EXHIBIT 4.11 Class A, Series A, Convertible, Subordinated Debenture
Equity Growth Systems, inc.
(a Delaware corporation)
Debenture Number 00000_
Class A, Series A, Convertible, Subordinated Debenture
$________ June __, 1999
FOR VALUE RECEIVED, Equity Growth Systems, inc., a Delaware corporation
with a class of securities registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and with offices at 8001
DeSoto Woods Drive; Sarasota, Florida 34243 (the "Registrant"), promises to pay
to the order of:
-----------------------------------
Type Name
-------------------------------------------------
Type Address
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Type Social Security or Federal Employer Identification Number
(the "Debenture Holder;" hereinafter collectively referred to with its
successors in interest and the Registrant as the "Parties"), the principal sum
of $________, together with interest thereon at the annual rate of 8%, at the
Registrant's offices, or such other address as the Debenture Holder may provide
for such purpose, subject to the following terms:
TERMS
1. Basic Terms:
(4) This Debenture is one of that series of debentures in the aggregate
principal amount of $110,000, identical in all material terms to this
one, privately placed by the Registrant solely to accredited
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investors pursuant to the provisions of Section 4(6) of the Securities
Act, and designated as the Class A, Series A, Convertible, Subordinated
Debentures.
(5) This Debenture shall be payable as follows:
(1) Interest shall be payable in one aggregate payment on the
maturity date of the Debenture, subject to tender of the
Debenture for cancellation and payment in the manner
hereinafter provided therefore. Except in the event of a
default on payment after presentation therefor, interest shall
cease on the maturity date.
(2) Principal on this Debenture shall be payable on the 366th day
following the later of its execution by the Registrant, as
evinced by the date hereon, or the tender of the total
subscription price for this Debenture, to the Registrant, in
cleared and immediately available funds.
(b) The Debenture Holder may elect to subdivide this Debenture into two or
more separate obligations, at its option, provided, however, that each
separate resulting instrument must be in an amount of at least $10,000
in principal and must be divisible by 1,000 without resulting fraction,
except as to one single certificate which will be in such amount as is
required to accurately reflect the principal balance then due.
(c) Transfers or divisions of Debentures will be affected by the
Registrant, at the written request of the Debenture Holder, including
appropriate signature guarantees (but payment of bond transfer fees
and taxes shall be the responsibility of the Debenture Holder);
provided, however, that unless the Debentures are properly registered
pursuant to Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), and comparable state blue sky laws in the state of
the transferee's domicile, no transfers will be effected unless
accompanied by an opinion of legal counsel acceptable to the
Registrant is providing attesting to the fact that the transfer will
not violate applicable laws and detailing the factual and legal basis
for such opinion.
(d) The Registrant shall immediately instruct its transfer agent to reserve
the quantity of common stock required to be issued in the event of
conversion of the Debentures and shall require its transfer agent to
maintain such reserved stock until the Debentures are either paid in
full or converted.
(e) Security and Subordination
This Debenture is an unsecured, general obligation of the Registrant.
2.01: Debentures Subordinate to Senior Indebtedness.
(a) The Registrant covenants and agrees, and each Holder of a Debenture, by
his acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this
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Section 2, the indebtedness represented by the Debentures and the
payment of the principal of and interest on each and all of the
Debentures are hereby expressly made subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness.
(b) "Senior Indebtedness" means all liabilities, contingent or otherwise,
of the Registrant (1) for borrowed money (but only if the recourse of
the lender is secured by any assets of the Registrant) and (2) with
respect to letters of credit, bankers acceptances, or similar
instruments issued or accepted by banks ("Indebtedness") incurred by
the Registrant prior to or after the date of this Debenture and any
replacement, renewal, refinancing, and extension (whether direct or
indirect) thereof; provided, however, that notwithstanding anything to
the contrary in this Debenture, Senior Indebtedness does not include
(i) any Indebtedness of the Registrant that by its terms or the terms
of the instrument creating or evidencing it expressly provides that
such Indebtedness is subordinate in right of payment to, or pari passu
in right of payment with, this Debenture and (ii) any Indebtedness
that ranks subordinate in right of payment to any other Indebtedness
of the Registrant; provided, that the limitation set forth in this
clause (ii) shall not apply to distinctions between categories of
Senior Indebtedness that exist by reason of any liens arising or
created in respect of some but not all Senior Indebtedness.
2.02: Payment Over of Proceeds Upon Dissolution, Etc.
(a) In the event of (1) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case
or proceeding in connection therewith, relative to the Registrant or
to its creditors, as such, or to its assets, or (2) any liquidation,
dissolution or other winding up of the Registrant, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy,
or (3) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of the Registrant, then and in
any such event the holders of Senior Indebtedness shall be entitled to
receive payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness, or provision shall be made for
such payment in money or money's worth, before the Holders of the
Debentures are entitled to receive any payment on account of principal
of (or premium, if any) or interest on the Debentures, and to that end
the holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any
kind or character, whether in cash, property or securities, which may
be payable or deliverable in respect of the Debentures in any such
case, proceeding, dissolution, liquidation or other winding up or
event.
(b) In the event that, notwithstanding the foregoing provisions of this
Section 2, the Holder of any Debenture shall have received any payment
or distribution of assets of the Registrant of any kind or character,
whether in case, property or securities, before all Senior Indebtedness
is paid in full or payment thereof provided for, and if such fact
shall, at or prior to the time of such payment or distribution, have
been made known to such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of
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assets of the Registrant for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
(c) The consolidation of the Registrant with, or the merger of the
Registrant into, another Person or the liquidation or dissolution of
the Registrant following the conveyance or transfer of its properties
and assets substantially as an entirety to another Person shall not be
deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshaling of assets and
liabilities of the Registrant for the purposes of this Section 2 if
the Person formed by such consolidation or into which the Registrant
is merged or the Person which acquires by conveyance or transfer such
properties and assets substantially as an entirety, as the case may
be, shall, as a part of such consolidation, merger, conveyance or
transfer, agree to comply with the Registrant's obligations under the
Senior Indebtedness.
2.03: Prior Payment to Senior Indebtedness Upon Acceleration of Debentures.
(a) In the event that any Debentures are declared due and payable before
their Stated Maturity, then and in such event the Holders of Senior
Indebtedness shall, if required pursuant to the terms of any Senior
Indebtedness, be entitled to receive payment in full of all amounts due
or to become due on or in respect of all Senior Indebtedness, or
provision shall be made for such payment in money or money's worth,
before the Holders of the Debentures are entitled to receive any
payment by the Registrant on account of the principal of (or premium,
if any) or interest on the Debentures or on account of the purchase or
other acquisition of Debentures.
(b) In the event that, notwithstanding the foregoing, the Registrant shall
make any payment to the Holder of any Debenture prohibited by the
foregoing provisions of this Section 2, such Holder, then and in such
event such payment shall be paid over and delivered forthwith to the
Registrant.
(c) The provisions of this Section 2 shall not apply to any payment with
respect to which Section 2.02 would be applicable.
2.04: No Payment when Senior Indebtedness in Default.
(a) In the event and during the continuation of (1) any default in the
payment of principal of (or premium, if any) or interest on any Senior
Indebtedness beyond any applicable grace period with respect thereto,
or in the event that any event of default with respect to any Senior
Indebtedness shall have occurred and be continuing permitting the
Holders of such Senior Indebtedness (or a trustee on behalf of the
holders thereof to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, unless and until such event of default shall have been cured
or waived or shall have ceased to exist, or (2) in the event any
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judicial proceeding shall be pending with respect to any such default,
then no payment shall be made by the Registrant on account of principal
of (or premium, if any) or interest on the
(b) Debentures or on account of the purchase or other acquisition of
Debentures.
(c) In the event that, notwithstanding the foregoing, the Registrant shall
make any payment to the Holder of any Debenture prohibited by the
foregoing provisions of this Section 2, and if such fact shall, at or
prior to the time of such payment, have been made known to such Holder,
then and in such event such payment shall be paid over and delivered
forthwith to the Registrant.
(d) The provisions of this Section 2 shall not apply to any payment with
respect to which Section 2.02 would be applicable.
2.05: Payment Permitted if No Default.
Nothing contained in this Section 2 or elsewhere in the Debentures
shall prevent (a) the Registrant, at any time except during the pendency of any
case, proceeding dissolution, liquidation or other winding up, assignment for
the benefit of creditors or other marshaling of assets and liabilities of the
Registrant referred to in Section 2.02 or under the conditions described in
Section 2.03 or 2.04, from making payments at any time of principal of (and
premiums, if any) or interest on the Debentures, or (b) the retention of such
payment by the Holders, if, at the time it did not have knowledge that such
payment would have been prohibited by the provisions of this Section 2.
2.06: Subrogation to Rights of Holders of Senior Indebtedness.
(a) Subject to the payment in full of all Senior Indebtedness, the Holders
of the Debentures shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant
to the provisions of this Section 2 (equally and ratably with the
holders of all indebtedness of the Registrant which by its express
terms is subordinated to indebtedness of the Registrant to
substantially the same extent as the Debentures are subordinated and
is entitled to like rights of subrogation) to the rights of the
holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of (and premium, if any) and
interest on the Debentures shall be paid in full.
(b) For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities
to which the Holders of the Debentures would be entitled except for the
provisions of this Section 2, and no payments over pursuant to the
provisions of this Section 2 to the Holders of Senior Indebtedness by
Holders of the Debentures shall, as among the Registrant, its creditors
other than holders of Senior Indebtedness and the Holders of the
Debentures, be deemed to be a payment or distribution by the Registrant
to or on account of the Senior Indebtedness.
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2.07: Provisions Solely to Define Relative Rights.
(a) The provisions of this Section 2 are and are intended solely for the
purpose of defining the relative rights of the Holders of the
Debentures on the one hand and the holders of Senior Indebtedness on
the other hand.
(b) Nothing contained in this Section 2 or elsewhere in the Debentures is
intended to or shall (1) impair, as among the Registrant, its
creditors other than holders of Senior Indebtedness and the Holders of
the Debentures, the obligation of the Registrant, which is absolute
and unconditional (and which, subject to the rights under this Section
2 of the holders of Senior Indebtedness, is intended to rank equally
with all other general obligations of the Registrant), to pay to the
Holders of the Debentures the principal of (and premium, if any) and
interest on the Debentures as and when the same shall become due and
payable in accordance with their terms; or (2) affect the relative
rights against the Registrant of the Holders of the Debentures and
creditors of the Registrant other than the holders of Senior
Indebtedness; or (3) prevent the Holder of any Debenture from
exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under
this Section 2 of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to such
Holder.
2.08: The Registrant to Effectuate Subordination.
Each Holder of a Debenture by his acceptance thereof authorizes and
directs the Registrant on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Section 2 and
appoints any designee of the Registrant his attorney-in-fact for any and all
such purposes.
2.09: No Waiver of Subordination Provisions.
(1) No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of
the Registrant or by any act or failure to act, in good faith, by any
such holder, or by any non-compliance by the Registrant with the terms,
provisions and covenants of this Debenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(2) Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Holders of the
Debentures, without incurring responsibility to the Holders of the
Debentures and without impairing or releasing the subordination
provided in this Section 2 or the obligation hereunder of the Holders
of the Debentures to the holders of Senior Indebtedness, do any one or
more of the following: (1) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any
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manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection of Senior Indebtedness;
and (4) exercise or refrain from exercising any rights against the
Registrant and any other Person.
2.10: Notice to Holder.
(1) The Registrant shall give prompt written notice to the Holder of any
fact known to the Registrant which would prohibit the making of any
payment to or by the Holder in respect of the Debentures.
(2) Notwithstanding the provisions of this Section 2 or any other provision
of this Debenture, the Holder shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any
payment to or by the Holder in respect of the Debentures, unless and
until the Holder shall have received written notice thereof from the
Registrant or a holder of Senior Indebtedness or from any trustee
therefor; and, prior to the receipt of any such written notice, the
Holder shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Holder shall not have received
the notice provided for in this Section 2 at least ten business days
prior to the date upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Debenture),
then, anything herein contained to the contrary notwithstanding, the
Holder shall have full power and authority to receive such money and to
apply the same to the purpose for which such money was received and
shall not be affected by any notice to the contrary which may be
received by it within ten business days prior to such date.
(3) The Registrant shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of
Senior Indebtedness (or a trustee therefor) to establish that such
notice has been given by a holder of Senior Indebtedness (or a trustee
therefor).
(4) In the event that the Registrant determines in good faith that further
evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Section 2, the Registrant may request
such Person to furnish evidence to the reasonable satisfaction of the
Registrant as to the amount of Senior Indebtedness held by such Person,
the extent to which such Person is entitled to participate in such
Payment or distribution and any other facts pertinent to the rights of
such Person under this Section 2, and if such evidence is not
furnished, the Registrant may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such
payment.
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2.11: Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Registrant referred
to in this Section 2, the Holders of the Debentures shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Holders of Debentures, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Registrant, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Section 2.
2.12: The Registrant Not Fiduciary for Holders of Senior Indebtedness.
(1) No implied covenants or obligations with respect to holders of Senior
Indebtedness shall be read into this Indenture against the Registrant.
(2) The Registrant shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such
holders if it shall in good faith mistakenly pay over or distribute to
Holders of Debentures or to the Registrant or to any other Person cash,
property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Section 2 or otherwise.
2.13: Certain Conversions Deemed Payment.
(1) For the purposes of this Section 2 only, (1) the issuance and delivery
of common stock upon conversion of Debentures as provided for in this
Debenture shall not be deemed to constitute a payment or distribution
on account of the principal of or premium or interest on Debentures or
on account of the purchase or other acquisition of Debentures, and (2)
the payment, issuance or delivery of cash, property or securities
(other than common stock) upon conversion of a Debenture shall be
deemed to constitute payment on account of the principal of such
Debenture.
(2) For the purposes of this Section 2, the term junior securities means
(1) shares of any stock of any class of the Registrant and (2)
securities of the Registrant which are subordinated in right of payment
to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Debentures are so
subordinated as provided in this Section 2.
(3) Nothing contained in this Section 2 or elsewhere in the Debentures is
intended to or shall impair, as among the Registrant, its creditors
other than holders of Senior Indebtedness and the Holders of the
Debentures, the right, which is absolute and unconditional, of the
Holder of any Debenture to convert such Debenture in accordance with
the provisions of this Debenture.
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3. Conversion, Trading, Exemptions from Securities Laws & Registration:
(a) (1) This Debenture shall, at the Debenture Holder's option, be
convertible into shares of the Registrant's common stock, $0.01 par
value per share, at a conversion price of $.50 per share, unless the
Registrant shall have split or reverse split its common stock
subsequent to the date of this Debenture, in which case, the exercise
price shall be adjusted in inverse ratio to such reverse or forward
split (e.g., in the event of a three for one split, the Debenture
Holder shall be entitled to three shares of common stock for each
$0.50 in principal and accrued interest, whereas in the event of a one
share for three reverse split, the Debenture Holder shall be entitled
to one third of a share of common stock for each $0.50 in principal
and accrued interest.
(2) Conversion may not be in part but rather must involve all of the
Debentures held by a Debenture Holder; provided that the decision of
any Debenture Holder not to convert will not preclude any other
Debenture Holder from exercising conversion rights, unless he, she or
it is merely the nominee or an alter ego of the non-exercising
Debenture Holder.
(b) This Debenture has not been registered under any federal or state
securities requirements in reliance on the exemption provided by
Section 4(6) of the Securities Act, the Debenture Holder having
heretofore confirmed to the Registrant that he, she or it is meets the
following definition of an "accredited investor" contained in Rule
501(a) of Securities and Exchange Commission (the "Commission")
Regulation D, and by acceptance of this Debenture, the Debenture Holder
hereby confirms such assertion under penalty of perjury:
"Reg. ss.230.501. As used in Regulation D (ss.ss.230.501-230.508),
the following terms shall have the meaning indicated:
(3) Accredited investor. "Accredited investor" shall mean
any person who comes within any of the following
categories, or who the issuer reasonably believes
comes within any of the following categories, at the
time of the sale of the securities to that person:
(1) Any bank as defined in section 3(a)(2) of
the Act, or any savings and loan association
or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity; any broker
or dealer registered pursuant to section 15
of the Securities Exchange Act of 1934; any
insurance company as defined in section
2(13) of the Act; any investment company
registered under the Investment Company Act
of 1940 or a business development company as
defined in section 2(a)(48) of that Act;
Small Business Investment Company licensed
by the U.S. Small Business Administration
under section 301(c) or (d) of the Small
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Business Investment Act of 1958; any plan
established and maintained by a state, its
political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions for the benefit of its
employees, if such plan has total assets in
excess of $5,000,000; employee benefit plan
within the meaning of the Employee
Retirement Income Security Act of 1974 if
the investment decision is made by a plan
fiduciary, as defined in section 3(21) of
such Act, which is either a bank, savings
and loan association, insurance company, or
registered investment adviser, or if the
employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed
plan, with investment decisions made solely
by persons that are accredited investors;
[Amended in Release No. 33-6758 (P. 84,211),
effective April 11, 1988, 53 F.R. 7866; and
Release No. 33-6825 (P. 84,404), effective
April 19, 1989, 54 F.R. 11369.]
(2) Any private business development company as
defined in section 202(a)(22) of the
Investment Advisers Act of 1940;
(3) Any organization described in Section
501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar
business trust, or partnership, not formed
for the specific purpose of acquiring the
securities offered, with total assets in
excess of $5,000,000; [Amended in Release
No. 33- 6758 (P. 84,211), effective April
11, 1988, 53 F.R. 7866.]
(4) Any director, executive officer, or general
partner of the issuer of the securities
being offered or sold, or any director,
executive officer, or general partner of a
general partner of that issuer;
(5) Any natural person whose individual net
worth, or joint net worth with that person's
spouse, at the time of his purchase exceeds
$1,000,000;
(6) Any natural person who had an individual
income in excess of $200,000 in each of the
two most recent years or joint income with
that person's spouse in excess of $300,000
in each of those years and has a reasonable
expectation of reaching the same income
level in the current year; [Amended in
Release No. 33-6758 (P. 84,221), effective
April 11, 1988, 53 F.R. 7866.]
(7) Any trust, with total assets in excess of
$5,000,000, not formed for the specific
purpose of acquiring the securities offered,
whose purchase is directed by a
sophisticated person as described in
ss.230.506(b)(2)(ii); and [Added in Release
No. 33-6758 (P. 84,221), effective April 11,
1988, 53 F.R. 7866.]
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(8) Any entity in which all of the equity owners
are accredited investors.[Amended in Release
No. 33-6758 (P. 84,221), effective April
11, 1988, 53 F.R. 7866.]"
(c) The Class A, Series A, Convertible, Subordinated Debentures will not
be subject to the protective features of the Trust Indenture Act of
1939, as amended (the "Indenture Act") pertaining to required use of
an approved form of trust indenture and the employment of an
independent trustee to protect the interests of the Debenture Holders,
pursuant to exemptive provisions of Sections 304(a)(8) and 304 (b) of
the Indenture Act and Rule 4a-1 adopted thereunder (Reg.
Section260.4a- 1). Consequently, all of the terms of the Class A,
Series A, Convertible, Subordinated Debentures are contained in this
instrument and each Debenture Holder will be required to monitor
compliance by the Registrant with its obligations hereunder directly
and to take enforcement actions individually.
(d) The Debenture Holder, by acceptance of this Debenture, hereby confirms
that
(a) He, she or it has reviewed all of the Registrant's filings
under the Exchange Act currently posted on the Commission's
Internet web site during the past 12 months, has had the
opportunity to question officers and directors of the
Registrant concerning its business, history, personnel and the
terms of the private placement pursuant to which this
Debenture was issued;
(b) Because neither this Debenture nor the shares of common stock
issuable in the event of its conversion have been registered
with the Commission or any state securities regulatory
authorities, the Debenture Holders hereby acknowledge that:
(1) This Debenture and the shares of common stock issuable upon
conversion will bear legends restricting their transfer,
sale, conveyance or hypothecation unless they are either
registered under the provisions of Section 5 of the
Securities Act and the securities laws of the Debenture
Holders state of domicile, or an opinion of legal counsel,
in form and substance satisfactory to legal counsel to the
Registrant is provided by the Debenture Holder to the effect
that such registration is not required as a result of
applicable exemptions therefrom; provided that the Parties
agree that it is their understanding that because the
exchange of the Debenture on conversion is solely in
consideration for shares of the Registrant's common stock,
the holding period applicable prior to resale under
Commission Rule 144(d) will commence on the date of the
Debenture, pursuant to the exchange of securities provisions
of Rule 144(d)(3)(ii).
(b) The Registrant's transfer agent shall be instructed not to
transfer this Debenture or any of the common stock issued on
conversion thereof unless the Registrant advises it that
such transfer is in compliance with all applicable laws; and
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(c) The Debenture Holder is acquiring this Debenture for its own
account, for investment purposes only, and not with a view
to further sale or distribution.
(e) In the event the Registrant files a registration statement during the
term of this Agreement, it shall notify all of the original Debenture
Holders of the series of debentures which includes this Debenture (the
Class A, Series A, Convertible, Subordinated Debentures") in writing,
and their successors in interest either in writing or by publication in
a newspaper of national circulation (e.g., USA Today or the Wall Street
Journal) of such intent and shall, at the request of any of them,
register their Debenture(s) and the shares of common stock underlying
the conversion rights described herein, in such registration statement.
4. Prepayment:
(a) The Debenture is pre-payable, in whole or in part, at the sole election
of the Registrant, at any time, without prepayment penalties, subject
to the following requirements:
(a) The Registrant may not selectively prepay the Debentures but
rather, unless it has elected to prepay all of the Class A,
Series A, Convertible, Subordinated Debentures, it must
notify all Class A, Series A, Convertible, Subordinated
Debenture Holders (the "Prepayment Notice"), either as
hereinafter provided by United States 1st Class Mail,
postage prepaid, addressed to the address set forth on the
face hereof or such other address as the Debenture Holder
has provided to the Registrant and the Registrant has listed
in its securities registry records; or, at the Registrant's
option, in the manner hereinbefore set forth for notice of
intent to file a registration statement with the Commission,
of its intention to partially prepay the Debentures,
specifying the terms of prepayment, and advising all
Debenture Holders who desire to voluntarily accept
prepayment to notify the Registrant on or before a specified
date no earlier than the tenth business day following the
date of the Prepayment Notice, in writing in the manner
hereinafter set forth for providing notice to the
Registrant, of such fact (the "Prepayment Request Notice").
(b) The Registrant shall first prepay the Debentures held by
persons who have provided timely Prepayment Request Notices
and if such Debenture Holders held Debentures with an
aggregate balance due exceeding the amount specified for
prepayment, the Registrant may, in its sole discretion,
either elect to increase the amount due which it is prepared
to prepay in order to prepay all of them; elect to prepay
the Debentures based on first paying Debenture Holders of
Debentures with the largest aggregate amount due; or, elect
to prepay the Debentures by random selection of Debenture
serial numbers.
(c) In the event that the aggregate amount due to the holder of
Debentures that have provided Prepayment request Notices is
less than the amount that the amount specified for
prepayment, the Registrant may, in its sole discretion,
either elect to decrease the amount due which it is prepared
to prepay in order to limit prepayment to the Debentures
held by those Debenture Holders that provided the Prepayment
Request Notice; elect to prepay the balance of the
Debentures to be prepaid based on first paying holders of
Debentures with the smallest aggregate amount due; or, elect
to prepay the Debentures by random selection of Debenture
serial numbers.
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(d) In all cases, the holders of Debentures will be provided
until not earlier than the 30th day following the date of
the Prepayment Notice, with the option of converting all
(but not less than all) of the Debentures held by them,
directly or indirectly, into shares of the Registrant's
common stock, in the manner hereinbefore provided.
5. Notices:
(a) Any demand or notice made or given by the Debenture Holder
pursuant hereto or in connection herewith shall be made upon
or given to the Registrant by registered mail, return
receipt requested, postage prepaid, directed to the
Registrant at its address as et forth on the latest Exchange
Act report filed by the Registrant with the Commission, as
reflected on the Commission's Internet we site
(www.sec.gov), unless the Registrant has ceased filing such
reports, in which case it shall be provided to the address
maintained for the Registrant by the Office of the Secretary
of State of the state in which it is then incorporated, but
making or giving or attempting to make or give any demand or
notice shall not waive any right granted hereunder or
otherwise to act without demand or notice.
(b) Any demand or notice made or given by the Registrant to any
Debenture Holder pursuant hereto or in connection herewith
shall be made upon or given to the by United States 1st
Class Mail, postage prepaid, addressed to the address set
forth on the face hereof or such other address as the
Debenture Holder has provided to the Registrant and the
Registrant has listed in its securities registry records;
or, at the Registrant's option, by publication in a
newspaper of national circulation (e.g., USA Today or the
Wall Street Journal).
6. Litigation
The Parties hereby covenant and agree that in the event that either is
required to retain an attorney to assist it in enforcing the provisions of this
Debenture, the victor in such proceeding shall, by application to the subject
tribunal, be entitled to recover from the other Party such costs, expenses and
damages associated with the actions or failures to act which led to such
decision, as such tribunal deems appropriate under the circumstances, including,
without limitation, attorneys fees actually paid throughout the course of any
negotiations, trials or appeals, but shall exclude consequential or incidental
damages.
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7. Governing Law, Venue, Process, Reformation & Enforcement
(a) This note shall be governed by and construed in accordance with the
laws of the State of Delaware but any proceedings arising hereunder
shall be adjudicated before a forum located within the county in which
the Registrant maintains its principal legal offices, or in the absence
of any such offices, its principal administrative offices.
(b) In the event any provision of this Agreement shall be deemed
unenforceable under the laws binding on a tribunal adjudicating its
validity, then the Parties hereby request that such tribunal reform
this Debenture in such manner as will most closely accomplish its
purpose without violating applicable laws or public policies.
(c) By execution and delivery of this Debenture, the Parties hereby
irrevocably accept and submit to, for themselves and in respect of
their, generally and unconditionally, to the in personam jurisdiction
of any tribunal meeting the requirements for venue set forth above.
(d) (1) The Parties hereby irrevocably consent to service of any
summons and/or legal process by registered or certified United
States air mail, postage prepaid, to the Party served at the
address determined in the manner hereinbefore set forth in
this Debenture for the provision of notice, such method of
service to constitute, in every respect, sufficient and
effective service of process in any such legal action or
proceeding.
(2) Nothing in this Agreement shall affect the right to service of
process in any other manner permitted by law.
(3) The Parties further agree that final judgment against either
of them in any legal action, suit or proceeding complying with
the foregoing provisions shall be conclusive and may be
enforced in any other jurisdiction, within or outside the
United States of America, by suit on the judgment, a certified
or exemplified copy of which shall be conclusive evidence of
the fact and the amount of the subject Party's liability.
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8. Acceptance of Terms of this Agreement by the Debenture Holders
By accepting any of the rights granted under this Debenture, the
Debenture Holder and all of the Debenture Holder's successors in interest to any
rights under this Debenture shall be conclusively presumed to have accepted all
obligations set forth herein as applying to Debenture Holders, such acceptance
constituting a condition precedent to any obligations of the Registrant to the
Debenture Holder or its successor in interest arising from the transaction
reflected in this Debenture.
9. License
This instrument is the property of The Yankee Companies, Inc., a
Florida corporation ("Yankees"), and has been licensed for use only in
conjunction with this transaction. No one may utilize this form or any
derivations thereof without the prior written consent of Yankees.
In Witness Whereof, the Registrant has executed this instrument on this
25th day of June, 1999.
Equity Growth Systems, inc.
By: ___________________________________
Charles J. Scimeca, President
[Corporate Seal]
Attest: ___________________________________
G. Richard Chamberlin, Esquire
Secretary & General Counsel
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Conversion Form
The Undersigned hereby irrevocably elects to convert all amounts due
under this Debenture and all other Class A, Series A Convertible, Subordinated
Debentures held by or on behalf of the undersigned, into shares of the
Registrant's common stock, as provided for in this Debenture.
Instructions For Registration and Delivery of Stock
Please type or print in block letters
---------------------
(Name)
--------------------------------
(Social Security or Federal Employer Identification Number)
--------------------------------
--------------------------------
(Address)
Dated: ___________
-------------------------------------
Debenture Holder's Signature
NOTICE: The signatures to this
notice of conversion must correspond
with the name as written upon the
face of the Debenture in every
particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL EXCHANGE OR BY A COMMERCIAL BANK OR A TRUST
COMPANY!
238
Assignment Form
(Please type or print in block letters)
FOR VALUE RECEIVED, ___________________ hereby sells, assigns and transfers unto
-----------------------------------------------------------
Name
-----------------------------------------------------------
Address
$_______________ of the principal amount and accrued interest of this
Debenture to which this Debenture relates, and does hereby irrevocably
constitute and appoint _______________________ attorney, to transfer the same on
the books of the Registrant with full power of substitution in the premises.
Dated: ___________
-------------------------------------
Debenture Holder's Signature
NOTICE: The signatures to this
assignment must correspond with the
name as written upon the face of the
Certificate in every particular,
without alteration or enlargement or
any change whatever.
Signature Guaranteed:
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL EXCHANGE OR BY A COMMERCIAL BANK OR A TRUST
COMPANY!
239