. On the Maturity Date, the Company will pay 105% of the principal of
and any accrued but unpaid interest due upon this Debenture, less any amounts
required by law to be deducted, to the registered holder of this Debenture and
addressed to such holder at the last address appearing on the debenture
register. If the Company is unable to pay the Holder such amount on the Maturity
Date and if the Company is able to make a draw down pursuant to an equity line
of credit arrangement, the Company shall immediately exercise draw downs under
such equity line arrangement for the maximum amount allowed pursuant to such
arrangement for the purpose of paying all amounts owed to the Holder until the
Company has paid all such amounts in full. The Company shall not be permitted to
pay the outstanding principal of this Debenture prior to the Maturity Date
without the express written consent of the Holder.
8. (a) Conversion shall be effectuated by surrendering this Debenture
to the Company (if such Conversion will convert all outstanding principal)
together with the form of conversion notice attached hereto as Exhibit A (the
"Notice of Conversion"), executed by the Holder of this Debenture evidencing
such Holder's intention to convert this Debenture or a specified portion (as
above provided) hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. Interest accrued or accruing from the date of
issuance to the date of conversion shall be paid as set forth above. No fraction
of a share or scrip representing a fraction of a share 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 the Notice of
Conversion duly executed to the Company. Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (650) 343-2506
Attn.: Michael Rudolph. Certificates representing Common Stock upon conversion
will be delivered to the Holder within three (3) Trading Days from the date the
Notice of Conversion is delivered to the Company. Delivery of shares upon
conversion shall be made to the address specified by the Holder in the Notice of
Conversion.
(b) The Company understands that a delay in the issuance of shares of
Common Stock upon a conversion pursuant to Section 3 herein beyond three (3)
Trading Days could result in economic loss to the Holder. As compensation to the
Holder for such loss, the Company agrees to pay late payments to the Holder for
late issuance of shares of Common Stock upon conversion in accordance with the
following schedule (where "No. Trading Days Late" is defined as the number of
Trading Days beyond three (3) Trading Days from the date the Notice of
Conversion is delivered to the Company).
- ---------------------------------- --------------------------------------
No. Trading Days Late Late Payment for Each
$5,000 of Principal Amount
Being Converted
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
1 $100
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
2 $200
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
3 $300
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
4 $400
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
5 $500
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
6 $600
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
7 $700
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
8 $800
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
9 $900
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
10 $1,000
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
More than 10 $1,000 +$200 for each Trading Day
Late beyond 10 Trading Days
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
The Company shall pay any payments incurred under this Paragraph 8(b)
in immediately available funds upon demand. Nothing herein shall limit Holder's
right to pursue injunctive relief and/or actual damages for the Company's
failure to issue and deliver Common to the holder, including, without
limitation, the Holder's actual losses occasioned by any "buy-in" of Common
Stock necessitated by such late delivery. Furthermore, in addition to any other
remedies which may be available to the Holder, in the event that the Company
fails for any reason to effect delivery of such shares of Common Stock within
three (3) Trading Days from the date the Notice of Conversion is delivered to
the Company, the Holder will be entitled to revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company, whereupon the
Company and the Holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion, and in such event no
late payments shall be due in connection with such withdrawn conversion.
(c) In the event the Holder shall elect to convert this Debenture or
any part hereof, the Company may not refuse conversion based on any claim that
the Holder or any one associated or affiliated with the Holder, including but
not limited to a Company stockholder who is not and has never been an affiliate
(as defined in Rule 405 under the Securities Act) of the Holder, has been
engaged in any violation of law, or for any other reason, unless an injunction
from a court, on notice, restraining and/or enjoining conversion of all or part
of this Debenture shall have been sought and obtained by the Company and the
Company posts a surety bond for the benefit of such Subscriber in the amount of
150% of the principal amount outstanding of this Debenture, which is subject to
the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to the Holder to the extent it obtains judgment, within three (3) business days
of such judgement. Under the circumstances set forth above, the Company shall
indemnify and hold harmless the holder and be responsible for the payment of all
costs and expenses of the Holder, including its reasonable legal fees and
expenses, as and when incurred in disputing any such action or pursuing its
rights hereunder (in addition to any other rights of the Holder).
9. 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 or shares of Common Stock herein prescribed. This Debenture is a direct
obligation of the Company.
10. 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, employee, 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.
11. 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, the Holder shall have the right to (A) deem such an occurrence an
Event of Default and exercise its rights of prepayment pursuant to Paragraph 14
herein, (B) convert its aggregate principal amount of this Debenture then
outstanding into (i) shares of Common Stock of the Company pursuant to Section 3
herein, (ii) 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 the 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 this
Debenture 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 convertible
debentures with such aggregate stated value or in such face amount, as the case
may be, equal to the aggregate principal amount of this Debenture then held by
the Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which newly issued debentures shall have terms identical (including
with respect to conversion) to the terms of this Debenture and shall be entitled
to all of the rights and privileges of the Holder of this Debenture set forth
herein and the agreements pursuant to which this Debenture was 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 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 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 Holder the right to receive the securities, cash and property set forth in
this Paragraph upon any conversion or redemption following such event. This
Paragraph shall similarly apply to successive such events.
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 New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York 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 conveniens, to the bringing of any such
proceeding in such jurisdictions.
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 three (3) Trading Days; or
b. Any of the material representations or warranties made by the
Company herein, in the Purchase Agreement, the Registration
Rights Agreement, or in any agreement, certificate or
financial statements heretofore or hereafter furnished by the
Company in connection with the execution and delivery of this
Debenture or the Purchase Agreement shall be false or
misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of
Common Stock upon proper 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 as and
when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to
remove any restrictive legend or to cause its Transfer Agent
to transfer any certificate or any shares of Common Stock
issued to the Holder upon conversion of this Debenture as and
when required by this Debenture, the Purchase Agreement or the
Registration Rights Agreement and such legend removal is
otherwise lawful, 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 the Company under the Purchase
Agreement, the Registration Rights Agreement or this Debenture
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 (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
f. 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
g. 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
h. Any money judgment, writ or warrant of attachment, or similar
process in excess of One Hundred Thousand ($100,000) 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
i. 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;
j. The Registration Statement is not declared effective by the
Commission within one hundred eighty (180) days from the
Closing Date;
k. Upon a properly noticed Notice of Conversion, the Company
fails to deliver Conversion Shares free of a legend, when
lawful to do so, within 10 Trading Days of such Notice of
Conversion; and
l. The Company shall have its Common Stock suspended or delisted
from trading on a Principal Market for in excess of five (5)
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 kind, 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 no event shall the Holder be permitted to convert this Debenture
for shares of Common Stock to the extent that (x) the number of shares of Common
Stock beneficially owned by such Holder (other than shares of Common Stock
issuable upon conversion of this Debenture) plus (y) the number of shares of
Common Stock issuable upon conversion of this Debenture, would be equal to or
exceed 9.9% of the number of shares of Common Stock then issued and outstanding,
including shares issuable upon conversion of this Debenture held by such Holder
after application of this Paragraph 16. As used herein, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder. To the extent
that the limitation contained in this Paragraph 16 applies, the determination of
whether this Debenture is convertible (in relation to other securities owned by
the Holder) and of which a portion of this Debenture is convertible shall be in
the sole discretion of such Holder, and the submission of a Notice of Conversion
shall be deemed to be such Holder's determination of whether this Debenture is
convertible (in relation to other securities owned by such holder) and of which
portion of this Debenture is convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. Nothing contained herein shall be
deemed to restrict the right of a holder to convert this Debenture into shares
of Common Stock at such time as such conversion will not violate the provisions
of this Paragraph 16. The provisions of this Paragraph 16 may be waived by the
Holder of this Debenture upon, at the election of the Holder, not less than 75
days' prior notice to the Company, and the provisions of this Paragraph 16 shall
continue to apply until such 75th day (or such later date as may be specified in
such notice of waiver). No conversion of this Debenture in violation of this
Paragraph 16 but otherwise in accordance with this Debenture shall affect the
status of the Common Stock issued upon such conversion as validly issued,
fully-paid and nonassessable. If instead of receiving cash on the Maturity Date
the Holder instead exercises its right to convert this Debenture into Common
Stock pursuant to Paragraph 3 by delivery of a Notice of Conversion prior to
receipt of payment, and such conversion would cause the limit contained in the
first sentence of this Paragraph 16 to be exceeded, such conversion of this
Debenture shall occur up to such limit and the remaining unconverted portion of
this Debenture shall be converted into Common Stock (1) in accordance with one
or more Notices of Conversion delivered by the Holder or (2) 65 days after the
Maturity Date, whichever is earlier. Notwithstanding anything contained herein
to the contrary, no interest shall accrue after the Maturity Date on any such
unconverted portion of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: July 30, 2002
Famous Fixins, Inc.
By:______________________________________
Name:
Title:
Attest:
- -----------------------
EXHIBIT A
NOTICE OF CONVERSION
(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 Famous Fixins, Inc. (the "Company") according to the conditions hereof,
as of the date written below.
Date of Conversion* ____________________________________________________________
Conversion Price * ____________________________________________________
Accrued Interest________________________________________________________________
Signature_____________________________________________________________________
[Name]
Address:______________________________________________________________________
-----------------------------------------------------------------------
*If such conversion represents the remaining principal balance of the Debenture,
the original Debenture must accompany this notice within three Trading Days.
