Exhibit 3.2
EXHIBIT A-2
FIRST DEBENTURE B
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER RULE 504 OF REGULATION D PROMULGATED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS.
US $50,000 NOVEMBER 9, 2004
1.0% CONVERTIBLE DEBENTURE DUE NOVEMBER 8, 2009
THIS DEBENTURE of GOT PIZZA MUSIC CAFE CLEARWATER I, INC., a Florida
corporation (the "Company") in the aggregate principal amount of Forty Nine
Thousand One Hundred Dollars (US $50,000), is designated as its $50,000, 1.0%
Convertible Debenture due November 8, 2009 (the "Debentures").
FOR VALUE RECEIVED, except as otherwise provided herein, the Company
promises to pay to Highgate House, LLC or its registered assigns (the "Holder"),
the principal sum of which Fifty Thousand Dollars ($50,000), on or prior to
November 8, 2009 (the "Maturity Date") and to pay interest to the Holder on the
principal sum at the rate of one percent (1.0%) per annum. Except as otherwise
provided herein, interest shall accrue daily commencing on the Original Issuance
Date (as defined in Section 1 below) in the form of cash or common stock of the
Company selected by the Holder, until payment in full of the principal sum,
together with all accrued and unpaid interest, has been made or duly provided
for. If at any time after the Original Issuance Date an Event of Default has
occurred and is continuing, interest shall accrue at the rate of fifteen percent
(15%) per annum from the date of the Event of Default and the applicable cure
period through and including the date of payment. Interest due and payable
hereunder shall be paid to the person in whose name this First Debenture B (or
one or more successor Debentures) is registered on the records of the Company
regarding registration and transfers of the Debentures (the "Debenture
Register"); provided, however, that the Company's obligation to a transferee of
this First Debenture B shall arise only if such transfer, sale or other
disposition is made in accordance with the terms and conditions hereof and of
the Convertible Debenture Purchase Agreement (the "Purchase Agreement") by and
between the Company and the Purchasers (as such term is defined in the Purchase
Agreement), dated as of November 9, 2004, as the same may be amended from time
to time. A transfer of the right to receive principal and interest under this
First Debenture B shall be transferable only through an appropriate entry in the
Debenture Register as provided herein.
If the Company in order to consummate a merger (the "Merger") enters
into a merger agreement or similar agreement with other parties (the "Merger
Partners"), the Merger Partners will effective upon the consummation of any such
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Merger assume all of the obligations, jointly and severally, with the Company,
under this First Debenture B and substitute the Company's Common Stock, into
which this First Debenture B is convertible, for common stock of such Merger
Partner ("MP Common Stock") including depositing 20,000,000 shares of MP Common
Stock with the Escrow Agent (as defined in the Purchase Agreement). If and when
the Merger occurs, at the time such Merger is effective, the Escrow Agent will
deliver the Company's Common Stock being held in accordance with the Purchase
Agreement and this First Debenture B to the Company. If the Merger occurs, then
(i) references herein to Company Common Stock shall be references to MP Common
Stock and (ii) any references the Company shall be read as references to the MP
that issued the MP Common Stock as if this First Debenture B were issued on the
date hereof by the MP that issued the MP Common Stock and the Company shall have
no further obligations to issue shares of Common Stock hereunder. For the
benefit of the Holder, the Company shall use its best efforts to effectuate the
intentions of this paragraph.
If there is a Merger all of the provisions of this First Debenture B
(specifically including Section 4) shall be read and interpreted as if this
First Debenture B was issued by the Merger Partner issuing the MP Common Stock
on the date hereof and this First Debenture B was initially convertible into MP
Common Stock.
This First Debenture B is subject to the following additional
provisions:
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Company" shall mean the Company (as defined in the Purchase Agreement)
or in the event there is a Merger, shall mean such Merger Partner that issues
the MP Common Stock.
"Common Stock" shall mean the Common Stock (as defined in the Purchase
Agreement) and in the event there is a Merger, shall mean the MP Common Stock
(as adjusted for any reverse splits, forward splits, combination,
reclassification or stock dividend from the date the Purchase Agreement is
signed).
"Conversion Date" shall have the meaning set forth in Section 4(a)
hereof.
"Conversion Ratio" means, at any time, a fraction, the numerator of
which is the then outstanding principal amount represented by the First
Debenture B plus accrued but unpaid interest thereon, and the denominator of
which is the conversion price at such time.
"Fixed Conversion Price" shall have the meaning set forth in Section
4(c)i hereof.
"Floating Conversion Price" shall have the meaning set forth in Section
4(c)i hereof.
"Maximum Conversion" shall have the meaning set forth in Section
4(c)(i) hereof.
"Notice of Conversion" shall have the meaning set forth in Section 4(a)
hereof.
"Original Issuance Date" shall mean the date of the first issuance of
this First Debenture B regardless of the number of transfers hereof.
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Section 2. Denominations of First Debenture B; Interest on First
Debenture B. The First Debenture B is 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 One Thousand Dollars
(US$1,000.00). No service charge to the Holder will be made for such
registration of transfer or exchange.
Section 3. Events of Default and Remedies.
I. "Event of Default," when used herein, means any one of the following
events (whatever the reason and whether any such event 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
First Debenture B as and when the same shall become due and payable either at
the Maturity Date, by acceleration, conversion, 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
First Debenture B, and such failure or breach shall not have been remedied
within five (5) Business Days of its receipt of notice of such failure or
breach;
(c) the occurrence of any event or breach or default by the Company
under the Purchase Agreement or any other Transaction Document and, if there is
a cure period, such failure or breach shall not have been remedied within the
cure period provided for therein;
(d) 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 thirty (30) days, or is not dismissed within sixty (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 sixty (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 thirty (30) days; or the Company makes
a general assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state in writing that it is 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;
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(e) the Company shall default in any of its obligations under any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Company in an amount
exceeding One Hundred Thousand Dollars ($100,000.00), 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;
(f) the Company shall have its Common Stock deleted or delisted, as the
case may be, from the American Stock Exchange, OTCBB or other national
securities exchange or market on which such Common Stock is listed for trading
or suspended from trading thereon;
(g) notwithstanding anything herein to the contrary, but subject to the
limitations set forth in the Debentures, the Company shall fail to deliver to
the Escrow Agent share certificates representing the shares of Common Stock to
be issued upon conversion of the Debentures within three (3) Business Days after
to the Company's receipt of notice from the Escrow Agent to the Company that
additional shares of Common Stock are required to be placed in escrow pursuant
to Section 4.14 of the Purchase Agreement, Article 2 of the Escrow Agreement,
and/or Section 4(b) of this First Debenture B;
(h) the Company shall issue a press release, or otherwise make publicly
known, that it is not honoring a properly executed and duly delivered Notice of
Conversion complying with the terms of this First Debenture B, the Purchase
Agreement and the Escrow Agreement, for any reason whatsoever; and
(i) the Company issues or enters into an agreement to issue any
convertible security, any equity line of credit, or any security issued pursuant
to Rule 504 of Regulation D promulgated under the Securities Act, other than to
the Purchasers or any of their Affiliates or assigns, during the period
commencing on the date hereof and ending on the five year anniversary of the
Post-Closing Date.
II. (a) If any Event of Default occurs, and continues beyond a cure
period, if any, then the Holder may, by written notice to the Company,
accelerate all of the payments due under this First Debenture B by declaring all
amounts so due under this First Debenture B, 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
contained herein to the contrary, and the Holder may immediately and without
expiration of any additional 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 the 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. This shall
include, but not be limited to the right to temporary, preliminary and permanent
injunctive relief without the requirement of posting any bond or undertaking.
(b) The Holder may thereupon proceed to protect and enforce its rights
either by suit in equity and/or by action at law or by other appropriate
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proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this First Debenture B or in aid
of the exercise of any power granted in this First Debenture B, and proceed to
enforce the payment of any of the Debentures held by it, and to enforce any
other legal or equitable right of such Holder.
(c) Except as expressly provided for herein, the Company specifically
(i) waives all rights it may have (A) to notice of nonpayment, notice of
default, demand, presentment, protest and notice of protest with respect to any
of the obligations hereunder or the shares of Common Stock and (B) notice of
acceptance hereof or of any other action taken in reliance hereon, notice and
opportunity to be heard before the exercise by the Holder of the remedies of
self-help, set-off, or other summary procedures and all other demands and
notices of any type or description except for cure periods, if any; and (ii)
releases the Holder, its officers, directors, agents, employees and attorneys
from all claims for loss or damage caused by any act or failure to act on the
part of the Holder, its officers, attorneys, agents, directors and employees
except for gross negligence or willful misconduct.
(d) As a non-exclusive remedy, upon the occurrence of an Event of
Default, the Holder may convert the remaining principal amount of the Debentures
and accrued interest thereon at the lesser of the Fixed Conversion Price or the
Floating Conversion Price upon giving a Notice of Conversion to the Company.
Except as otherwise provided herein, the Company shall not have the right to
object to the conversion or the calculation of the applicable conversion price,
absent manifest error and the Escrow Agent shall release the shares of Common
Stock from escrow upon notifying the Company of the conversion.
III. To effectuate the terms and provision of this First Debenture B,
the Holder may give notice of any default to the Attorney-in-Fact as set forth
herein and give a copy of such notice to the Company and its counsel,
simultaneously, and request the Attorney-in-Fact to comply with the terms of
this First Debenture B and the Purchase Agreement and all agreements entered
into pursuant to the Purchase Agreement on behalf of the Company.
Section 4. Conversion.
(a) Except as otherwise set forth herein or in the Purchase Agreement,
the unpaid principal amount of this First Debenture B shall be convertible into
shares of Common Stock at the Conversion Ratio as defined above, and subject to
the Limitation on Conversion described in Section 4.18 of the Purchase
Agreement, at the option of the Holder, in whole or in part, at any time,
commencing on the Original Issuance Date. Such shares of Common Stock shall be
without any restriction and freely tradable pursuant to Rule 504 of Regulation D
of the Securities Act. The Holder shall effect conversions by surrendering the
Debenture to be converted to the Escrow Agent, together with the form of notice
attached hereto as Appendix I ("Notice of Conversion") in the manner set forth
in Section 4(j) hereof. Each Notice of Conversion shall specify the principal
amount of Debentures to be converted and the date on which such conversion is to
be effected (the "Conversion Date") which date shall not be less than one (1)
Business Day after the date on which the Notice of Conversion is delivered to
the Escrow Agent. Subject to the last paragraph of Section 4(b) hereof, each
Notice of Conversion, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the Debentures
tendered by the Holder in the Notice of Conversion, the Company shall deliver to
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the Holder a new Debenture for such principal amount as has not been converted
within one (1) Business Day of the Conversion Date. In the event that the Escrow
Agent holds the Debentures on behalf of the Holder, the Company agrees that in
lieu of surrendering the Debentures upon every partial conversion, the Escrow
Agent shall give the Company and the Holder written notice of the amount of the
Debentures left unconverted. Upon conversion in full of the Debentures or upon
the Maturity Date, the Escrow Agent shall return the Debentures and the Escrow
Shares, if any, to the Company for cancellation.
(b) Not later than one (1) Business Day after the Conversion Date, the
Escrow Agent shall deliver to the Holder (i) a certificate or certificates
representing the number of shares of Common Stock being acquired upon the
conversion of the Debentures, and once the Debentures so converted in part shall
have been surrendered to the Company, the Company shall deliver to the Holder
Debentures in the principal amount of the Debentures not yet converted;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of the
Debentures, until the Debentures are either delivered for conversion to the
Escrow Agent or 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 an affidavit of loss and an agreement
reasonably acceptable to the Company indemnifying the Company from any loss
incurred by it in connection with such loss, theft or destruction. In the case
of a conversion pursuant to a Notice of Conversion, if such certificate or
certificates are not delivered by the date required under this Section 4(b), the
Holder shall be entitled, upon providing 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.
Subject to any limitations set forth in the Purchase Agreement, the
Company agrees that at any time the conversion price of the Debentures are such
that the number of Escrow Shares is less than 200% of the Full Conversion
Shares, upon five (5) Business Days of the Company's receipt of notice of such
circumstance from the Purchaser and/or the Escrow Agent, the Company shall issue
share certificates in the name of the Purchaser and deliver the same to the
Escrow Agent, in such number that the new number of Escrow Shares is equal to
200% of the Full Conversion Shares, provided, however, that if a reverse stock
split or forward stock split of the common stock of BMOO occurs, "200%" in this
paragraph shall be "2,000%".
(c) (i) The conversion price for First Debenture B in effect on any
Conversion Date shall be the LESSER of (a) the LESSER of $.60 AND one hundred
twenty-five percent (125%) of the average of the closing bid prices per share of
the Common Stock during the five (5) Trading Days immediately preceding the
Closing (as defined in the Purchase Agreement) (the "Fixed Conversion Price")
AND (b) sixty five percent (65%) of the average of the four (4) lowest closing
bid prices per share of the Common Stock during the forty (40) Trading Days
immediately preceding the Conversion Date (the "Floating Conversion Price");
provided, however, that the aggregate maximum number of shares of Common Stock
that the Debentures may be converted into shall be Six Million (6,000,000)
shares (the "Maximum Conversion"); and further provided, however, that upon the
Maximum Conversion, the Company shall, at its option (a) increase the Maximum
Conversion or (b) redeem the unconverted amount of all of the Debentures in
whole at one hundred twenty five percent (125%) of the unconverted amount of
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such Debentures being redeemed plus accrued interest thereon. For purposes of
determining the closing bid price on any day, reference shall be to the closing
bid price for a share of Common Stock on such date on the OTCBB (or such other
exchange, market, or other system that the Common Stock is then traded on), as
reported on Bloomberg, L.P. (or similar organization or agency succeeding to its
functions of reporting prices); and further provided, however, that this Section
4(c)(i) shall not be adjusted for the Merger.
(ii) If the Company, at any time while any of the Debentures
are outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock payable in shares of its capital
stock (whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification any shares of capital stock of the
Company, the Fixed Conversion Price as applied in Section 4(c)(i) shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock of the Company outstanding immediately before such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such event. Any adjustment made pursuant to
this Section 4(c)(ii) shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification, provided that no
adjustment shall be made if the Company does not complete such dividend,
distribution, subdivision, combination or reclassification.
(iii) If, at any time while any of the Debentures are
outstanding, the Company issues or sells shares of Common Stock, or options,
warrants or other rights to subscribe for or purchase shares of Common Stock
(excluding shares of Common Stock issuable upon the conversion of the Debentures
or upon the exercise of options, warrants or conversion rights granted prior to
the date hereof) and at a price per share less than the Per Share Market Value
(as defined in the Purchase Agreement) of the Common Stock at the issue date
mentioned below, the Fixed Conversion Price shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such shares,
options, warrants or rights plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase at such
Per Share Market Value, and the denominator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such options, rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase. Such
adjustment shall be made whenever such options, rights or warrants are issued
(and if such adjustment is made, no further adjustment will be made when such
options, rights or warrants are exercised), and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such options, rights or warrants. However, upon the expiration of any
options, right or warrant to purchase Common Stock, the issuance of which
resulted in an adjustment in the conversion price designated in Section 4(c)(i)
hereof pursuant to this Section 4(c)(iii), if any such options, right or warrant
shall expire and shall not have been exercised, the Fixed Conversion Price shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the conversion price made pursuant to the
provisions of this Section 4 after the issuance of such rights or warrants) had
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the adjustment of the conversion price made upon the issuance of such options,
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased upon the
exercise of such options, rights or warrants actually exercised. There will be
no adjustment under this Section 4(c)(iii) if Common Stock is issued due to the
exercise of (x) employee stock options that were issued to such employee, or (y)
other options, warrants or rights to subscribe for or purchase that, in any
case, are issued at an exercise or subscription price equal to Per Share Market
Value.
(iv) If, at any time while Debentures are outstanding, the
Company distributes to all holders of Common Stock (and not to holders of
Debentures) evidences of Company indebtedness or assets, or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Section 4(c)(iii) hereof), then, in each such case, the conversion price at
which each Debenture then outstanding shall thereafter be convertible shall be
determined by multiplying (A) the Fixed Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the Per
Share Market Value of the Common Stock determined as of the record date
mentioned above less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of Common Stock as determined by the Board of Directors in
good faith and the denominator of which shall be the Per Share Market Value of
the Common Stock on such record date; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of nationally recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the holders of a majority of the principal amount of
the Debentures then outstanding; and provided, further, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case such fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the Holder and all
other holders of Debentures of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one 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. The Company shall pay all fees and expenses of any Appraiser selected
under this Section 4(c)(iv).
(v) All calculations under this Section 4 shall be made to the
nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may
be. Any calculation equal to or over .005 shall be rounded up to the next cent
or share and any calculation less than .005 shall be rounded down to the
previous cent or share.
(vi) In the event the conversion price is not adjusted
pursuant to Section 4(c)(ii) or (v), within one (1) Business Day following the
occurrence of an event described therein and, in the case of Section 4(c)(iv),
within three (3) Business Days following the determination of the fair market
value by the Appraiser(s), the Holder shall have the right to require the
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Company to redeem the Debentures at 135% of the Purchase Price and
simultaneously pay such amount and all accrued interest and dividends to the
Holder pursuant to the written instructions provided by the Holder. The Company
will have one (1) Business Day to make the appropriate adjustment from the time
the Company is provided with written notice from the Holder of a failure to
comply with this Section 4.
(vii) Whenever the Fixed Conversion Price is adjusted pursuant
to Section 4(c)(ii),(iii) or (iv), the Company shall within one (1) Business Day
after the determination of the new Fixed Conversion Price mail and fax (in the
manner set forth in Section 4(j) hereof) to the Holder and to each other holder
of Debentures, a notice ("Company Notice of Conversion Price Adjustment")
setting forth the Fixed Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.
(viii) 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 (except in the event the
property is cash, then the Holder shall have the right to convert the Debentures
and receive cash in the same manner as other stockholders), and the Holder shall
be entitled upon such event to receive such amount of securities or property as
the holder of 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 4(c)(viii) 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;
(ix) If:
(A) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(B) the Company shall declare a special
non-recurring cash dividend redemption of its
Common Stock; or
(C) the Company shall authorize the grant 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
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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 and faxed
to the Holder and each other holder of the Debentures at their last addresses
and facsimile number set forth in the Debenture Register at least twenty (20)
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) If at any time conditions shall arise by reason of action or
failure to act by the Company, which action or failure to act, in the opinion of
the Board of Directors of the Company, is not adequately covered by the other
provisions hereof and which might materially and adversely affect the rights of
the Holder and all other holders of Debentures (different or distinguishable
from the effect generally on rights of holders of any class of the Company's
capital stock), the Company shall, at least twenty (20) calendar days prior to
the effective date of such action, mail and fax a written notice to each holder
of Debentures briefly describing the action contemplated, and an Appraiser
selected by the holders of majority in principal amount of the outstanding
Debentures shall give its opinion as to the adjustment, if any (not inconsistent
with the standards established in this Section 4 and the terms of the Purchase
Agreement and the Debentures), of the conversion price (including, if necessary,
any adjustment as to the securities into which Debentures may thereafter be
convertible) and any distribution which is or would be required to preserve
without diluting the rights of the holders of Debentures; provided, however,
that the Company, after receipt of the determination by such Appraiser, shall
have the right to select an additional Appraiser, in which case the adjustment
shall be equal to the average of the adjustments recommended by each such
Appraiser. The Company shall pay all fees and expenses of any Appraiser selected
under this Section 4(d). The Board of Directors of the Company shall make the
adjustment recommended forthwith upon the receipt of such opinion or opinions or
the taking of any such action contemplated, as the case may be; provided,
however, that no such adjustment of the conversion price shall be made which, in
the opinion of the Appraiser(s) giving the aforesaid opinion or opinions, would
result in an increase of the conversion price above the conversion price then in
effect.
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(e) Subject to the terms and limitations set forth in the Debentures
and the Purchase Agreement, including without limitation, Sections 4.14 thereof,
the Company covenants and agrees that it shall, at all times, reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of the Debentures as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holder of the Debentures, two (2) times such number of shares of
Common Stock as shall be issuable (taking into account the adjustments and
restrictions of Section 4(c) and Section 4(d) hereof) upon the conversion of the
aggregate principal amount of the outstanding Debentures. The Company covenants
that, subject to the limitations set forth in this Section 4(e), all shares of
Common Stock that shall be issuable upon conversion of the Debentures shall,
upon issuance, be duly and validly authorized and issued and fully paid and
non-assessable.
(f) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up
to the nearest whole share. If a fractional share interest arises upon any
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing to the Holder an additional full share of Common Stock.
(g) The issuance of a certificate or certificates for shares of Common
Stock upon conversion of the Debentures shall be made without charge to the
Holder for any documentary stamp or similar taxes that may be payable in respect
of the issuance 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.
(h) The Debentures converted into Common Stock shall be canceled upon
conversion.
(i) On the Maturity Date, the unconverted principal amount of the
Debentures and all interest due thereon shall either be paid off in full by the
Company or, if payment in full is not received within one (1) Business Day after
the Maturity Date, convert automatically into shares of Common Stock at the
lesser of the Fixed Conversion Price and the Floating Conversion Price as set
forth in Section 4(c)(i).
(j) Each Notice of Conversion shall be given by facsimile or electronic
mail to the Escrow Agent no later than 4:00 pm New York time on any Business
Day. Upon receipt of such Notice of Conversion, the Escrow Agent shall forward
such Notice of Conversion to the Company by facsimile or electronic mail by 6:00
p.m. New York time on the day on which the Escrow Agent receives the Notice of
Conversion, at the facsimile telephone number or electronic mail address and
address of the principal place of business of the Company. Any such notice shall
be deemed given and effective upon the transmission of such facsimile or
electronic mail at the facsimile telephone number or electronic mail address, as
the case may be, specified in the Purchase Agreement (with printed confirmation
of transmission). In the event that the Escrow Agent receives the Notice of
Conversion after 4:00 p.m. New York time or the Company receives the Notice of
A2-11
Conversion after 6:00 p.m. New York time on such day, or the Holder receives the
Company Notice of Conversion Price Adjustment after 6:00 p.m. New York time, any
such notice shall be deemed to have been given on the next Business Day.
Section 5. Redemption of Debentures. (a) At any time after the
Execution Date, so long as no Event of Default has occurred and, if a cure
period is provided, has not been cured, the Company shall have the option to
redeem all of the unconverted aggregate principal amount of the Debentures, in
whole, upon no less than thirty (30) days written notice thereof given to the
Holder with a copy to the Escrow Agent (the "Redemption Notice"), at one hundred
twenty five percent (125%) of the unconverted amount of the Debentures plus
accrued interest thereon (the "Redemption Price"). Notwithstanding anything
contained herein to the contrary, if the Company decides to redeem the
outstanding principal amount of the Debenture under the second proviso in the
first sentence of Section 4(c)(i) of this First Debenture B, the Company shall
have three (3) Business Days from their decision to redeem the Debenture in
order to effectuate the redemption of such principal amount of the outstanding
Debenture.
(b) Within three (3) Business Days prior to the date fixed for
redemption in the Redemption Notice, the Company shall deposit the Redemption
Price by wire transfer to the IOLA account of the Escrow Agent. Upon receipt of
the Redemption Price, on such redemption date, the Escrow Agent shall release
the Redemption Price to the Holder and return the remaining Debentures, Escrow
Shares and Underlying Shares to the Company.
(c) In the event that the Company fails to deposit the Redemption Price
in the Escrow Agent's IOLA account number within the time allocated in Section
5(b) hereof, then the redemption shall be declared null and void.
Section 6. Intentionally Omitted.
Section 7. Absolute Payment Obligation; Limitation on Prepayment.
Except as expressly provided herein, no provision of this First Debenture B
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, and interest on, this First Debenture B
at the time, place, and rate, and in the coin or currency, herein prescribed.
This First Debenture B is a direct obligation of the Company. This First
Debenture B ranks pari passu with all other Debentures now or hereafter issued
under the terms set forth herein. The Company may not prepay any portion of the
outstanding principal amount on the Debentures except in accordance with the
Purchase Agreement or Sections 4(c)(i) or 5 hereof.
Section 8. No Rights of Stockholders. Except as otherwise provided
herein or in the Purchase Agreement, this First Debenture B shall not entitle
the Holder to any of the rights of a stockholder of the Company, including
without limitation, the right to vote on or consent to any action, 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 9. Loss, Theft, Mutilation or Destruction. If this First
Debenture B shall be mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon cancellation of a
A2-12
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 First
Debenture B so mutilated, lost, stolen or destroyed but only upon receipt of an
affidavit of such loss, theft or destruction of such Debenture, and, if
requested by the Company, an agreement to indemnity the Company in form
reasonably acceptable to the Company.
Section 10. Governing Law. This First Debenture B shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof. Any
action to enforce the terms of this First Debenture B, the Purchase Agreement or
any other Transaction Document shall be exclusively brought in the state and/or
federal courts in the state and county of New York. Service of process in any
action by the Holder to enforce the terms of this First Debenture B may be made
by serving a copy of the summons and complaint, in addition to any other
relevant documents, by commercial overnight courier to the Company at its
address set forth in the Purchase Agreement.
Section 11. Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed duly given only if
delivered to the party personally or sent to the party by facsimile or
electronic mail upon electronic confirmation receipt (promptly followed by a
hard-copy delivered in accordance with this Section 11) or three days after
being mailed by registered or certified mail (return receipt requested), with
postage and registration or certification fees thereon prepaid, or if sent by
nationally recognized overnight courier, one day after being mailed, addressed
to the party at its address as set forth in Section 7.3 of the Purchase
Agreement or such other address as may be designated hereafter by notice given
pursuant to the terms of this Section 11.
Section 12. Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this First Debenture B 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 First Debenture B. The failure of the Company or the
Holder to insist upon strict adherence to any term of this First Debenture B 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 First Debenture B in any other occasion. Any waiver must be in
writing.
Section 13. Invalidity. If any provision of this First Debenture B is
held to be invalid, illegal or unenforceable, the balance of this First
Debenture B shall remain in effect, and if any provision is held to be
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
Section 14. Payment Dates. 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 following Business Day.
Section 15. Transfer; Assignment. This First Debenture B may not be
transferred or assigned, in whole or in part, at any time, except in compliance
by the transferor and the transferee with applicable federal and state
securities laws.
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Section 16. Future Financing. If, at any time this First Debenture B is
outstanding, the Company, or its successors in interest due to mergers,
consolidations and/or acquisitions (the "Successors-in-Interest"), is funded an
amount equal to or exceeding Five Million United States dollars ($5,000,000),
the Company or the Successors-in-Interest, as the case may be, agrees to pay the
Purchaser an amount equal to One Hundred Fifty Percent (150%) of the then
outstanding Debenture (the "Lump Sum Payment"). Upon the Purchaser's receipt of
the Lump Sum Payment, any and all remaining obligations then outstanding between
the Company or the Successors-in-Interest, as the case may be, and Purchaser in
connection with the Purchase Agreement and this First Debenture B shall be deem
satisfied, and the Purchase Agreement and this First Debenture B shall be
terminated. This provision shall survive both Closing and Post-Closing.
Section 17. Fees of Enforcement. In the event any Party commences legal
action to enforce its rights under this First Debenture B, the non-prevailing
party shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights.
[SIGNATURE PAGE FOLLOWS]
A2-14
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.
GOT PIZZA MUSIC CAFE
CLEARWATER, INC.
Attest: ______________________ By: ______________________________
Name: Thomas Fornarelli
Title: President
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APPENDIX I
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debentures)
Except as provided by Section 4(b) of the Debentures, the undersigned hereby
irrevocably elects to convert the attached Debenture into shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of GOT PIZZA MUSIC CAFE
CLEARWATER I, INC. (the "Company"), or, if a Merger (as defined in the
Debenture) has occurred, into shares of MP Common Stock (as defined in the
Debenture) according to the provisions 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. A fee of $400 will be charged by the Escrow
Agent to the Holder for each conversion. No other fees will be charged to the
Holder, except for transfer taxes, if any.
Conversion calculations:
_________________________________________________
Date to Effect Conversion
_________________________________________________
Principal Amount of Debentures to be Converted
_________________________________________________
Interest to be Converted or Paid
_________________________________________________
Applicable Conversion Price
(Pursuant to Section 4(c)(v))
_________________________________________________
Number of Shares to be Issued Upon Conversion
_________________________________________________
Signature
_________________________________________________
Name
_________________________________________________
Address
A2-16
EXHIBIT A-4
FIRST DEBENTURE D
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER RULE 504 OF REGULATION D PROMULGATED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS.
US $50,000 NOVEMBER 9, 2004
1.0% CONVERTIBLE DEBENTURE DUE NOVEMBER 8, 2009
THIS DEBENTURE of GOT PIZZA MUSIC CAFE CLEARWATER I, INC., a Florida
corporation (the "Company") in the aggregate principal amount of Fifty Thousand
Dollars (US $50,000), is designated as its $50,000, 1.0% Convertible Debenture
due November 8, 2009 (the "Debentures").
FOR VALUE RECEIVED, except as otherwise provided herein, the Company
promises to pay to Highgate House, LLC or its registered assigns (the "Holder"),
the principal sum of which Fifty Thousand Dollars ($50,000), on or prior to
November 8, 2009 (the "Maturity Date") and to pay interest to the Holder on the
principal sum at the rate of one percent (1.0%) per annum. Except as otherwise
provided herein, interest shall accrue daily commencing on the Original Issuance
Date (as defined in Section 1 below) in the form of cash or common stock of the
Company selected by the Holder, until payment in full of the principal sum,
together with all accrued and unpaid interest, has been made or duly provided
for. If at any time after the Original Issuance Date an Event of Default has
occurred and is continuing, interest shall accrue at the rate of fifteen percent
(15%) per annum from the date of the Event of Default and the applicable cure
period through and including the date of payment. Interest due and payable
hereunder shall be paid to the person in whose name this First Debenture D (or
one or more successor Debentures) is registered on the records of the Company
regarding registration and transfers of the Debentures (the "Debenture
Register"); provided, however, that the Company's obligation to a transferee of
this First Debenture D shall arise only if such transfer, sale or other
disposition is made in accordance with the terms and conditions hereof and of
the Convertible Debenture Purchase Agreement (the "Purchase Agreement") by and
between the Company and the Purchaser (as such term is defined in the Purchase
Agreement), dated as of November 9, 2004, as the same may be amended from time
to time. A transfer of the right to receive principal and interest under this
First Debenture D shall be transferable only through an appropriate entry in the
Debenture Register as provided herein.
If the Company in order to consummate a merger (the "Merger") enters
into a merger agreement or similar agreement with other parties (the "Merger
Partners"), the Merger Partners will effective upon the consummation of any such
Merger assume all of the obligations, jointly and severally, with the Company,
A4-1
under this First Debenture D and substitute the Company's Common Stock, into
which this First Debenture D is convertible, for common stock of such Merger
Partner ("MP Common Stock") including depositing 20,000,000 shares of MP Common
Stock with the Escrow Agent (as defined in the Purchase Agreement). If and when
the Merger occurs, at the time such Merger is effective, the Escrow Agent will
deliver the Company's Common Stock being held in accordance with the Purchase
Agreement and this First Debenture D to the Company. If the Merger occurs, then
(i) references herein to Company Common Stock shall be references to MP Common
Stock and (ii) any references the Company shall be read as references to the MP
that issued the MP Common Stock as if this First Debenture D were issued on the
date hereof by the MP that issued the MP Common Stock and the Company shall have
no further obligations to issue shares of Common Stock hereunder. For the
benefit of the Holder, the Company shall use its best efforts to effectuate the
intentions of this paragraph.
If there is a Merger all of the provisions of this First Debenture D
(specifically including Section 4) shall be read and interpreted as if this
First Debenture D was issued by the Merger Partner issuing the MP Common Stock
on the date hereof and this First Debenture D was initially convertible into MP
Common Stock.
Notwithstanding anything contained herein, in the Purchase Agreement,
or in the Note to the contrary, this First Debenture D shall not accrue
interest, shall not be convertible, and shall not be subject to repayment by the
Company or the Merger Partner, as the case may be, at its maturity, and the Note
shall not be due and payable and shall not be deemed part of the "Purchase
Price" for purposes of Section 4.25 of the Purchase Agreement, unless and until:
(i) the closing bid price per share of the Common Stock
having been at or above the Fixed Conversion Price
(as defined in the First Debenture A and First
Debenture B) for thirty (30) consecutive Trading Days
(as defined in the Purchase Agreement) at any time
until the Maturity Date (as defined in this First
Debenture D); and
(ii) the number of Escrow Shares for the aggregate
principal amount of the Debentures then outstanding
and this First Debenture D is at least 200% of the
number of shares of common stock of the Company or
BMOO, as the case may be, that would be needed to
satisfy full conversion of all such unconverted
Debentures,
provided, however, that if subparagraph (i) is satisfied and subparagraph (ii)
is not, the Company or the Merger Partner, as the case may be, shall increase in
accordance with and subject to the provisions of Section 4.14 of the Purchase
Agreement, the number of Escrow Shares to cover 200% of the number of shares of
common stock of the Company or the Merger Partner, as the case may be, that
would be needed to satisfy full conversion of all of such Debenture pursuant to
the procedures set forth in Section 4.14 of the Purchase Agreement; provided,
further, that, notwithstanding the foregoing, this First Debenture D shall not
accrue interest, shall not be convertible and shall not be subject to repayment
by the Company or the Merger Partner, as the case may be, at its maturity, and
the Note shall not be deemed part of the "Purchase Price" for purposes of
Section 4.25 of the Purchase Agreement, unless and until the Note is paid in
full by the Holder or its successors and assigns, provided, further, that if a
reverse stock split or forward stock split of the common stock of BMOO occurs,
"200%" in this paragraph shall be "2,000%".
A4-2
If the Note has not been paid in full by the Holder to the Company
(whether or not it is otherwise then due or payable by its terms), (i) any
payments from the Company to the Holder pursuant to Sections 4.19 and 4.31 of
the Purchase Agreement will be offset by the principal amount of the Note and
(ii) "Debentures" shall specifically refer to First Debenture A, First Debenture
B, First Debenture C and First Debenture D in Sections 4.19 and 4.31 in Purchase
Agreement.
This First Debenture D is subject to the following additional
provisions:
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Company" shall mean the Company (as defined in the Purchase Agreement)
or in the event there is a Merger, shall mean such Merger Partner that issues
the MP Common Stock.
"Common Stock" shall mean the Common Stock (as defined in the Purchase
Agreement) and in the event there is a Merger, shall mean the MP Common Stock
(as adjusted for any reverse splits, forward splits, combination,
reclassification or stock dividend from the date the Purchase Agreement is
signed).
"Conversion Date" shall have the meaning set forth in Section 4(a)
hereof.
"Conversion Ratio" means, at any time, a fraction, the numerator of
which is the then outstanding principal amount represented by the First
Debenture D plus accrued but unpaid interest thereon, and the denominator of
which is the conversion price at such time.
"Fixed Conversion Price" shall have the meaning set forth in Section
4(c)i hereof.
"Floating Conversion Price" shall have the meaning set forth in Section
4(c)i hereof.
"Maximum Conversion" shall have the meaning set forth in Section
4(c)(i) hereof.
"Notice of Conversion" shall have the meaning set forth in Section 4(a)
hereof.
"Original Issuance Date" shall mean the date of the first issuance of
this First Debenture D regardless of the number of transfers hereof.
A4-3
Section 2. Denominations of First Debenture D; Interest on First
Debenture D. The First Debenture D is 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 One Thousand Dollars
(US$1,000.00). No service charge to the Holder will be made for such
registration of transfer or exchange.
Section 3. Events of Default and Remedies.
I. "Event of Default," when used herein, means any one of the following
events (whatever the reason and whether any such event 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
First Debenture D as and when the same shall become due and payable either at
the Maturity Date, by acceleration, conversion, 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
First Debenture D, and such failure or breach shall not have been remedied
within five (5) Business Days of its receipt of notice of such failure or
breach;
(c) the occurrence of any event or breach or default by the Company
under the Purchase Agreement or any other Transaction Document and, if there is
a cure period, such failure or breach shall not have been remedied within the
cure period provided for therein;
(d) 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 thirty (30) days, or is not dismissed within sixty (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 sixty (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 thirty (30) days; or the Company makes
a general assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state in writing that it is 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;
A4-4
(e) the Company shall default in any of its obligations under any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Company in an amount
exceeding One Hundred Thousand Dollars ($100,000.00), 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;
(f) the Company shall have its Common Stock deleted or delisted, as the
case may be, from the American Stock Exchange, OTCBB or other national
securities exchange or market on which such Common Stock is listed for trading
or suspended from trading thereon;
(g) notwithstanding anything herein to the contrary, but subject to the
limitations set forth in the Debentures, the Company shall fail to deliver to
the Escrow Agent share certificates representing the shares of Common Stock to
be issued upon conversion of the Debentures within three (3) Business Days after
to the Company's receipt of notice from the Escrow Agent to the Company that
additional shares of Common Stock are required to be placed in escrow pursuant
to Section 4.14 of the Purchase Agreement, Article 2 of the Escrow Agreement,
and/or Section 4(b) of this First Debenture D;
(h) the Company shall issue a press release, or otherwise make publicly
known, that it is not honoring a properly executed and duly delivered Notice of
Conversion complying with the terms of this First Debenture D, the Purchase
Agreement and the Escrow Agreement, for any reason whatsoever; and
(i) the Company issues or enters into an agreement to issue any
convertible security, any equity line of credit, or any security issued pursuant
to Rule 504 of Regulation D promulgated under the Securities Act, other than to
the Purchasers or any of their Affiliates or assigns, during the period
commencing on the date hereof and ending on the five year anniversary of the
Post-Closing Date.
II. (a) If any Event of Default occurs, and continues beyond a cure
period, if any, then the Holder may, by written notice to the Company,
accelerate all of the payments due under this First Debenture D by declaring all
amounts so due under this First Debenture D, 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
contained herein to the contrary, and the Holder may immediately and without
expiration of any additional 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 the 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. This shall
include, but not be limited to the right to temporary, preliminary and permanent
injunctive relief without the requirement of posting any bond or undertaking.
(b) The Holder may thereupon proceed to protect and enforce its rights
either by suit in equity and/or by action at law or by other appropriate
A4-5
proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this First Debenture D or in aid
of the exercise of any power granted in this First Debenture D, and proceed to
enforce the payment of any of the Debentures held by it, and to enforce any
other legal or equitable right of such Holder.
(c) Except as expressly provided for herein, the Company specifically
(i) waives all rights it may have (A) to notice of nonpayment, notice of
default, demand, presentment, protest and notice of protest with respect to any
of the obligations hereunder or the shares of Common Stock and (B) notice of
acceptance hereof or of any other action taken in reliance hereon, notice and
opportunity to be heard before the exercise by the Holder of the remedies of
self-help, set-off, or other summary procedures and all other demands and
notices of any type or description except for cure periods, if any; and (ii)
releases the Holder, its officers, directors, agents, employees and attorneys
from all claims for loss or damage caused by any act or failure to act on the
part of the Holder, its officers, attorneys, agents, directors and employees
except for gross negligence or willful misconduct.
(d) As a non-exclusive remedy, upon the occurrence of an Event of
Default, the Holder may convert the remaining principal amount of the Debentures
and accrued interest thereon at the lesser of the Fixed Conversion Price or the
Floating Conversion Price upon giving a Notice of Conversion to the Company.
Except as otherwise provided herein, the Company shall not have the right to
object to the conversion or the calculation of the applicable conversion price,
absent manifest error and the Escrow Agent shall release the shares of Common
Stock from escrow upon notifying the Company of the conversion.
III. To effectuate the terms and provision of this First Debenture D,
the Holder may give notice of any default to the Attorney-in-Fact as set forth
herein and give a copy of such notice to the Company and its counsel,
simultaneously, and request the Attorney-in-Fact to comply with the terms of
this First Debenture D and the Purchase Agreement and all agreements entered
into pursuant to the Purchase Agreement on behalf of the Company.
Section 4. Conversion.
(a) Except as otherwise set forth herein or in the Purchase Agreement,
the unpaid principal amount of this First Debenture D shall be convertible into
shares of Common Stock at the Conversion Ratio as defined above, and subject to
the Limitation on Conversion described in Section 4.18 of the Purchase
Agreement, and subject to the limitation set forth in Section 4.28 of the
Purchase Agreement and in the paragraphs three through five of this First
Debenture D following the paragraph that begins "For Value Received," at the
option of the Holder, in whole or in part, at any time, commencing on the
Original Issuance Date. Such shares of Common Stock shall be without any
restriction and freely tradable pursuant to Rule 504 of Regulation D of the
Securities Act. The Holder shall effect conversions by surrendering the
Debenture to be converted to the Escrow Agent, together with the form of notice
attached hereto as Appendix I ("Notice of Conversion") in the manner set forth
in Section 4(j) hereof. Each Notice of Conversion shall specify the principal
amount of Debentures to be converted and the date on which such conversion is to
be effected (the "Conversion Date") which date shall not be less than one (1)
Business Day after the date on which the Notice of Conversion is delivered to
the Escrow Agent. Subject to the last paragraph of Section 4(b) hereof, each
Notice of Conversion, once given, shall be irrevocable. If the Holder is
A4-6
converting less than all of the principal amount represented by the Debentures
tendered by the Holder in the Notice of Conversion, the Company shall deliver to
the Holder a new Debenture for such principal amount as has not been converted
within one (1) Business Day of the Conversion Date. In the event that the Escrow
Agent holds the Debentures on behalf of the Holder, the Company agrees that in
lieu of surrendering the Debentures upon every partial conversion, the Escrow
Agent shall give the Company and the Holder written notice of the amount of the
Debentures left unconverted. Upon conversion in full of the Debentures or upon
the Maturity Date, the Escrow Agent shall return the Debentures and the Escrow
Shares, if any, to the Company for cancellation.
(b) Not later than one (1) Business Day after the Conversion Date, the
Escrow Agent shall deliver to the Holder (i) a certificate or certificates
representing the number of shares of Common Stock being acquired upon the
conversion of the Debentures, and once the Debentures so converted in part shall
have been surrendered to the Company, the Company shall deliver to the Holder
Debentures in the principal amount of the Debentures not yet converted;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of the
Debentures, until the Debentures are either delivered for conversion to the
Escrow Agent or 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 an affidavit of loss and an agreement
reasonably acceptable to the Company indemnifying the Company from any loss
incurred by it in connection with such loss, theft or destruction. In the case
of a conversion pursuant to a Notice of Conversion, if such certificate or
certificates are not delivered by the date required under this Section 4(b), the
Holder shall be entitled, upon providing 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.
Subject to any limitations set forth in the Purchase Agreement, the
Company agrees that at any time the conversion price of the Debentures are such
that the number of Escrow Shares is less than 200% of the Full Conversion
Shares, upon five (5) Business Days of the Company's receipt of notice of such
circumstance from the Purchaser and/or the Escrow Agent, the Company shall issue
share certificates in the name of the Purchaser and deliver the same to the
Escrow Agent, in such number that the new number of Escrow Shares is equal to
200% of the Full Conversion Shares, provided, however, that if a reverse stock
split or forward stock split of the common stock of BMOO occurs, "200%" in this
paragraph shall be "2,000%".
(c) i. The conversion price for the First Debenture D in effect on any
Conversion Date shall be the LESSER of (a) one hundred twenty-five percent
(125%) of the Fixed Conversion Price (as defined and computed in the First
Debenture A and First Debenture B) (the "Fixed Conversion Price") AND (b) sixty
five percent (65%) of the average of the three (3) lowest closing bid prices per
share of the Common Stock during the forty (40) Trading Days immediately
preceding the Conversion Date (the "Floating Conversion Price"); provided,
however, that the aggregate maximum number of shares of Common Stock that the
Debentures may be converted into shall be Six Million (6,000,000) shares (the
"Maximum Conversion"); and further provided, however, that upon the Maximum
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Conversion, the Company shall, at its option (a) increase the Maximum Conversion
or (b) redeem the unconverted amount of the Debentures in whole at one hundred
twenty five percent (125%) of the unconverted amount of such Debentures being
redeemed plus accrued interest thereon. For purposes of determining the closing
bid price on any day, reference shall be to the closing bid price for a share of
Common Stock on such date on the OTCBB (or such other exchange, market, or other
system that the Common Stock is then traded on), as reported on Bloomberg, L.P.
(or similar organization or agency succeeding to its functions of reporting
prices); and further provided, however, that this section 4(c)(i) shall not be
adjusted for the Merger.
(ii) If the Company, at any time while any of the Debentures
are outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock payable in shares of its capital
stock (whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification any shares of capital stock of the
Company, the Fixed Conversion Price as applied in Section 4(c)(i) shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock of the Company outstanding immediately before such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such event. Any adjustment made pursuant to
this Section 4(c)(ii) shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification, provided that no
adjustment shall be made if the Company does not complete such dividend,
distribution, subdivision, combination or reclassification.
(iii) If, at any time while any of the Debentures are
outstanding, the Company issues or sells shares of Common Stock, or options,
warrants or other rights to subscribe for or purchase shares of Common Stock
(excluding shares of Common Stock issuable upon the conversion of the Debentures
or upon the exercise of options, warrants or conversion rights granted prior to
the date hereof) and at a price per share less than the Per Share Market Value
(as defined in the Purchase Agreement) of the Common Stock at the issue date
mentioned below, the Fixed Conversion Price shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such shares,
options, warrants or rights plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase at such
Per Share Market Value, and the denominator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such options, rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase. Such
adjustment shall be made whenever such options, rights or warrants are issued
(and if such adjustment is made, no further adjustment will be made when such
options, rights or warrants are exercised), and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such options, rights or warrants. However, upon the expiration of any
options, right or warrant to purchase Common Stock, the issuance of which
resulted in an adjustment in the conversion price designated in Section 4(c)(i)
hereof pursuant to this Section 4(c)(iii), if any such options, right or warrant
shall expire and shall not have been exercised, the Fixed Conversion Price shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the conversion price made pursuant to the
A4-8
provisions of this Section 4 after the issuance of such rights or warrants) had
the adjustment of the conversion price made upon the issuance of such options,
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased upon the
exercise of such options, rights or warrants actually exercised. There will be
no adjustment under this Section 4(c)(iii) if Common Stock is issued due to the
exercise of (x) employee stock options that were issued to such employee, or (y)
other options, warrants or rights to subscribe for or purchase that, in any
case, are issued at an exercise or subscription price equal to Per Share Market
Value.
(iv) If, at any time while Debentures are outstanding, the
Company distributes to all holders of Common Stock (and not to holders of
Debentures) evidences of Company indebtedness or assets, or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Section 4(c)(iii) hereof), then, in each such case, the conversion price at
which each Debenture then outstanding shall thereafter be convertible shall be
determined by multiplying (A) the Fixed Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the Per
Share Market Value of the Common Stock determined as of the record date
mentioned above less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of Common Stock as determined by the Board of Directors in
good faith and the denominator of which shall be the Per Share Market Value of
the Common Stock on such record date; provided, however, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company, such
fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of nationally recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the holders of a majority of the principal amount of
the Debentures then outstanding; and provided, further, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case such fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the Holder and all
other holders of Debentures of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one 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. The Company shall pay all fees and expenses of any Appraiser selected
under this Section 4(c)(iv).
(v) All calculations under this Section 4 shall be made to the
nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may
be. Any calculation equal to or over .005 shall be rounded up to the next cent
or share and any calculation less than .005 shall be rounded down to the
previous cent or share.
(vi) In the event the conversion price is not adjusted
pursuant to Section 4(c)(ii) or (v), within one (1) Business Day following the
occurrence of an event described therein and, in the case of Section 4(c)(iv),
within three (3) Business Days following the determination of the fair market
A4-9
value by the Appraiser(s), the Holder shall have the right to require the
Company to redeem the Debentures at 135% of the Purchase Price and
simultaneously pay such amount and all accrued interest and dividends to the
Holder pursuant to the written instructions provided by the Holder. The Company
will have one (1) Business Day to make the appropriate adjustment from the time
the Company is provided with written notice from the Holder of a failure to
comply with this Section 4.
(vii) Whenever the Fixed Conversion Price is adjusted pursuant
to Section 4(c)(ii),(iii) or (iv), the Company shall within one (1) Business Day
after the determination of the new Fixed Conversion Price mail and fax (in the
manner set forth in Section 4(j) hereof) to the Holder and to each other holder
of Debentures, a notice ("Company Notice of Conversion Price Adjustment")
setting forth the Fixed Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.
(viii) 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 (except in the event the
property is cash, then the Holder shall have the right to convert the Debentures
and receive cash in the same manner as other stockholders), and the Holder shall
be entitled upon such event to receive such amount of securities or property as
the holder of 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 4(c)(viii) 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;
(ix) If:
(A) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(B) the Company shall declare a special
non-recurring cash dividend redemption of its
Common Stock; or
(C) the Company shall authorize the grant 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
A4-10
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 and faxed
to the Holder and each other holder of the Debentures at their last addresses
and facsimile number set forth in the Debenture Register at least twenty (20)
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) If at any time conditions shall arise by reason of action or
failure to act by the Company, which action or failure to act, in the opinion of
the Board of Directors of the Company, is not adequately covered by the other
provisions hereof and which might materially and adversely affect the rights of
the Holder and all other holders of Debentures (different or distinguishable
from the effect generally on rights of holders of any class of the Company's
capital stock), the Company shall, at least twenty (20) calendar days prior to
the effective date of such action, mail and fax a written notice to each holder
of Debentures briefly describing the action contemplated, and an Appraiser
selected by the holders of majority in principal amount of the outstanding
Debentures shall give its opinion as to the adjustment, if any (not inconsistent
with the standards established in this Section 4 and the terms of the Purchase
Agreement and the Debentures), of the conversion price (including, if necessary,
any adjustment as to the securities into which Debentures may thereafter be
convertible) and any distribution which is or would be required to preserve
without diluting the rights of the holders of Debentures; provided, however,
that the Company, after receipt of the determination by such Appraiser, shall
have the right to select an additional Appraiser, in which case the adjustment
shall be equal to the average of the adjustments recommended by each such
Appraiser. The Company shall pay all fees and expenses of any Appraiser selected
under this Section 4(d). The Board of Directors of the Company shall make the
adjustment recommended forthwith upon the receipt of such opinion or opinions or
the taking of any such action contemplated, as the case may be; provided,
however, that no such adjustment of the conversion price shall be made which, in
the opinion of the Appraiser(s) giving the aforesaid opinion or opinions, would
result in an increase of the conversion price above the conversion price then in
effect.
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(e) Subject to the terms and limitations set forth in the Debentures
and the Purchase Agreement, including without limitation, Sections 4.14 and 4.28
thereof, the Company covenants and agrees that it shall, at all times, reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of the Debentures as herein provided,
free from preemptive rights or any other actual contingent purchase rights of
persons other than the Holder of the Debentures, two (2) times such number of
shares of Common Stock as shall be issuable (taking into account the adjustments
and restrictions of Section 4(c) and Section 4(d) hereof) upon the conversion of
the aggregate principal amount of the outstanding Debentures. The Company
covenants that, subject to the limitations set forth in this Section 4(e), all
shares of Common Stock that shall be issuable upon conversion of the Debentures
shall, upon issuance, be duly and validly authorized and issued and fully paid
and non-assessable.
(f) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up
to the nearest whole share. If a fractional share interest arises upon any
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing to the Holder an additional full share of Common Stock.
(g) The issuance of a certificate or certificates for shares of Common
Stock upon conversion of the Debentures shall be made without charge to the
Holder for any documentary stamp or similar taxes that may be payable in respect
of the issuance 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.
(h) The Debentures converted into Common Stock shall be canceled upon
conversion.
(i) On the Maturity Date, the unconverted principal amount of the
Debentures and all interest due thereon shall either be paid off in full by the
Company or, if payment in full is not received within one (1) Business Day after
the Maturity Date, convert automatically into shares of Common Stock at the
lesser of the Fixed Conversion Price and the Floating Conversion Price as set
forth in Section 4(c)(i).
(j) Each Notice of Conversion shall be given by facsimile or electronic
mail to the Escrow Agent no later than 4:00 pm New York time on any Business
Day. Upon receipt of such Notice of Conversion, the Escrow Agent shall forward
such Notice of Conversion to the Company by facsimile or electronic mail by 6:00
p.m. New York time on the day on which the Escrow Agent receives the Notice of
Conversion, at the facsimile telephone number or electronic email address and
address of the principal place of business of the Company. Any such notice shall
be deemed given and effective upon the transmission of such facsimile or
electronic mail at the facsimile telephone number or electronic mail address, as
the case may be, specified in the Purchase Agreement (with printed confirmation
of transmission). In the event that the Escrow Agent receives the Notice of
A4-12
Conversion after 4:00 p.m. New York time or the Company receives the Notice of
Conversion after 6:00 p.m. New York time on such day, or the Holder receives the
Company Notice of Conversion Price Adjustment after 6:00 p.m. New York time, any
such notice shall be deemed to have been given on the next Business Day.
Section 5. Redemption of Debentures. (a) At any time after the
Execution Date, so long as no Event of Default has occurred and, if a cure
period is provided, has not been cured, the Company shall have the option to
redeem all of the unconverted aggregate principal amount of the Debentures, in
whole, upon no less than thirty (30) days written notice thereof given to the
Holder with a copy to the Escrow Agent (the "Redemption Notice"), at one hundred
twenty five percent (125%) of the unconverted amount of the Debentures plus
accrued interest thereon (the "Redemption Price"). Notwithstanding anything
contained herein to the contrary, if the Company decides to redeem the
outstanding principal amount of the Debenture under the second proviso in the
first sentence of Section 4(c)(i) of this First Debenture D, the Company shall
have three (3) Business Days from their decision to redeem the Debenture in
order to effectuate the redemption of such principal amount of the outstanding
Debenture.
(b) Within three (3) Business Days prior to the date fixed for
redemption in the Redemption Notice, the Company shall deposit the Redemption
Price by wire transfer to the IOLA account of the Escrow Agent. Upon receipt of
the Redemption Price, on such redemption date, the Escrow Agent shall release
the Redemption Price to the Holder and return the remaining Debentures, Escrow
Shares and Underlying Shares to the Company.
(c) In the event that the Company fails to deposit the Redemption Price
in the Escrow Agent's IOLA account number within the time allocated in Section
5(b) hereof, then the redemption shall be declared null and void.
Section 6. Intentionally Omitted.
Section 7. Absolute Payment Obligation; Limitation on Prepayment.
Except as expressly provided herein in the Purchase Agreement, or in the Note,
no provision of this First Debenture D shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
interest on, this First Debenture D at the time, place, and rate, and in the
coin or currency, herein prescribed. This First Debenture D is a direct
obligation of the Company. This First Debenture D ranks pari passu with all
other Debentures now or hereafter issued under the terms set forth herein. The
Company may not prepay any portion of the outstanding principal amount on the
Debentures except in accordance with the Purchase Agreement or Sections 4(c)(i)
or 5 hereof.
Section 8. No Rights of Stockholders. Except as otherwise provided
herein or in the Purchase Agreement, this First Debenture D shall not entitle
the Holder to any of the rights of a stockholder of the Company, including
without limitation, the right to vote on or consent to any action, 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.
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Section 9. Loss, Theft, Mutilation or Destruction. If this First
Debenture D 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 First
Debenture D so mutilated, lost, stolen or destroyed but only upon receipt of an
affidavit of such loss, theft or destruction of such Debenture, and, if
requested by the Company, an agreement to indemnity the Company in form
reasonably acceptable to the Company.
Section 10. Governing Law. This First Debenture D shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof. Any
action to enforce the terms of this First Debenture D, the Purchase Agreement or
any other Transaction Document shall be exclusively brought in the state and/or
federal courts in the state and county of New York. Service of process in any
action by the Holder to enforce the terms of this First Debenture D may be made
by serving a copy of the summons and complaint, in addition to any other
relevant documents, by commercial overnight courier to the Company at its
address set forth in the Purchase Agreement.
Section 11. Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed duly given only if
delivered to the party personally or sent to the party by facsimile upon
electronic confirmation receipt (promptly followed by a hard-copy delivered in
accordance with this Section 11) or three days after being mailed by registered
or certified mail (return receipt requested), with postage and registration or
certification fees thereon prepaid, or if sent by nationally recognized
overnight courier, one day after being mailed, addressed to the party at its
address as set forth in Section 7.3 of the Purchase Agreement or such other
address as may be designated hereafter by notice given pursuant to the terms of
this Section 11.
Section 12. Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this First Debenture D 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 First Debenture D. The failure of the Company or the
Holder to insist upon strict adherence to any term of this First Debenture D 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 First Debenture D in any other occasion. Any waiver must be in
writing.
Section 13. Invalidity. If any provision of this First Debenture D is
held to be invalid, illegal or unenforceable, the balance of this First
Debenture D shall remain in effect, and if any provision is held to be
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
Section 14. Payment Dates. 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 following Business Day.
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Section 15. Transfer; Assignment. This First Debenture D may not be
transferred or assigned, in whole or in part, at any time, except in compliance
by the transferor and the transferee with applicable federal and state
securities laws.
Section 16. Future Financing. If, at any time this First Debenture D is
outstanding, the Company, or its successors in interest due to mergers,
consolidations and/or acquisitions (the "Successors-in-Interest"), is funded an
amount equal to or exceeding Five Million United States dollars ($5,000,000),
the Company or the Successors-in-Interest, as the case may be, agrees to pay the
Purchaser an amount equal to One Hundred Fifty Percent (150%) of the then
outstanding Debenture (the "Lump Sum Payment"). Upon the Purchaser's receipt of
the Lump Sum Payment, any and all remaining obligations then outstanding between
the Company or the Successors-in-Interest, as the case may be, and Purchaser in
connection with the Purchase Agreement and this First Debenture D shall be deem
satisfied, and the Purchase Agreement and this First Debenture D shall be
terminated. This provision shall survive both Closing and Post-Closing.
Section 17. Fees of Enforcement. In the event any Party commences legal
action to enforce its rights under this First Debenture D, the non-prevailing
party shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights.
[SIGNATURE PAGE FOLLOWS]
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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.
GOT PIZZA MUSIC CAFE
CLEARWATER, INC.
Attest: ______________________ By: ______________________________
Name: Thomas Fornarelli
Title: President
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APPENDIX I
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debentures)
Except as provided by Section 4(b) of the Debentures, the undersigned hereby
irrevocably elects to convert the attached Debenture into shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of GOT PIZZA MUSIC CAFE
CLEARWATER I, INC. (the "Company"), or, if a Merger (as defined in the
Debenture) has occurred, into shares of MP Common Stock (as defined in the
Debenture) according to the provisions 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. A fee of $400 will be charged by the Escrow
Agent to the Holder for each conversion. No other fees will be charged to the
Holder, except for transfer taxes, if any.
Conversion calculations:
_________________________________________________
Date to Effect Conversion
_________________________________________________
Principal Amount of Debentures to be Converted
_________________________________________________
Interest to be Converted or Paid
_________________________________________________
Applicable Conversion Price
(Pursuant to Section 4(c)(v))
_________________________________________________
Number of Shares to be Issued Upon Conversion
_________________________________________________
Signature
_________________________________________________
Name
_________________________________________________
Address
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