EXHIBIT 10.21
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THIS DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY,
THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD UNLESS
THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION D OR
PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT
AND THE COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH
INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE
AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE MADE
EXCEPT IN COMPLIANCE WITH THE ACT.
DEBENTURE
IVOICE, INC.
5% Convertible Debenture
Due June ___, 2004
No. ___ $150,000
This Debenture is issued by IVOICE, INC., a Delaware corporation (the
"Company"), to ____________________________ (together with its permitted
successors and assigns, the "Holder") pursuant to exemptions from registration
under the Securities Act of 1933, as amended.
ARTICLE I.
Section 1.01 PRINCIPAL AND INTEREST. For value received, on June ___, 2002,
the Company hereby promises to pay to the order of the Holder in lawful money of
the United States of America and in immediately available funds the principal
sum of __________________(US $________), together with interest on the unpaid
principal of this Debenture at the rate of five percent (5%) per year (computed
on the basis of a 365-day year and the actual days elapsed) from the date of
this Debenture until paid. Unless converted earlier in accordance with Section
1.02 hereof, all amounts due hereunder shall automatically convert into shares
of the Company's Class A common stock, par value $0.001 per share ("Common
Stock"), on the second anniversary of the date hereof. Any such conversion shall
be on the terms specified in Section 1.02 hereof, except that the Conversion
Price (as defined in Section 1.02) that is used shall be the one that results in
the greatest number of shares of Common Stock being issued to the Holder.
Section 1.02 CONVERSION. The Holder is entitled, at its option, to convert,
and sell on the same day, at any time and from time to time, until payment in
full of this Debenture, all or any part of the principal amount of the
Debenture, plus accrued interest, into shares (the "Conversion Shares") of the
Company's Common Stock at the price per share (the "Conversion Price") equal to
either (a) an amount equal to one hundred twenty percent (120%) of the closing
bid price of the Common Stock as listed on a Principal Market (as defined
herein), as quoted by Bloomberg L.P. (the "Closing Bid Price") as of the date
hereof, or (b) an amount equal to eighty percent (80%) of the average of the
four (4) lowest Closing Bid Prices of the Common Stock for the five (5) trading
days immediately preceding the Conversion Date (as defined herein).
Subparagraphs (a) and (b) above are individually referred to as a "Conversion
Price". As used herein, "Principal Market" shall mean the Over-the-Counter
Bulletin Board, Nasdaq SmallCap Market, or American Stock Exchange. If the
Common Stock is not traded on a Principal Market, the Closing Bid Price shall
mean, the reported Closing Bid Price for the Common Stock, as furnished by the
National Association of Securities Dealers, Inc., for the applicable periods. No
fraction of 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. To convert this Debenture, the Holder hereof shall deliver written
notice thereof, substantially in the form of Exhibit "A" to this Debenture, with
appropriate insertions (the "Conversion Notice"), to the Company at its address
as set forth herein. The date upon which the conversion shall be effective (the
"Conversion Date") shall be deemed to be the date set forth in the Conversion
Notice.
Section 1.03 RIGHT OF REDEMPTION. The Company at its option shall have the
right to redeem, with ten (10) business days advance written notice (the
"Redemption Notice"), a portion or all outstanding convertible debenture. The
redemption price shall be one hundred twenty percent (120%) of the amount
redeemed plus accrued interest. Once the Company has issued to the Holder a
Redemption Notice the Holder may continue to execute conversions only as long as
the closing bid price of the Company's Common Stock the day prior to conversion
is above the Fixed Price.
In the event the Company exercises a redemption of either all or a portion the
Convertible Debenture, the Holder shall receive a warrant to purchase ten
thousand (10,000) shares of the Company's Common Stock for every One Hundred
Thousand Dollars ($100,000) redeemed, pro rata (the "Warrant"). The Warrant
shall be exercisable on a "cash basis" and have an exercise price equal to one
hundred twenty percent (120%) of the Closing Bid Price of the Common Stock as
listed on a Principal Market as of the date hereof, per share. The Warrant shall
have "piggy-back" and demand registration rights and shall survive for two (2)
years from the Closing Date.
Section 1.04 RESERVATION OF COMMON STOCK. The Company shall reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Debenture, such number of
shares of Common Stock as shall from time to time be sufficient to effect such
conversion, based upon the Conversion Price. If at any time the Company does not
have a sufficient number of Conversion Shares authorized and available, then the
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Company shall call and hold a special meeting of its stockholders within thirty
(30) days of that time for the sole purpose of increasing the number of
authorized shares of Common Stock.
Section 1.05 REGISTRATION RIGHTS. The Company is obligated to register the
resale of the Conversion Shares under the Securities Act of 1933, as amended,
pursuant to the terms of a Registration Rights Agreement, between the Company
and the Holder of even date herewith (the "Investor Registration Rights
Agreement").
Section 1.06 INTEREST PAYMENTS. The interest so payable will be paid at the
time of maturity or conversion to the person in whose name this Debenture is
registered. At the time such interest is payable, the Company, in its sole
discretion, may elect to pay interest in cash (via wire transfer or certified
funds) or in the form of Common Stock. In the event of default, as described in
Article III Section 3.01 hereunder, the Holder may elect that the interest be
paid in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of Common Stock, the amount of stock to be issued
will be calculated as follows: the value of the stock shall be the Closing Bid
Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
Section 1.07 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
paying agent and registrar. The Company may change any paying agent, registrar,
or Company-registrar by giving the Holder not less than ten (10) business days'
written notice of its election to do so, specifying the name, address, telephone
number and facsimile number of the paying agent or registrar. The Company may
act in any such capacity.
Section 1.08 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all
payments hereon, including principal or interest, shall be subordinate and
junior in right of payment to all accounts payable of the Company incurred in
the ordinary course of business and/or bank debt of the Company not to exceed
$400,000.
ARTICLE II.
Section 2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Holder. Without the consent of the Holder, the Debenture
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company obligations to the Holder or to make any change that
does not adversely affect the rights of the Holder.
ARTICLE III.
Section 3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
(a) failure by the Company to pay amounts due hereunder within fifteen (15) days
of the date of maturity of this Debenture; (b) failure by the Company to comply
with the terms of the Irrevocable Transfer Agent Instructions attached to the
Securities Purchase Agreement; (c) failure by the Company's transfer agent to
issue Common Stock to the Holder within ten (10) days of the Company's receipt
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of the attached Notice of Conversion from Holder; (d) failure by the Company for
ten (10) days after notice to it to comply with any of its other agreements in
the Debenture; (e) events of bankruptcy or insolvency; (f) a breach by the
Company of its obligations under the Securities Purchase Agreement or the
Investor Registration Rights Agreement which is not cured by the Company within
ten (10) days after receipt of written notice thereof.
Section 3.02 FAILURE TO ISSUE UNRESTRICTED COMMON STOCK. As indicated in
Article III Section 3.01, a breach by the Company of its obligations under the
Investor Registration Rights Agreement shall be deemed an Event of Default,
which if not cured within ten (10) days, shall entitle the Holder accelerated
full repayment of all debentures outstanding. The Company acknowledges that
failure to honor a Notice of Conversion shall cause irreparable harm to the
Holder.
ARTICLE IV.
Section 4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time following the date of closing, into shares of
Common Stock at a price equal to the Conversion Price as described in Section
1.02 above.
Section 4.02 RE-ISSUANCE OF DEBENTURE. When the Holder elects to convert a
part of the Debenture, then the Company shall reissue a new Debenture in the
same form as this Debenture to reflect the new principal amount.
Section 4.03 TERMINATION OF CONVERSION RIGHTS. The Holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on the date that is the second (2nd) year anniversary from the
date hereof and this Debenture shall be automatically converted on that date in
accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of Common Stock and amount of interest shall be issued to the
Holder.
ARTICLE V.
Section 5.01 ANTI-DILUTION. In the event that the Company shall at any time
subdivide the outstanding shares of Common Stock, or shall issue a stock
dividend on the outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
Section 5.02 CONSENT OF HOLDER TO SELL COMMON STOCK. Except for the Equity
Line of Credit Agreement dated the date hereof between the Company and Cornell
Capital Partners, LP. so long as any of the principal of or interest on this
Note remains unpaid and unconverted, the Company shall not, without the prior
consent of the Holder, issue or sell (i) any Common Stock without consideration
or for a consideration per share less than its fair market value determined
immediately prior to its issuance, (ii) issue or sell any warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Stock without consideration or for a
consideration per share less than such Common Stock's fair market value
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determined immediately prior to its issuance, or (iii) file any registration
statement on Form S-8.
ARTICLE VI.
Section 6.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company, to: Ivoice, Inc.
Attention: Jerome R. Mahoney, CEO
750 Highway 34
Matawan, NJ 07747
Telephone: (732) 441-7700
Facsimile: (732) 441-9895
With a copy to: Kirkpatrick & Lockhart LLP
201 South Biscayne Boulevard - Suite 2000
Miami, FL 33131-2399
Attention: Clayton E. Parker, Esq.
Telephone: (305) 539-3300
Facsimile: (305) 358-7095
If to the Holder: Cornell Capital Partners, LP
101 Hudson Street - Suite 3606
Jersey City, NJ 07302
Attention: Mark Angelo
Facsimile: (201) 985-8622
With a copy to: Butler Gonzalez LLP
1000 Stuyvesant Avenue - Suite 6
Union, NJ 07083
Attention: David Gonzalez, Esq.
Telephone: (908) 810-8588
Facsimile: (908) 810-0973
Section 6.02 GOVERNING LAW. This Debenture shall be deemed to be made under
and shall be construed in accordance with the laws of the State of Delaware
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
District of the State of New Jersey or the state courts of the State of New
Jersey sitting in Hudson County, New Jersey in connection with any dispute
arising under this Debenture 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.
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Section 6.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
Section 6.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
Section 6.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Company
as executed this Debenture as of the date first written above.
IVOICE, INC.
By: __________________________________
Name: Jerome R. Mahoney
Title: President and CEO
EXHIBIT "A"
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NOTICE OF CONVERSION
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(To be executed by the Holder in order to Convert the Note)
TO:
The undersigned hereby irrevocably elects to convert $ __________________
of the principal amount of the above Note into Shares of Common Stock of IVOICE,
INC., according to the conditions stated therein, as of the Conversion Date
written below.
Conversion Date: ______________________________________________
Applicable Conversion Price: ______________________________________________
Signature: ______________________________________________
Name: ______________________________________________
Address: ______________________________________________
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Amount to be converted: $ ______________________________________________
Amount of Debenture
unconverted: $ ______________________________________________
Conversion Price per share: $ ______________________________________________
Number of shares of Common Stock
to be issued: ______________________________________________
Please issue the shares of
Common Stock in the following name
and to the following address: ______________________________________________
Issue to: ______________________________________________
Authorized Signature: ______________________________________________
Name: ______________________________________________
Title: ______________________________________________
Phone Number: ______________________________________________
Broker DTC Participant Code: ______________________________________________
Account Number: ______________________________________________
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