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EXHIBIT 10.19
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION SHALL NO LONGER BE REQUIRED.
7% CONVERTIBLE DEBENTURE DUE DECEMBER 28, 2004
$1,000,000 December 29, 1999
New York, New York
1. CONSIDERATION. FOR VALUE RECEIVED, IBIZ TECHNOLOGY CORP., a
Florida corporation (the "undersigned" or the "Company"), hereby promises to pay
to the order of GLOBE UNITED HOLDINGS, INC., a British Virgin Islands
corporation at its offices located at Akara Building, Wickhams Cay #1, Road Town
Tortola, British Virgin Islands or at such other place as the holder hereof (the
"holder" or the "Registered Holder") shall designate to the undersigned in
writing, in lawful money of the United States of America or in New York Clearing
House Funds, the principal amount of One Million Dollars, and to pay interest
(computed on the basis of a 360-day year and the actual number of days elapsed)
on the unpaid principal amount hereof at the rate of seven (7 %) percent per
annum. The undersigned promises to pay the said principal sum and interest in
accordance with the terms of this Debenture.
2. PAYMENT. Until this Debenture is completely retired the
undersigned shall make payments of accrued interest on this Debenture on the
first day of April and November in each year (commencing with April 1, 2000),
computed at the rate of 7% per annum on the unpaid principal balance of this
Debenture for the period from the date of this Debenture until the date of such
interest payment. On December 28, 2004 (the "Maturity Date") the undersigned
shall pay the holder all unpaid principal and interest on this Debenture.
Principal and interest shall be payable at the most recent address
as the Registered Holder shall have designated to the Company in writing. No
payment of the principal of the Debenture may be made prior to the Maturity Date
by the Company without the consent of the Registered Holder, except as otherwise
provided herein. At the Registered Holder's option, any interest payments on
this Debenture may be made in the form of the issuance to the holder of the
Company's common stock, par value $.001 per share (the "Common Stock"), with the
number of shares of
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such Common Stock to be payable in respect of such interest payments to be
determined in accordance with the provisions of Section 6, as if such interest
payment were a portion of the principal amount of the Debenture to be converted
into Common Stock.
3. OVERDUE INTEREST PAYMENTS. Interest on the indebtedness evidenced
by this Debenture after default or maturity accelerated or otherwise shall be
due and payable at the rate of eighteen (18%) percent per annum, subject to the
limitations of applicable law.
4. HOLIDAYS. If this Debenture or any installment hereof becomes due
and payable on a Saturday, Sunday or public holiday under the laws of the State
of New York, the due date hereof shall be extended to the next succeeding
business day and interest shall be payable at the rate of seven (7%) percent per
annum during such extension. All payments received by the holder shall be
applied first to the payment of all accrued interest payable hereunder.
5. ISSUANCE OF DEBENTURES. This Debenture has been issued by the
Company pursuant to the authorization of the Board of Directors of the Company
(the "Board") and issued pursuant to a Securities Purchase Agreement, dated as
of the date hereof, by and between the Company and the Purchasers identified
therein (the "Securities Purchase Agreement"). Pursuant to the Securities
Purchase Agreement, the Company issued an aggregate of $1,000,000 principal
amount of the Debentures and warrants to purchase 200,000 shares of Common Stock
(the "Warrants"). The Securities Purchase Agreement contains certain additional
terms that are binding upon the Company and each Registered Holder of the
Debentures. A copy of the Securities Purchase Agreement may be obtained by any
registered holder of the Debentures from the Company upon written request.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Securities Purchase Agreement. The Debentures, together with any
debentures from time to time issued in replacement thereof, whether pursuant to
transfer and assignment, partial conversion thereof or otherwise, are
collectively referred to herein as the "Debentures."
6. CONVERSION. (a) Subject to and in compliance with the provisions
hereof, the holder shall have the right to convert all or a portion of the
outstanding principal amount of this Debenture into such number of shares of
Common Stock (the shares of Common Stock issuable upon conversion of, and
issuable in respect of interest payments on, this Debenture are hereinafter
referred to as the "Conversion Shares") as shall equal the quotient obtained by
dividing (x) the principal amount of this Debenture to be converted by (y) the
Applicable Conversion Price (as hereinafter defined) and by surrender of this
Debenture, such surrender to be made in the manner provided herein.
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(b) For purposes hereof the term "Applicable Conversion Price" shall
mean the lesser of (i) $0.94 (the "Fixed Price") or (ii) the product obtained by
multiplying (x) the Average Closing Price (as hereinafter defined) by (y) .80.
For purposes hereof the "Average Closing Price" with respect to any
conversion elected to be made by the holder shall be the average of the daily
closing bid prices (each such price is referred to individually as a "Floating
Reference Price" and, collectively, as the "Floating Reference Prices") for any
three trading days, as selected by the holder, out of the twenty trading days
immediately preceding the date on which the holder gives the Company a written
notice of the holder's election to convert outstanding principal of this
Debenture. The closing bid price on any trading day shall be (a) if the Common
Stock is then listed or quoted on either the NASD Bulletin Board, the NASDAQ
SmallCap Market or the NASDAQ National Market, the reported closing bid price
for the Common Stock as reported by Bloomberg, L.P. ("Bloomberg") or The Wall
Street Journal (the "Journal") on such day (or, if not so reported, as otherwise
reported by The Nasdaq Small Cap Market), (b) if the Common Stock is listed on
either the American Stock Exchange or New York Stock Exchange, the last reported
sales price for the Common Stock on such exchange on such day as reported by
Bloomberg or the Journal or (c) if no such prices are reported for the Common
Stock by Bloomberg or the Journal, then the average of such prices of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the prices of the Common Stock cannot be calculated on
such date on any of the foregoing bases, such prices on such date shall be the
fair market value as determined by an unaffiliated investment bank selected by
Registered Holder for which the calculation is required in order to determine
the Applicable Conversion Price. "Trading day" shall mean any day on which the
Company's Common Stock is traded for any period on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
(c) If, during any period following the issuance of this Debenture,
as a result of the occurrence of any of the events set forth in Section 3(f) or
3(g) of the Registration Rights Agreement, dated as of the date hereof, by and
between the Company and the purchasers set forth therein (the "Registration
Rights Agreement"), the Purchasers set forth therein are not able to sell shares
of Common Stock issuable upon conversion of, or in lieu of interest payments on,
this Debenture pursuant to a registration statement filed pursuant to such
agreement, the Registered Holder shall have the right, for any purpose under
this Debenture during such period and thereafter, to designate as the Applicable
Conversion Price any Conversion Price that would have been applicable during
such period had the Registered Holder delivered a Notice of Conversion with
respect to any portion of this Debenture. "Conversion Date" shall have the
meaning given such term in Section 5(b) of the Securities Purchase Agreement.
(d) The Registered Holder shall convert this Debenture in accordance
with Section 5 of the Securities Purchase Agreement. If the Company
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fails to deliver to the holder a certificate or certificates for shares of
Common Stock in the period set forth in the Securities Purchase Agreement, the
Company shall pay a penalty to the Registered Holder as set forth in Section
5(e) of the Securities Purchase Agreement.
(e) If the entire outstanding principal amount of this Debenture is
not converted, the Company shall also issue and deliver to such holder a new
Debenture of like tenor in the principal amount equal to the principal which was
not converted and dated the effective date of conversion. Each conversion shall
be deemed to have been effected immediately prior to the close of business on
the date on which a Notice of Conversion shall have been delivered as aforesaid,
and the person or persons in whose name or names any certificate of certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares represented
thereby at such time on such date.
(f) All shares of Common Stock delivered upon conversion of this
Debenture will, upon delivery, be duly authorized, validly issued and fully paid
and nonassessable.
(g) No fractional shares of Common Stock shall be issued upon
conversion of this Debenture. Instead of any fractional share of Common Stock
which would otherwise be deliverable upon the conversion of a principal of this
Debenture the Company shall pay to the holder an amount in cash (computed to the
nearest cent) equal to the Average Closing Price multiplied by the fraction of a
share of Common Stock represented by such fractional interest.
(h) The issuance of certificates for shares of Common Stock upon any
conversion of this Debenture shall be made without charge to the payee hereof
for any tax or other expense in respect to the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company, and such
certificates shall be issued only in the name of the registered holder of this
Debenture.
7. REDEMPTION BY COMPANY. (a) If while this Debenture is outstanding
there shall occur a Change in Control of the Company (as defined below), then,
at the option of the Registered Holder, the Company shall, on the effective date
of and subject to the consummation of such Change in Control, redeem this
Debenture for cash from the Registered Holder at a redemption price equal to
125% of the aggregate principal and accrued interest outstanding under this
Debenture. Nothing in this subsection shall limit the Registered Holder's right
to convert this Debenture on or prior to such Change in Control. For purposes
hereof, a "Change in Control" shall be deemed to have occurred if (A) any person
or group (as defined for purposes of Regulation 13D of the Securities Exchange
Act of 1934, as amended) (excluding persons who on the date hereof are
beneficial owners of shares of the Company's voting stock and affiliates of such
persons) shall have become the
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beneficial owner or owners of more than 50% of the outstanding voting stock of
the Company; (B) there shall have occurred a merger or consolidation in which
the Company or an affiliate of the Company is not the survivor or in which
holders of the Common Stock of the Company shall have become entitled to receive
cash, securities of the Company other than voting common stock or securities of
any other person; (C) at any time persons constituting the Existing Board of
Directors cease for any reason whatsoever to constitute at least a majority of
the members of the Board of Directors of the Company; or (D) there shall have
occurred a sale of all or substantially all the assets of the Company. For
purposes hereof, the term "Existing Board of Directors" shall mean the persons
constituting the Board of Directors of the Company on the date hereof, together
with each new director whose election, or nomination for election by the
Company's stockholders is approved by a vote of the majority of the members of
the Existing Board of Directors who are in office immediately prior to the
election or nomination of such director.
(b) At any time that the number of shares of Common Stock issued
upon conversion of the Debentures and in respect of interest payments on the
Debentures, shall equal 4,750,000 (a "Redemption Event"), the Corporation shall,
at its election, either (x) redeem all of the principal amount then outstanding
under this Debenture for cash in an amount equal to (A) the quotient of (i) the
aggregate principal and accrued interest outstanding under this Debenture and
(ii) the Applicable Conversion Price as if this Debenture had been converted on
the Debenture Redemption Date multiplied by (B) the Average Closing Price of
shares of Common Stock for the five (5) trading days immediately preceding the
Debenture Redemption Date, or (y) if required, call a special meeting of its
stockholders for the purpose of approving the transactions contemplated by the
Securities Purchase Agreement, including the issuance of the Debenture on the
terms set forth therein, together with any other approvals that shall be
required so as to cause the transactions contemplated by the Securities Purchase
Agreement to remain in compliance with the Rules and Regulations of The Nasdaq
Stock Market (including Rules 4300 and 4310 of Nasdaq's Non-Qualitative
Designation Criteria in connection with conversions of Debentures; such
approvals are referred to herein as the "Required Approvals"). The Corporation
shall determine within five (5) business days following the receipt of a Notice
of Conversion which of such actions it shall take, and shall promptly furnish
notice to each of the holders of Debenture as to such determination, including,
if applicable, a notice of redemption.
(c) If the Corporation elects to call a special meeting of its
stockholders pursuant to Subsection 7(b) of this Debenture to obtain the
Required Approvals, the Corporation shall use its best efforts to obtain such
Required Approvals within forty five (45) days (or 75 days if the information
statement is reviewed by the Commission) of the Initial Closing Date (such forty
five (45) day (or seventy five (75) day) period is referred to herein as an
"Approval Period"). If the Corporation does not obtain the Required Approvals
within the Approval Period and the Corporation receives a Notice of Conversion
after the termination of the Approval
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Period, the Corporation must redeem, in accordance with this Section 7 of this
Debenture, any principal amount of Debentures outstanding after the Corporation
has issued in excess of 4,750,000 shares of Common Stock in connection with
conversions of this Debenture.
(d) If the Corporation elects, pursuant to this Section 7, to redeem
this Debenture on the occurrence of a Debenture Redemption Event, it shall
redeem such Debenture at the price determined in accordance with Subsection 7(b)
of this Debenture. If the Corporation shall have elected, pursuant to this
Subsection 7(b), to obtain the Required Approvals but shall not have done so by
the later of the occurrence of the Debenture Redemption Event or the expiration
of the Approval Period, it shall furnish a redemption notice to the Purchasers
within three (3) business days after the expiration of the Approval Period.
(e) If the Company elects to redeem the Debentures pursuant to any
of the terms or conditions set forth in this Section 7, the Company shall remit
the redemption price to the Registered Holder thereof immediately upon such
redemption.
8. COVENANTS.
(a) The Company will pay all taxes, assessments and governmental
charges lawfully levied or assessed upon it, its property and any part thereof,
and upon its income for profits, and any part thereof, before the same shall
become delinquent; and will duly observe, and conform to, all lawful
requirements of any governmental authority relative to any of its property, and
all covenants, terms and conditions upon or under which any of its property is
held; provided that nothing in this Section shall require the Company to observe
or conform to any requirement of governmental authority or to pay any such tax,
assessment or governmental charges so long as the validity thereof shall be
contested in good faith.
(b) Subject to the other provisions of this Debenture, the Company
at all times will maintain its corporate existence and right to carry on its
business and will duly procure all necessary renewals and extensions thereof and
use its best efforts to maintain, preserve and renew all of its rights, powers,
privileges and franchises; provided, however, that nothing herein contained
shall be construed to prevent the Company from ceasing or omitting to exercise
any rights, powers, privileges or franchises which, in the judgment of the
Board, can no longer be profitably exercised, nor to prevent the consolidation,
merger or liquidation of any subsidiary or subsidiaries of the Company with or
into the Company.
(c) The Company will at no time close its stock transfer books
against the transfer of any shares of Common Stock issued or issuable upon the
conversion of, or in lieu of payments on, the Debentures, in any manner which
interferes with the timely conversion of such Debentures.
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(d) As used in this Debenture, the term "Common Stock" shall mean
the Company's authorized common stock, par value $0.001 per share. The Company
shall not, without the prior written consent of the Registered Holder of this
Debenture, issue any shares of its capital stock, other than as permitted by the
Securities Purchase Agreement or in exchange for Debentures as provided
hereunder. The term "Common Stock" includes all stock of any class or classes
(however designated) of the Company, authorized on or after the date hereof, the
holders of which shall have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall ordinarily be entitled to
vote for the election of the directors of the Company.
(e) As used in this Debenture, the term "Primary Documents" shall
have the meaning set forth in the Securities Purchase Agreement. The Company
will not, by amendment of its Articles of Incorporation or By-laws or through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder or pursuant to any of the Primary Documents by the
Company, and will at all times assist in good faith in the carrying out of all
the provisions of this Debenture and the Primary Documents and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the Registered Holders of the Debentures against
impairment.
(f) In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, the Company shall mail to each Registered Holder of the
Debentures, at least ten (10) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
9. LIMITATION ON CERTAIN CORPORATE ACTS. The Company hereby
covenants and agrees that upon any consolidation or merger or upon the transfer
of all or substantially all of the property or assets of the Company, the due
and punctual payment of the principal and interest on all the Debentures
according to their tenor and the due and punctual performance and observance of
all the terms, covenants and conditions of the Debentures and the Primary
Documents to be kept and performed by the Company shall be expressly assumed by
the corporation formed by such consolidation, or into which the Company shall
have merged or by the purchaser of
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such property or assets; and such assumption shall be an express condition of
such merger or consolidation agreement or agreement for the transfer of property
or assets.
10. EVENTS OF DEFAULT. In case one or more of the following events
of default shall have occurred:
(a) default in the due and punctual payment of interest upon or
principal of any of the Debentures as and when the same becomes due and payable
either at maturity or otherwise; or
(b) failure to deliver the shares of Common Stock required to be
delivered upon conversion of Debentures or exercise of the Warrants in the
manner and at the time required by Section 5 of the Securities Purchase
Agreement; or
(c) failure of the Company to have authorized the number of shares
of Common Stock issuable upon conversion of the Debentures or exercise of the
Warrants; or
(d) failure on the part of the Company to duly observe or perform
any of its other covenants or agreements contained in the Debentures or in the
Primary Documents, or to cure any material breach in a material representation
or covenant contained in the Primary Documents for a period of ten (10) days
after the date on which written notice of such failure or breach requiring the
same to be remedied has been given by a Registered Holder to the Company; or
(e) a decree or order by a court having jurisdiction has been
entered adjudging the Company (or any Material Subsidiary) a bankrupt or
insolvent, or approving a petition seeking reorganization of the Company (or any
Material Subsidiary) under any applicable bankruptcy law and such decree or
order has continued undischarged or unstayed for a period of thirty (30) days;
or a decree or order of a court having jurisdiction for the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the
Company (or any Material Subsidiary) or of all or substantially all of its
property, or for the winding-up or liquidation of its affairs, has been entered,
and has remained in force undischarged or unstayed for a period of thirty (30)
days; or
(f) the Company (or any Material Subsidiary) institutes proceedings
to be adjudicated a voluntary bankrupt, or consents to the filing of a
bankruptcy proceeding against it, or files a petition or answer or consent
seeking reorganization under applicable law, or consents to the filing of any
such petition or to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of all or substantially all of its
property, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally as they become due; or if the
Company (or any Material Subsidiary) shall suffer any writ of attachment or
execution or any similar process to be issued or levied against it
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or any significant part of its property which is not released, stayed, bonded or
vacated within thirty (30) days after its issue or levy; or if the Company (or
any Material Subsidiary) takes corporate action in furtherance of any of the
aforesaid purposes or conditions; or
(g) if any default shall occur under any indenture, mortgage,
agreement, instrument or commitment evidencing or under which there is at the
time outstanding any indebtedness of the Company (or a Material Subsidiary, as
hereinafter defined), in excess of $25,000, or which results in such
indebtedness, in an aggregate amount (with other defaulted indebtedness) in
excess of $25,000 becoming due and payable prior to its due date and if such
indenture or instrument so requires, the holder or holders thereof (or a trustee
on their behalf) shall have declared such indebtedness due and payable; or
(h) if any of the Company or its subsidiaries shall default in the
observance or performance of any material term or provision of a material
agreement to which it is a party or by which it is bound, and such default is
not waived or cured within the applicable grace period; or
(i) if a final judgment which, either alone or together with other
outstanding final judgments against the Company and its subsidiaries, exceeds an
aggregate of $25,000 shall be rendered against the Company (or any Material
Subsidiary) and such judgment shall have continued undischarged or unstayed for
thirty (30) days after entry thereof;
then, and in each and every such case, so long as such event of
default has not been remedied and unless the principal of all the Debentures has
already become due and payable, the holders of not less than fifty-one percent
(51%) in principal amount of the Debentures then outstanding, by notice in
writing to the Company, may declare the principal of all the Debentures then
outstanding and the interest accrued thereof, if not already due and payable, to
be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything herein contained to
the contrary notwithstanding.
For purposes of this Section 10, "Material Subsidiary" means any
subsidiary with respect to which the Company has directly or indirectly
invested, loaned, advanced or guaranteed the obligations of, an aggregate amount
exceeding fifteen percent (15%) of the Company's gross assets, or the Company's
proportionate share of the assets or net income of which (based on the
subsidiary's most recent financial statements) exceed fifteen percent (15%) of
the Company's gross assets or net income, respectively, or the gross revenues of
which exceed fifteen percent (15%) of the gross revenues of the Company based
upon the most recent financial statements of such subsidiary and the Company.
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11. TRANSFERABILITY. This Debenture is transferable, in whole or in
part, only in accordance with the terms of the Securities Purchase Agreement.
The Registered Holder may submit a written request, in person or by his duly
authorized attorney, for a transfer of the Debenture on the register of the
Company maintained at its principal offices. The Company may deem and treat the
person in whose name this Debenture is registered as the absolute owner hereof,
for the purpose of receiving payment of the principal thereof and interest
hereon, whether or not the same shall be overdue, and for all other purposes
whatsoever, including but without limitation, the giving of any written notices
required hereunder, and the Company shall not be affected by any notice to the
contrary.
12. STOCK SPLITS; DIVIDENDS; ADJUSTMENTS; REORGANIZATIONS.
(a) If the Company, at any time while the Debentures are
outstanding, (i) shall pay a stock dividend or otherwise make a distribution or
distributions on any equity securities (including investments or securities
convertible into or exchangeable for such equity securities) in shares of Common
Stock, (ii) issue any securities payable in shares of Common Stock, (iii)
subdivide the outstanding shares of Common Stock into a larger number of shares,
(iv) combine outstanding shares of Common Stock into a smaller number of shares,
the Fixed Price and each Floating Reference Price prior to the date of any such
occurrence (collectively, the "Reference Prices") shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 12(a) shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of an issuance, a subdivision or a combination.
(b) In the event that the Company issues or sells any Common Stock
or securities which are convertible into or exchangeable for its Common Stock or
any convertible or exchangeable securities, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of its Common Stock
or any such convertible or exchangeable securities (other than shares or options
issued pursuant to the Company's employee or director option plans or shares
issued upon exercise of options, warrants or rights outstanding on the date of
the Securities Purchase Agreement and listed in the Company's most recent
periodic report filed under the Exchange Act) at an effective purchase price per
share which is less than the Fixed Price then in effect, then the Fixed Price in
effect immediately prior to such issue or sale shall be reduced effective
concurrently with such issue or sale to an amount determined by multiplying such
Fixed Price then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, plus (2) the number of shares of Common Stock which
the aggregate consideration received by the Company
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for such additional shares would purchase at such Fixed Price then in effect;
and (y) the denominator of which shall be the number of shares of Common Stock
of the Company outstanding immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the
issuance of any convertible or exchangeable securities, warrants, options or
other rights to subscribe for or to purchase or exchange for, shares of Common
Stock ("Exchangeable Securities"), the maximum number of shares of Common Stock
issuable upon exercise, conversion or exchange of such Exchangeable Securities
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Exchangeable Securities.
(c) If the Company, at any time while the Debentures are
outstanding, shall distribute to all holders of Shares of Common Stock evidences
of its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Section 12(b) above) then in each
such case the Fixed Price thereafter shall be determined by multiplying the
Fixed Price in effect immediately prior to the record date fixed for
determination of shareholders entitled to receive such distribution by a
fraction of which the denominator shall be the Market Price for Shares of Common
Stock (as defined below) determined as of the record date mentioned above, and
of which the numerator shall be such Market Price for Shares of Common Stock on
such record date less the then fair market value at such record date of the
portion of such assets or evidences of indebtedness so distributed applicable to
one outstanding share of Common Stock as determined by the Board in good faith;
provided, however that in the event of a distribution exceeding 25% of the net
assets of the Company, such fair market value shall be determined by a
nationally recognized investment banking firm or firm of independent chartered
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the Board and holders of a majority in interest of the Debentures.
In either case the adjustments shall be described in a statement provided to all
holders of Debentures of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one outstanding share of
Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
"Market Price for Shares of Common Stock" shall mean the price
of one share of Common Stock determined as follows:
(i) If the Common Stock is listed on NASDAQ, the
closing bid price on the date of valuation;
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(ii) If the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, the closing bid price on
such exchange on the date of valuation;
(iii) If neither (i) nor (ii) apply but the Common Stock
is quoted in the over-the-counter market, another recognized
exchange, on the pink sheets or the OTC Bulletin Board, the lesser
of (A) the lowest sales price or (B) the mean between the last
reported "bid" and "asked" prices thereof on the date of valuation;
and
(iv) If neither clause (i), (ii) or (iii) above applies,
the market value as determined by a nationally recognized investment
banking firm or other nationally recognized financial advisor
retained by the Company for such purpose, taking into consideration,
among other factors, the earnings history, book value and prospects
for the Company, and the prices at which shares of Common Stock
recently have been traded. Such determination shall be conclusive
and binding on all persons.
(d) (1) In the event that at any time or from time to time after the
Closing Date, the Common Stock issuable upon the conversion of the Debentures is
changed into the same or a different number of shares of any class or classes of
stock, whether by merger, consolidation, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or reorganization provided for elsewhere in this Paragraph 12), then and as a
condition to each such event provision shall be made in a manner reasonably
acceptable to the holders of Debentures so that each holder of Debentures shall
have the right thereafter to convert such Debenture into the kind of stock
receivable upon such recapitalization, reclassification or other change by
holders of shares of Common Stock, all subject to further adjustment as provided
herein. In such event, the formulae set forth herein for conversion and
redemption shall be equitably adjusted to reflect such change in number of
shares or, if shares of a new class of stock are issued, to reflect the market
price of the class or classes of stock (applying the same factors used in
determining the Fixed Price) issued in connection with the above described
transaction.
(2) If at any time or from time to time after the Closing Date
there is a capital reorganization of the Common Stock, including by way of a
sale of all or substantially all of the assets of the Company (other than a
recapitalization, subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Paragraph 12), then, as a part of and a
condition to such reorganization, provision shall be made in a manner reasonably
acceptable to the holders of the Debentures so that the holders of the
Debentures shall thereafter be entitled to receive upon conversion of the
Debentures the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital
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reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Paragraph 12 with respect to the rights of
the holders of the Debentures after the reorganization to the end that the
provisions of this Paragraph 12 shall be applicable after that event and be as
nearly equivalent as may be practicable, including, by way of illustration and
not limitation, by equitably adjusting the formulae set forth herein for
conversion and redemption to reflect the market price of the securities or
property (applying the same factors used in determining the Market Price for
Shares of Common Stock) issued in connection with the above described
transaction.
(e) If at any time during the period ending twelve (12) months after
the Closing Date, the Company sells or agrees to sell (including pursuant to a
letter of intent, term sheet, or similar means) shares of Common Stock or
securities or options convertible into, exercisable for, or exchangeable for,
shares of Common Stock (other than (i) a sale pursuant to a bona fide registered
public offering of shares of Common Stock by the Company conducted on the basis
of a firm commitment underwriting raising at least $10,000,000 or (ii) shares or
options issued pursuant to the Company's employee, director or consultant stock
option plans) then, if the effective or maximum sales price of the shares of
Common Stock with respect to such transaction (including the effective or
maximum conversion exercise or exchange price) ("Other Price") is less than the
Fixed Price of the Debentures at such time, the Company, at the option of a
holder exercised by written notice to the Company, shall adjust the Fixed Price
applicable to the Debentures of such holder not yet converted in form and
substance reasonably satisfactory to such holder of Debentures so that the
conversion price applicable to those Debentures shall, in no event, be greater,
after giving effect to all other adjustments contained therein, than the Other
Price.
(f) Whenever any element of the Applicable Conversion Price is
adjusted pursuant to Section 12(a), (b), (c), (d) or (e), the Company shall
promptly mail to each holder of the Debentures, a notice setting forth the
Applicable Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(g) In the event of any taking by the Company of a record date of
the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
any security or right convertible or exchangeable into or entitling the holder
thereof to receive additional shares of Common Stock, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company, shall
deliver to each holder of Debentures at least 20 days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution, security or right and
the amount and character of such dividend, distribution, security or right.
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13. REMEDIES CUMULATIVE. The rights, powers and remedies given to
the payee under this Debenture shall be in addition to all rights, powers and
remedies given to it by virtue of the Purchase Agreement, any document or
instrument executed in connection therewith, or any statute or rule of law.
14. NON-WAIVER. Any forbearance, failure or delay by the payee in
exercising any right, power or remedy under this Debenture, the Primary
Documents, any documents or instruments executed in connection therewith or
otherwise available to the payee shall not be deemed to be a waiver of such
right, power or remedy, nor shall any single or partial exercise of any right,
power or remedy preclude the further exercise thereof.
15. MODIFICATIONS AND WAIVERS. No modification or waiver of any
provision of this Debenture, the Primary Documents or any documents or
instruments executed in connection therewith shall be effective unless it shall
be in writing and signed by the payee, and any such modification or waiver shall
apply only in the specific instance for which given.
16. ATTORNEY'S FEES. If this Debenture shall not be paid when due
and shall be placed by the Registered Holder hereof in the hands of an attorney
for collection, through legal proceedings or otherwise, or if this Debenture
shall not be converted into shares of Common Stock on the Conversion Date, and
an action is brought by the Registered Holder with respect thereto, the Company
shall pay attorney's fees to the Registered Holder hereof, together with
reasonable costs and expenses of collection or enforcement incurred in
connection with any such action.
17. ENFORCEMENT; SPECIFIC PERFORMANCE. (a) In case any one or more
Events of Default shall occur and be continuing, a Registered Holder of a
Debenture then outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law.
(b) The Company expressly agrees that each Registered Holder may not
have adequate remedies at law if the Company does not perform its obligations
under this Debenture. Upon a breach of the terms or covenants of this Debenture
by the Company, the Registered Holder shall, each in addition to all other
remedies, be entitled to obtain injunctive relief, and an order for specific
performance of the Company's obligations hereunder.
18. This Debenture and the rights and obligations of the parties
hereto, shall be governed, construed and interpreted according to the laws of
the State of New York. The Company agrees that any final judgment after
exhaustion of all appeals or the expiration of time to appeal in any such action
or proceeding shall be
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conclusive and binding, and may be enforced in any federal or state court in the
United States by suit on the judgment or in any other manner provided by law.
Nothing contained in this Debenture shall affect or limit the right of the
Registered Holder to serve any process or notice or motion or other application
in any other manner permitted by law, or limit or affect the right of the
Registered Holder to bring any action or proceeding against the Company or any
of its property in the courts of any other jurisdiction. The Company hereby
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Debenture, and hereby waives, to the maximum extent permitted by law, any
objection, including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
19. PAYEE DEFINED. The term "payee" as used herein shall be deemed
to include the payee and its successors, endorsees and assigns.
20. WAIVER OF PRESENTMENT, ETC. The undersigned hereby waives
presentment, demand for payment, protest, notice of protest and notice of
non-payment hereof.
21. HEADINGS. The headings contained in this Debenture are for
reference purposes only and shall not affect the meaning of interpretation of
this Debenture.
IN WITNESS WHEREOF, the Company has caused this Debenture to be
executed as of the date first written above.
By:_____________________________________
Name: Kenneth W. Schilling
Title: Chairman
NOTICE OF CONVERSION
The conversion form appearing below should only be executed by the
Registered Holder desiring to convert all or part of the principal amount of the
Debenture attached hereto.
CONVERSION FORM
Date: __________________________
TO: iBIZ TECHNOLOGY CORP.
1919 West Lane Cactus
Phoenix, Arizona 85027
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The undersigned hereby exercises the conversion privilege upon the
terms and conditions set forth in the attached Debenture, to the extent of the
maximum number of shares of Common Stock issuable pursuant to the terms of
Section 6 of the Debenture, and accordingly, authorizes the Company to apply
$_______________ principal amount of the attached Debenture to payment in full
for such shares of Common Stock. Please register such shares and make delivery
thereof as follows:
Registered in the Name of (Giving First or Middle Name in Full)
Name ______________________________________
(Please Print)
Address ___________________________________
DELIVERY INSTRUCTIONS
To be completed ONLY if Certificates are to be mailed to persons
other than the Registered Holder.
Name _____________________________________
(Please Print)
Address __________________________________
Signature ________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfer unto the within Debenture and all rights thereunder, hereby irrevocably
authorizing the Company to transfer said Debenture on the books of the Company,
with full power of substitution in the premises.
Dated: _________________________________________
Signature: _____________________________________
Print Name: ____________________________________
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