SERIES B DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE `ACT''), AND
MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED IN
REGULATION S UNDER THE ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF
U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE ACT) EXCEPT
PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES
LAWS.
No. B-001 US$300,000
MANAGEMENT TECHNOLOGIES, INC.
9% SERIES B CONVERTIBLE DEBENTURES DUE DECEMBER 31, 1997
THIS DEBENTURE is one of a duly authorized issue of Series B Debentures of
Management Technologies, Inc., a corporation duly organized and existing under
the laws of the State of New York (the `Company'') designated as its 9% Series
B Convertible Debenture Due December 31, 1997, in an aggregate principal amount
of $1,500,000.
FOR VALUE RECEIVED, the Company promises to pay to Henry Zieleniec, the
registered holder hereof and its successors and assigns (the `Holder''), the
principal sum of Three Hundred Thousand Dollars (US $300,000) on December 31,
1997 (the `Maturity Date''), and to pay interest on the principal sum
outstanding, at the rate of 9% per annum due and payable quarterly. Accrual of
interest shall commence on the first business day to occur after the date hereof
and shall continue until payment in full of the principal sum has been made or
duly provided for. The interest so payable will be paid to the person in whose
name this Series B Debenture (or one or more predecessor Series B Debentures) is
registered on the records of the Company regarding registration and transfers of
the Series B Debentures (the `Debenture Register''); provided, however, that
the Company's obligation to a transferee of this Series B Debenture arises only
if such transfer, sale or other disposition is made in accordance with the terms
and conditions of the Offshore Securities Subscription Agreement dated as of
January 25, 1996 between the Company and Holder (the `Subscription
Agreement'). The principal of, and interest on, this Series B Debenture are
payable 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 Series B Debenture Register of the Company as
designated in writing by the Holder hereof from time to time. The Company will
pay the principal of and all accrued and unpaid interest due upon this Series B
Debenture on the Maturity Date, less any amounts required by law to be deducted
or withheld, to the Holder of this Series B Debenture as of the tenth (10th) 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 shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Series B Debenture to
the extent of the sum represented by such check plus any amounts so deducted.
This Series B Debenture is subject to the following additional provisions:
1. The Series B Debentures are issuable in denominations of Fifty Thousand
Dollars (US$50,000) and integral multiples thereof. The Series B
Debentures are exchangeable for an equal aggregate principal amount of
Series B Debentures of different authorized denominations, as requested by
the Holders 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 Series B Debenture any amounts required to be
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withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Series B Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933,
as amended (the `Act'') and applicable state securities laws. Prior to
due presentment for transfer of this Series B Debenture, the Company and
any agent of the Company may treat the person in whose name this Series B
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 Series B 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 Series B Debenture is entitled, at its option, at
any time commencing 45 days after issue hereof to convert any or all
of the original principal amount of this Series B Debenture and
accrued interest into shares of common stock, $0.01 par value per
share, of the Company (the `Common Stock''), at a conversion price
for each share or Common Stock equal to the Market Price (as defined
below) of the Company's Common Stock. For purposes of this Section
4(a), the `Market Price'' shall be the lower of (i) 62.5% of the
average closing bid price of the Common Stock for the five (5)
business days immediately preceding the conversion date, or (ii) $.53.
Such conversion shall be effectuated by surrendering the Series B
Debentures to be converted (with a copy, by facsimile or courier, to
the Company) to the Escrow Agent and/or Company with the form of
conversion notice attached hereto as Exhibit I, executed by the Holder
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of this Series B Debenture evidencing such Holder's intention to
convert this Series B Debenture or a specified portion (as above
provided) hereof, and accompanied, if required by the Company, by
proper assignment hereof in blank. Accrued but unpaid interest shall
be subject to conversion. No fractional shares 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, with the
fraction paid in cash at the discretion of the Company. The date on
which notice of conversion is given shall be deemed to be the date on
which the Holder has delivered this Series B Debenture, with the
conversion notice duly executed, to the Escrow Agent and/or Company
or, if earlier, the date set forth in such notice of conversion if the
Series B Debenture is received by the Company within five (5) business
days thereafter. Notice of Conversion may be delivered to the Company
by telecopier to (212) 557 6967.
b) Notwithstanding the provisions of paragraph 4(a) hereof, the Company
is entitled, at it option, to redeem part or all of the Series B
Debentures upon maturity hereof by paying to the holder the product of
(i) the Market Price, and (ii) the higher number of shares of Common
Stock that would be issuable for such Series B Debentures pursuant to
the calculations in paragraph 4(a) or to require the Holder to convert
pursuant to paragraph 4(a) hereof. Such payment shall include accrued
interest to such date, and shall be less any amounts required by law
to be deducted or withheld. Such payment shall be made by delivering
immediately available funds in United States Dollars by wire transfer
to the Holder, or if no wiring instructions have been provided to the
company, by cashier's or certified check to the last address of Holder
appearing on the Debenture Register. The wiring of such funds or the
forwarding of such check shall constitute a payment of principal and
interest hereunder and shall satisfy and discharge the liability for
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principal and interest on this Series B Debenture to the extent of the
sum represented by such wire or check plus any amount so deducted.
5. No provision of this Series B Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Series B Debenture at the time, place,
and rate, and in the coin currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, bringing of suit and
diligence in taking any action to collect amounts called for hereunder and
shall be directly and primarily liable for the payment of all sums owing
and to be owing hereon, regardless of and without any notice, diligence,
act or omission as or with respect to the collection of any amount called
for hereunder.
7. The Company agrees to pay all costs and expenses, including reasonable
attorneys' fees, which may be incurred by the Holder in collecting any
amount due under this Series B Debenture.
8. If one or more of the following described ``vents of Default'' shall
occur:
a) The Company shall default in the payment of principal or interest on
this Series B Debenture; or
b) Any of the representations or warranties made by the Company herein,
in the Subscription Agreement, or in any certificate or financial or
other written statements heretofore or hereafter furnished by or on
behalf of the Company in connection with the execution and delivery of
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this Series B Debenture or the Subscription Agreement shall be false
or misleading in any material respect at the time made; or
c) 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 this Series B Debenture and such
failure shall continue uncured for a period of seven (7) days after
notice from the Holder of such failure; or
d) The Company shall (1) become insolvent; (2) admit in writing its
liability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for
its dissolution; or (4) 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
e) 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 thirty (30) days after such
appointment; or
f) 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 thirty (30) days
thereafter; or
g) 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
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unstayed for a period of fifteen (15) days or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
h) 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
thirty (30) days after such instruction of 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
i) The Company shall have its Common Stock delisted from an exchange or
over-the-counter market.
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 Series B 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, and without expiration of any period of grace, enforce any and
all of the Holder's rights and remedies provided herein or any other rights
or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of, or the
interest on, this Series B 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
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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.
10. The Holder of this Series B Debenture, by acceptance hereof, agrees that
this Series B Debenture is being acquired for investment and that such
Holder will not offer, sell or otherwise dispose of this Series B Debenture
or the Shares of Common Stock issuable upon exercise thereof except under
circumstances which will not result in a violation of the Act or any
applicable state Blue Sky law or similar laws relating to the sale of
securities.
11. In case any provision of this Series B Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Series B
Debenture will not in any way be affected or impaired thereby.
12. This Series B Debenture and the agreements referred to in this Series B
Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof.
Neither this Series B Debenture nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the
Company and the Holder.
13. This Debenture is one of a series of Company's Series B Debentures and all
Debentures of this issue rank equally and ratably without priority over one
another.
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14. This Series B Debenture shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: January 25, 1996
MANAGEMENT TECHNOLOGIES, INC.
/s/ Peter Morris
By: Peter Morris
Title: President and Chief Operating Officer
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EXHIBIT I
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Series B
Debenture)
The undersigned hereby irrevocably elects to convert $ of the
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above Series B Debenture No. into Shares of Common Stock of Management
---
Technologies, Inc. (the ``ompany'') according to the conditions set forth in
such Series B Debenture, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Series B Debenture on behalf of any U.S. Person.
Date of Conversion*
Applicable Conversion Price
Signature
[Name]
Address:
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* This original Series B Debenture and Notice of Conversion must be received by
the Company by the fifth business date following the Date of Conversion.
PATH: office/mngmnt/exhibit.