Exhibit 10.10
THE SECURITIES REPRESENTED BY THIS DEBENTURE AND THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT WITH RESPECT TO
THIS NOTE UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES
LAWS OR (2) AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
No. ____ U.S. $________
Netgateway, Inc.
SECURED CONVERTIBLE DEBENTURE DUE DECEMBER 31, 1999
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Netgateway, Inc. , a Nevada corporation having a principal place of business at
300 Oceangate, 5th Floor, Long Beach, California (the "Company"), designated as
its Secured Convertible Debentures, Due December 31, 1999 (the "Debentures"), in
an aggregate principal amount of up to U.S. $1,000,000.
FOR VALUE RECEIVED, the Company promises to pay to__________________, or
registered assigns (the "Holder"), the principal sum of ______________ Dollars
(U.S. $______), on or prior to December 31, 1999 (the "Maturity Date") and to
pay interest to the Holder on the principal sum, at the rate per annum equal to
the Treasury Rate (as defined below) plus four percent (4.0%), payable
quarterly, in arrears. Interest shall accrue daily commencing on the Original
Issue Date (as defined in Section 6) until payment in full of the principal sum,
together with all accrued and unpaid interest, has been made or duly provided
for. Interest shall be calculated on the basis of a 360-day year. Interest due
and payable hereunder will be paid on each December 31, March 31, June 30 and
September 30 (each, an "Interest Due Date"), and at the Maturity Date, to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and transfers of
the Debentures (the "Debenture Register") on the first business day prior to the
Interest Due Date or the Maturity Date, as the case may be; provided, however,
that the Company's obligation to a transferee of this Debenture arises only if
such transfer, sale or other disposition is made in accordance with the terms
and conditions. The principal of, and interest on, this 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 of the
Holder last appearing on the Debenture Register. A transfer of the right to
receive principal and interest under this Debenture shall be transferable only
through an appropriate entry in the Debenture Register as provided herein.
This Debenture is subject to the following additional provisions:
Section 1. Amounts. The Debentures are issuable in denominations of
Ten Thousand Dollars (U.S.$10,000) and integral multiples of Ten Thousand
Dollars (U.S.$10,000) in excess thereof. The Debentures are exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same but shall not be
issuable in denominations of less than integral multiplies of Ten Thousand
Dollars (U.S.$10,000). No services charge will be made for such registration of
transfer or exchange.
Section 2. Taxes. In the event any interest or principal due
hereunder is subject to any withholding tax under the income tax or other
applicable laws of the United States, the Company will pay to the Holder, in
addition to the payments otherwise due hereunder, such additional amount as is
necessary to provide that the net amount actually received by the Holder (free
and clear of any such withholding tax, whether assessed against the Company or
the Holder) will equal the full amount the Holder would have received had such
withholding tax not been assessed.
Section 3. Securities Act. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in a
Subscription Agreement and may be transferred or exchanged only in compliance
with the Securities Act of 1933, as amended (the "Act"), including Regulation D
promulgated thereunder. Prior to due presentment to the Company for transfer of
this Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 4. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(a) any default in the payment of the principal of or interest on
this Debenture as and when the same shall become due and payable either at
the Maturity Date, by acceleration or otherwise;
(b) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of,
this Debenture, and such failure or breach shall not have been remedied
within 30 days after the date on which notice of such failure or breach
shall have been given;
(c) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or hereafter
in effect or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against the Company under the Bankruptcy
Code and the petition is not controverted within 30 days, or is not
dismissed within 60 days, after commencement of the case; or a "custodian"
(as defined in the Bankruptcy Code) is appointed for, or takes charge of,
all or any substantial part of the property of the Company or the Company
commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or there is commenced against the Company
any such proceeding which remains undismissed for a period of 60 days; or
the Company is adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is entered; or the
Company suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed
for a period of 60 days; or the Company makes a general assignment for the
benefit of creditors; or the Company shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or the Company shall call a meeting of its creditors
with a view to arranging a composition or adjustment of its debts; or the
Company shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or
other action is taken by the Company for the purpose of effecting any of
the foregoing; or
(d) the Company shall default in any of its obligations under any
mortgage, indenture or instrument, whether such indebtedness now exists or
shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable.
If any Event of Default occurs and is continuing, and in every such case, then
so long as such Event of Default shall then be continuing the Holder may, by
notice to the Company, declare the full principal amount of this Debenture,
together with all accrued but unpaid interest to the date of acceleration, to
be, whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything herein contained to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right
consequent thereon.
Section 5. Conversion.
(a) This Debenture shall be convertible into shares of Common Stock
at the Conversion Ratio, at the option of the Holder in whole or in part at any
time after the expiration of 60 days after the Original Issue Date. Any
conversion under this Section 5(a) shall be of a minimum principal amount of
US$10,000 of Debentures. The Holder shall effect conversions by surrendering the
Debentures (or such portions thereof) to be converted to the Company, together
with the form of conversion notice attached hereto as Exhibit A (the "Conversion
Notice") in the manner set forth in Section 5(j). Each Conversion Notice shall
specify the principal amount of Debentures to be converted and the date on which
such conversion is to be effected (the "Conversion Date"). Subject to Section
5(c), each Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the Debenture(s)
tendered by the Holder with the Conversion Notice, the Company shall promptly
deliver to the Holder a new Debenture for such principal amount as has not been
converted.
(b) Not later than ten Business Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates containing
the restrictive legends and trading restrictions required by law, representing
the number of shares of Common Stock being acquired upon the conversion of
Debentures and (ii) Debentures in principal amount equal to the principal amount
of Debentures not converted; provided, however that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon conversion of any Debentures, until Debentures are either delivered for
conversion to the Company or any transfer agent for the Debentures or Common
Stock, or the Holder notifies the Company that such Debentures have been lost,
stolen or destroyed and provides a bond (or other adequate security reasonably
acceptable to the Company) satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection therewith. If such certificate or
certificates are not delivered by the date required under this Section 5(c), the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
Debentures tendered for conversion. In addition, the Company shall grant to any
Holder receiving such Common Stock customary "piggy-back" registration rights.
(c) (i) The conversion price ("Conversion Price") for each Debenture
in effect on any Conversion Date shall be $2.50.
(ii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then each holder of
Debentures then outstanding shall have the right thereafter to convert such
Debentures only into the shares of stock and other securities and property
receivable upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities or property as the shares of the Common Stock into which such
Debentures could have been converted immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange would have been
entitled. The terms of any such consolidation, merger, sale, transfer or share
exchange shall include such terms so as to continue to give to the Holder the
right to receive the securities or property set forth in this Section 5(c) upon
any conversion following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(iii) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(D) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company (other than a subdivision or combination
of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is a
party, any sale or transfer of all or
substantially all of the assets of the Company, or
any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or
property; or
(E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up
of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of
conversion of Debentures, and shall cause to be mailed to the Holder and each
other holder of Debentures at their last addresses as it shall appear upon the
Debenture Register, at least 30 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding-up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, such number of shares of Common Stock as
shall be issuable upon the conversion of the aggregate principal amount of all
outstanding Debentures. The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly and validly authorized,
issued and fully paid and nonassessable.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Conversion Price at such time. If the Company elects not
to, or is unable to, make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
(f) The issuance of certificates for shares of Common Stock on
conversion of Debentures shall be made without charge to the Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
(g) Debentures converted into Common Stock shall be canceled.
(h) Each Conversion Notice shall be given by facsimile and by mail,
postage prepaid, addressed to the Chief Financial Officer of the Company at the
facsimile telephone number and address of the principal place of business of the
Company Any such notice shall be deemed given and effective upon the earliest to
occur of (i) receipt of such facsimile at the facsimile telephone number
specified in this Section 5(h), (ii) five days after deposit in the United
States mails or (iii) upon actual receipt by the party to whom such notice is
required to be given.
(i) If (but without any obligation to do so) the Company proposes to
register any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company employee benefits
plan, or a registration relating to corporate reorganizations or other
transactions under Rule 145 of the Act) the Company shall, at such time,
promptly give each holder of Debentures that has converted such Debentures into
Common Stock (a "Holder") written notice of such registration. Upon the written
request of each Holder given within ten (10) days after mailing of such notice
by the Company in accordance with Section 5(h) hereof, the Company shall,
subject to the provisions of Section 5(k) hereof, cause to be registered under
the Act all of the Common Stock issued to such Holder upon conversion of any
Debenture (the "Registrable Securities") that each such Holder has requested to
be registered.
(j) The Company shall bear and pay all expenses incurred in
connection with any registration, filing or qualification of Registrable
Securities with respect to the registrations pursuant to Section 5(i) hereof for
each Holder, including (without limitation) all registration, filing and
qualification fees, printers and accounting fees relating or apportionable
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities and fees and disbursements of counsel for any or the
Holders.
(k) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required under
Section 5(i) hereof to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling Holders
according to the total amount of securities entitled to be included therein
owned by each selling Holder or in such other proportions as shall mutually be
agreed to by such selling Holders) but in no event shall the amount of
securities of the selling Holders included in the offering be reduced below
twenty percent (20%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's
securities, in which case the selling Holders may be excluded if the
underwriters make the determination described above and no other shareholder's
securities are included. For purposes of the preceding parenthetical concerning,
apportionment, for any selling Holder which is a Holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons, shall be deemed to be a single "Selling Holder," any pro
rata reduction with respect to such "Selling Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Selling Holder," as defined in this sentence.
(l) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of the rights granted any Holder under this Section 5.
(m) In the event any Registrable Securities are included in a
registration statement under this Section 5:
(i) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for
such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages or liabilities, joint or several) to which they
may become subject under the Act, or the 1934 Act, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, or any rule or regulation promulgated under the
Act, or the 1934 Act; and the Company will pay to each such Holder,
underwriter or controlling person any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this
subsection 5(m)(i) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter
or controlling person.
(ii) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other
Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons may become subject, under
the Act, or the 1934 Act, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 5(m)(ii), in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this subsection
5(m)(ii) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability (action if such settlement is effected without
the consent of the Holder, which consent shall not unreasonably withheld);
provided, that, in no event shall any indemnity under this subsection
5(m)(ii) exceed the gross proceeds from the offering received by such
Holder.
(iii) Promptly after receipt by an indemnified party under
this Section 5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
5(m), deliver to the indemnifying party a written notice of the
commencement thereof, the indemnifying party shall have the right to
participate in and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense therewith counsel mutually satisfactory to the parties; provided,
however, that any indemnified parties (together with all other indemnified
parties which may be represented without conflict by one counsel) shall
have the right to retain one separate counsel, with the fees and expenses
to be paid the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 5(m), but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to indemnified party otherwise than under this
Section 5(m).
(iv) The obligations of the Company and Holders under this
Section 5(m) shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 5, and
otherwise.
Section 6. Redemption.
(a) The Company may prior to Maturity, at its option, redeem all, or
from time to time any part, of the Debenture by payment of one hundred one
percent (101%) of the outstanding principal thereof, together with accrued
interest to the Redemption Date (the "Redemption Price"). Each redemption notice
("Redemption Notice") shall be given by facsimile and by mail, postage prepaid,
addressed to each holder of Debentures at the facsimile telephone number and
address of such holder appearing on the books of the Company or provided to the
Company by such holder for the purpose of such Redemption Notice, or if no such
facsimile telephone number or address appears or is so provided, at the
principal place of business of the holder.
(b) In case of any redemption at the election of the Company, the
Company shall, at least 30 days prior to the Redemption Date fixed by the
Company notify the Holder of such Redemption Date and of the principal amount to
be redeemed.
Each Redemption Notice shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will
become due and payable upon the Debenture, and that interest thereon shall cease
to accrue on said date,
(4) the place where such Debenture is to be surrendered for
payment of the Redemption Price, which shall be the office or agency of the
Company,
(5) the current Conversion Price of the Debenture, the place
or places where such Debentures may be surrendered for conversion, and shall
specify the right to convert the Debenture or portions thereof to be redeemed
and that it will terminate on the Redemption Date,
(c) On the Redemption Date, the Company shall pay the Redemption
Price to the Holder.
(d) A Redemption Notice having been given as aforesaid, the
Debenture so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified and on such date (unless the
Company shall default in the payment of the Redemption Price) such Debenture
shall cease to bear interest. Upon surrender of such Debenture for redemption in
accordance with said notice, such Debenture shall be paid by the Company at the
Redemption Price.
If any Debenture call for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Debenture.
(e) If the Debenture is to be redeemed only in part, it shall be
surrendered at the office of the Company and the Company shall execute and
deliver to the Holder without service charge, a new Debenture or Debentures, of
any authorized denomination as requested by the Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Debenture so surrendered.
(f) Nothing in this Section 6 shall impair the Holder's right to
convert this Debenture pursuant to Section 5 prior to the Redemption Date.
Section 7. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day of the year on which commercial banks
are not required or authorized to be closed in Los Angeles, California.
"Common Stock" means shares now or hereafter authorized of the class
of Common Stock, $.001 par value, of the Company and stock of any other class
into which such shares may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is the principal amount represented by any Debenture plus accrued but
unpaid interest, and of which the denominator is the Conversion Price at such
time.
"Original Issue Date" shall mean the date of the first issuance of
this Debenture regardless of the number transfers hereof.
"Person" means a corporation, an association, a partnership,
organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
"Redemption Date" means the date fixed by the Company for redemption
of the Debenture.
"Treasury Rate" shall mean the rate of interest payable on a 90-day
United States Treasury Bill from time to time
Section 8. Ranking. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the Company. This Debenture
ranks pari passu with all other Debentures now or hereafter issued under the
terms set forth herein
Section 9. No Rights. This Debenture shall not entitle the Holder to
any of the rights of a stockholder of the Company, including without limitation,
the right to vote, to receive dividends and other distributions, or to receive
any notice of, or to attend, meetings of stockholders or any other proceedings
of the Company, unless and to the extent converted into shares of Common Stock
in accordance with the terms hereof.
Section 10. Lost Debenture. If this Debenture shall be mutilated,
lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 11. Governing Law. This Debenture shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to conflicts of laws thereof.
Section 12. Notices. All notices or other communications hereunder
shall be given, and shall be deemed duly given and received, if given, in the
manner set forth in Section 5(h) and 6(a).
Section 13. Waiver. Any waiver by the Company or the Holder a breach
of any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure
of the Company or the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Debenture. Any waiver must be in writing.
Section 14. Severability. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
Section 15. Business Days. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day (or, if such next succeeding Business
Day falls in the next calendar month, the preceding Business Day in the
appropriate calendar month).
Section 16. Security. This Debenture is secured by, and entitled to
the benefits provided in, that certain Security Agreement entered into by the
Company for the benefit of the Holder and each other holder or Debentures.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer thereunto duly authorized as of the date first above
indicated.
Netgateway, Inc.
Attest: ________________________ By: __________________________________
Name: Donald M. Corliss, Jr.
Title: President
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No. ___
into shares of Common Stock, par value U.S.$.001 per share (the "Common Stock"),
of Netgateway, Inc. (the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
Date to Effect Conversion
__________________________________________________
Principal Amount of Debentures to be Converted
Applicable Conversion Price
Signature
__________________________________________________
Name:
__________________________________________________
Address: