FORM OF DEBENTURE
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (II)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY DEBENTURE ISSUED
IN EXCHANGE FOR THIS DEBENTURE.
DIMENSIONAL VISIONS INCORPORATED
Series A 12% Convertible Secured Debenture
$__________ July ___, 1998
FOR VALUE RECEIVED, Dimensional Visions Incorporated, a Delaware
corporation (the "Company") with its principal executive office at 2301 West
Dunlap Avenue, Suite 207, Phoenix, Arizona 85021, promises to pay to the order
of __________________ (the "Payee" or the "Holder of this Debenture") or
registered assigns on July 31, 2001 (the "Maturity Date"), the principal sum of
__________ ($______________) (the "Principal Amount"), in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, together with interest thereon at
the rate of twelve (12%) percent per annum (the "Stated Rate"), payable as
hereinafter set forth in cash, or at the option of the Holder of this Debenture,
in the Company's Common Stock as provided in SECTION 4 hereof. Payment of
interest shall be made at the Stated Rate on July 31, 1999 and each July 31
thereafter (an "Interest Payment Date") through the Maturity Date at the address
designated above or at such other place as the Payee shall have notified the
Company in writing at least five (5) days before such payment is due.
Each payment by the Company pursuant to this Debenture shall be made
without setoff or counterclaim and in immediately available funds.
This Debenture is one of a duly authorized issue of Debentures of the
Company designated as its Series A 12% Convertible Secured Debenture due July
31, 2001 (herein called the
"Debentures"), limited in aggregate principal amount to Five Hundred Thousand
Dollars ($500,000).
The amount of all repayments of principal, interest rates applicable
thereto and interest accrued thereon shall be recorded on the records of the
Payee and, prior to any transfer of, or any action to collect, this Debenture
shall be endorsed on this Debenture. Any such recordation or endorsement shall
constitute PRIMA FACIE evidence of the accuracy of the information so recorded
or endorsed, but the failure to record any such amount or rate shall not limit
or otherwise affect the obligations of the Company hereunder to make payments of
principal or interest when due. All payments by the Company hereunder shall be
applied first to pay any interest which is due, but unpaid ("Accrued Interest"),
then to reduce the Principal Amount.
The Company (i) waives presentment, demand, protest, or notice of any
kind in connection with this Debenture and (ii) agrees, in the event of an Event
of Default (as defined in Section 2 hereof), to pay to the Holder of this
Debenture, on demand, all costs and expenses (including reasonable legal fees)
incurred in connection with the enforcement and collection of this Debenture. If
the date for any payment due hereunder would otherwise fall on a day which is
not a Business Day, such payment or expiration date shall be extended to the
next following Business Day with interest payable at the applicable rate
specified herein during such extension. "Business Day" shall mean any day other
than a Saturday, Sunday, or any day which shall be in the State of Arizona a
legal holiday or a day on which banking institutions are authorized by law to
close.
In the event that for any reason the Company shall fail to pay to the
Holder of this Debenture when due all or any portion of the unpaid Accrued
Interest or Principal Amount of this Debenture, interest shall accrue and be
payable on such due but unpaid amounts at a rate per annum (the "Default Rate")
equal to the Stated Rate plus four percent (4%) (but in no event higher than the
maximum rate permitted by law) from the date when first due until and including
the date when actually collected by the Holder of this Debenture. Such interest
shall be payable on demand.
In consideration for the loan evidenced by this Debenture and other
identical Debentures in the aggregate Principal Amount of up to Five Hundred
Thousand Dollars ($500,000), the Company shall issue to the Holders of this
Debenture warrants to purchase 25,000 shares of the Company's common stock, at
an exercise price of Fifty Cents ($0.50) per share (subject to adjustment) (the
"Warrant") for each Twenty Five Thousand Dollars ($25,000) Principal Amount of
Debentures.
THE OBLIGATIONS OF THE COMPANY UNDER THE DEBENTURES ARE SECURED
PURSUANT TO A SEPARATE SECURITY AGREEMENT.
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1. CONVERSION OF DEBENTURE.
A. CONVERSION. This Debenture is convertible, in whole or in
part, at the option of the Holder, into shares of the Company's common stock,
par value $.001 (the "Common Stock") at any time prior to the repayment of this
Debenture at the rate of One Dollar ($1.00) per share (the "Conversion Price")
(i.e., one share of Common Stock for each One Dollar ($1.00) of principal amount
converted) subject to adjustment as hereinafter provided.
B. ADJUSTMENT BASED UPON STOCK DIVIDENDS, COMBINATION OF
SHARES OR RECAPITALIZATION. In the event that the Company shall at any time (i)
pay a stock dividend, (ii) subdivide its outstanding shares of Common Stock into
a greater number of shares, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares, or (iv) issue by reclassification of its shares
of Common Stock any other special capital stock of the Company, the Holder, upon
surrender of this Debenture for conversion, shall be entitled to receive the
number of shares of Common Stock or other capital stock of the Company which he
would have owned or have been entitled to receive after the happening of any of
the events described above had this Debenture been converted immediately prior
to the happening of such event.
C. ADJUSTMENT BASED UPON MERGER OR CONSOLIDATION. In case of
any consolidation or merger to which the Company is a party (other than a merger
in which the Company is the surviving entity and which does not result in any
reclassification of or change in the outstanding Common Stock of the Company),
or in case of any sale or conveyance to another corporation of the property of
the Company as an entirety or substantially as an entirety, the Holder shall
have the right to convert this Debenture into the kind and amount of securities
and property receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such Debenture might
have been converted immediately prior thereto.
D. EXERCISE OF CONVERSION PRIVILEGE. The conversion privilege
provided for herein shall be exercisable in whole or in part by the Holder by
written notice to the Company and the surrender of this Debenture in exchange
for up to the number of shares of Common Stock into which this Debenture is
convertible based upon the Conversion Price. If the entire amount of this
Debenture is not so exercised, the Company shall issue a new Debenture
representing the remaining outstanding Principal Amount.
E. CORPORATE STATUS OF SHARES TO BE ISSUED. All shares of the
Company's Common Stock which may be issued upon the conversion of this Debenture
shall, upon issuance, be fully paid and non-assessable.
F. ISSUANCE OF STOCK CERTIFICATE. Upon the conversion of this
Debenture, the Company shall in due course issue to the Holder a certificate or
certificates representing the number of shares of its Common Stock to which the
conversion relates.
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G. STAMP TAXES, ETC. The Company shall pay all documentary,
stamp or other transactional taxes attributable to the issuance or delivery of
the Common Stock upon conversion of this Debenture; PROVIDED, HOWEVER, that the
Company shall not be required to pay any taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificate for such
Common Stock in a name other than that of the Holder of this Debenture and the
Company shall not be required to issue or deliver any such certificate unless
and until the person requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the Company's
satisfaction that such tax has been paid.
2. EVENTS OF DEFAULT
A. The term "Event of Default" shall mean any of the events
set forth in this SECTION 2A:
(a) NON-PAYMENT OF OBLIGATIONS. The Company shall
default in the payment of the principal or accrued interest of this
Debenture as and when the same shall become due and payable, whether by
acceleration or otherwise.
(b) BANKRUPTCY, INSOLVENCY, ETC. The Company shall:
(i) become insolvent or generally fail or be
unable to pay, or admit in writing its inability to pay, its
debts as they become due;
(ii) apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any of its property, or make a
general assignment for the benefit of creditors;
(iii) in the absence of such application,
consent or acquiesce in, permit or suffer to exist the
appointment of a trustee, receiver, sequestrator or other
custodian for the Company or for any part of its property;
(iv) permit or suffer to exist the
commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy
or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Company, and, if
such case or proceeding is not commenced by the Company or
converted to a voluntary case, such case or proceeding shall
be consented to or acquiesced in by the Company or shall
result in the entry of an order for relief; or
(v) take any corporate or other action
authorizing, or in furtherance of, any of the foregoing.
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(c) JUDGMENTS. A judgment which, with other such
outstanding judgments against the Company and its subsidiaries (in each
case to the extent not covered by insurance), exceeds an aggregate of
One Hundred Thousand Dollars($100,000), shall be rendered against the
Company or any subsidiary and, within fifteen (15) days after entry
thereof, such judgment shall not have been discharged or execution
thereof stayed pending appeal, or, within fifteen (15) days after the
expiration of any such stay, such judgment shall not have been
discharged.
(d) SECURITY AGREEMENT. The Company shall breach or
default under any provision of the Security Agreement.
B. ACTION IF BANKRUPTCY. If any Event of Default described in
clauses (b)(i) through (v) of Section 2A shall occur, the outstanding principal
amount of this Debenture and all other obligations hereunder shall automatically
be and become immediately due and payable, without notice or demand.
C. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in clauses (b)(i) through (v) of
Section 2A) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Holder of this Debenture may, upon notice to the Company,
declare all or any portion of the outstanding principal amount of this Debenture
together with interest accrued thereon to be due and payable and any or all
other obligations hereunder to be due and payable, whereupon the full unpaid
principal amount hereof, such accrued interest, and any and all other such
obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand, or presentment.
D. REMEDIES. Subject to the provisions of Section 2C and 3A
hereof, in case any Event of Default shall occur and be continuing, the Holder
of this Debenture may proceed to protect and enforce its rights by a proceeding
seeking the specific performance of any covenant or agreement contained in this
Debenture or the Security Agreement, or in aid of the exercise of any power
granted in this Debenture or may proceed to enforce the payment of this
Debenture or to enforce any other legal or equitable rights as such Holder.
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3. AMENDMENTS AND WAIVERS.
A. WAIVERS, AMENDMENTS, ETC.
(a) The provisions of this Debenture may from time to
time be amended, modified or waived, if such amendment, modification,
or waiver is in writing and consented to by the Company and the holders
of not less than 50% in principal amount of the Debentures (the
"Required Holders"); PROVIDED, HOWEVER, that no such amendment,
modification or waiver:
(i) which would modify this Section 3A,
change the definition of "Required Holders", extend the
Maturity Date, or subject the Payee under each Debenture to
any additional obligations shall be made without the consent
of the Payee of each Debenture, or
(ii) which would reduce the amount of any
payment or prepayment of principal of or interest on any
principal amount payable hereunder (or reduce the principal
amount of or rate of interest payable hereunder) shall be made
without the consent of the Holder of each Debenture so
affected.
(b) No failure or delay on the part of the Payee in
exercising any power or right under this Debenture shall not operate as
a waiver thereof, nor shall any single or partial exercise of any such
power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the
Company in any case shall entitle it to any notice or demand in similar
or other circumstances. No waiver or approval by the Payee shall,
except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
(c) To the extent that the Company makes a payment or
payments to the Payee, and such payment or payments or any part thereof
are subsequently for any reason invalidated, set aside, and/or required
to be repaid to a trustee, receiver, or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause,
then to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not
occurred.
(d) After any waiver, amendment, or supplement under
this section becomes effective, the Company shall mail to the Holders
of the Debentures a copy thereof.
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4. COMMON STOCK IN LIEU OF INTEREST.
At the sole discretion of the Holder, the Holder may elect to
receive one share of Common Stock for each one dollar of interest due to Holder
on any Interest Payment Date (i.e., Common Stock at the rate of $1.00 per share)
partially or entirely in lieu of cash payment of interest, by notifying the
Company of its election to receive the Common Stock at least five (5) days prior
to any Interest Payment Date. The number of shares of Common Stock so issued
shall be subject to adjustment in accordance with SECTION 1B AND 1C hereof.
5. REDEMPTION/PREPAYMENT.
The Company may not redeem or prepay this Debenture, except
that the Company may redeem or prepay this Debenture, in whole, but not in part,
at any time on or after July 31, 1999, upon 30 days prior written notice, for
the outstanding Principal Amount and Accrued Interest, but only if a
registration statement with respect to the Common Stock issuable on conversion
of this Debenture is then effective under the Securities Act of 1933, as
amended.
6. MISCELLANEOUS.
A. PARTIES IN INTEREST. All covenants, agreements, and
undertakings in this Debenture binding upon the Company or the Payee shall bind
and inure to the benefit of the successors and permitted assigns of the Company
and the Payee, respectively, whether so expressed or not.
(a) REGISTERED HOLDER. The Company may consider and
treat the person in whose name this Debenture shall be registered as
the absolute owner thereof for all purposes whatsoever (whether or not
this Debenture shall be overdue) and the Company shall not be affected
by any notice to the contrary. In case of transfer of this Debenture by
operation of law, the transferee agrees to notify the Company of such
transfer and of its address, and to submit appropriate evidence
regarding such transfer so that this Debenture may be registered in the
name of the transferee. This Debenture is transferable only on the
books of the Company by the Holder hereof, in person or by attorney, on
the surrender hereof, duly endorsed. Communications sent to any
registered owner shall be effective as against all Holders or
transferees of the Debenture not registered at the time of sending the
communication.
B. GOVERNING LAW. This Debenture shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
any conflict provisions therein.
C. NOTICES. Unless otherwise provided, all notices required or
permitted under this Debenture shall be in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified, (ii)
upon confirmed delivery by Federal Express or other nationally
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recognized courier service providing next-business-day delivery, or (iii) three
(3) business days after deposit with the United States Postal Service, by
registered or certified mail, postage prepaid and addressed to the party to be
notified, in each case at the address set forth below, or at such other address
as such party may designate by written notice to the other party (provided that
notice of change of address shall be effective upon receipt by the party to whom
such notice is addressed).
If sent to Payee, notices shall be sent to the following address:
________________________________
________________________________
________________________________
________________________________
If sent to the Company, notices shall be sent to the following address:
Dimensional Visions Incorporated
2301 West Dunlap Avenue
Suite 207
Phoenix, Arizona 85201
John D. McPhilimy, President
D. WAIVER OF JURY TRIAL. THE PAYEE AND THE COMPANY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS DEBENTURE OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR
THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S EXTENDING
CREDIT PURSUANT TO THIS DEBENTURE.
IN WITNESS WHEREOF, this Debenture has been executed and delivered on
the date specified above by the duly authorized representative of the Company.
DIMENSIONAL VISIONS INCORPORATED
By:________________________________
John D. McPhilimy
President