EXHIBIT 10. 4
DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD,
PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.
No. __ $___________
FLEXXTECH CORPORATION
CONVERTIBLE DEBENTURE DUE AUGUST 13, 2003
FOR VALUE RECEIVED, FLEXXTECH CORPORATION, a corporation organized and
existing under the laws of the State of Nevada (the "Company"), hereby promises
to pay to ___________________, a __________________, having its address at
______________________ or its assigns (the "Holder"), the principal sum of
________ and 00/100 Dollars ($____________) on August ___, 2003 (the "Maturity
Date") and to pay simple interest on the principal sum outstanding from time to
time in arrears (i) upon conversion as provided herein or (ii) on the Maturity
Date, at the rate of 6% per annum. Interest shall commence to accrue on this
Debenture on the first such business day to occur after the date hereof and
shall continue on a daily basis until payment in full of the principal sum has
been made or duly provided for or until the full outstanding amount of this
Debenture has been converted in accordance with the provisions hereof.
This Debenture is the Debenture referred to in the Securities Purchase
Agreement (the "Securities Purchase Agreement") dated August 14, 2001, between
the Company and the Holder, is subject to the provisions of the Securities
Purchase Agreement and further is subject to the following additional
provisions:
1. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act and other applicable state and foreign
securities laws. In the event of any proposed transfer of this Debenture, the
Company may require, prior to issuance of a new Debenture in the name of such
other person, that it receive reasonable transfer documentation including legal
opinions that the issuance of the Debenture in such other name does not and will
not cause a violation of the Securities Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
2. A. The Holder is entitled to, at any time or from time to time,
convert the Conversion Amount into shares of Common Stock of the Company, par
value $.001 per share ("Common Stock"), at a conversion price for each share of
Common Stock (the "Conversion Price") equal to the lower of (x) 120% of the
closing bid price per share (as reported by Bloomberg, LP) on the Closing Date,
and (y) 80% of the lowest closing bid price per share (as reported by Bloomberg,
LP) of the Company's Common Stock for the five (5) Trading Days immediately
preceding the date of conversion. The Conversion Price will be adjusted as
provided in Section 6.
B. For purposes of this Debenture, the following terms have the meanings
indicated below:
(i) "Conversion Amount" shall mean the sum of (A) all or any portion of the
outstanding principal amount of this Debenture, as designated by the Holder upon
exercise of its right of conversion and (B) all interest that has accrued
on the portion of the principal amount that has been designated for payment
pursuant to (A).
(ii) "Market Price of the Common Stock" means (x) the closing bid price of
the Common Stock for the period indicated in the relevant provision hereof
(unless a different relevant period is specified in the relevant provision), as
reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market or (y) if the Common Stock is listed on a stock
exchange, the closing price on such exchange, as reported in The Wall Street
Journal.
(iii) "Trading Day" shall mean any day on which the New York Stock Exchange
is open for business.
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, Pacific Stock Transfer Co. located at
5844 South Pecos, Suite D, Las Vegas, Nevada 89120, accompanied by or
preceded by facsimile or other delivery to the Company of the form of conversion
notice attached hereto as Exhibit A, executed by the Holder of the Debenture
evidencing such Holder's intention to convert this Debenture or a specified
portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. No fractional shares of Common Stock or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. The date on which
notice of conversion is given (the "Conversion Date") shall be deemed to be the
date on which the Company receives by fax or by mail the conversion notice
("Notice of Conversion"), substantially in the form annexed hereto as Exhibit A,
duly executed, to the Company; providedthat the Holder shall deliver to the
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Company's transfer agent or the Company the original Debentures being converted
within five (5) business days thereafter (and if not so delivered within such
time, the Conversion Date shall be the date on which the later of the Notice of
Conversion and the original Debentures being converted is received by the
Company). Facsimile delivery of the Notice of Conversion shall be accepted by
the Company at facsimile number (310) 342-0791 ATTN: Corporate Secretary. Except
as otherwise provided, certificates representing Common Stock upon conversion
will be delivered within five (5) business days from the date of delivery of the
Notice of Conversion.
3. Unless demand has otherwise been made in writing for payment in cash by
the Holder, any Debentures not previously received for conversion as of the
Maturity Date shall be deemed to have been surrendered for conversion, without
further action of any kind by the Company or any of its agents, employees or
representatives, as of the Maturity Date at the Conversion Price applicable on
the Maturity Date ("Mandatory Conversion").
4. No provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to Convert this Debenture into
Common Stock, at the time, place, and rate herein prescribed. This
Debenture is a direct obligation of the Company.
5. If the Company (a) merges or consolidates with another corporation or
after business entity and the Company is not the surviving entity or (b) sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee will agree that this Debenture may thereafter
be converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any (i) proposed
merger or consolidation where the Company is not the surviving entity or (ii)
sale or transfer of all or substantially all of the assets of the Company (in
either such case, a "Sale"), the Holder shall have the right to convert by
delivering a Notice of Conversion to the Company within fifteen (15) days of
receipt of notice of such Sale from the Company.
6. If, at any time while any portion of this Debenture remains outstanding,
the Company effectuates a stock split or reverse stock split of its Common Stock
or issues a dividend on its Common Stock consisting of shares of Common
Stock or otherwise recapitalizes its Common Stock, the Conversion Price shall be
equitably adjusted to reflect such action. By way of illustration, and not in
limitation, of the foregoing (i) if the Company effectuates a 2:1 split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such split, the Conversion Price
shall be deemed to be one-half of what it had been calculated to be immediately
prior to such split; (ii) if the Company effectuates a 1:10 reverse split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such reverse split, the Conversion
Price shall be deemed to be the amount of such Conversion Price calculated
immediately prior to the record date multiplied by 10; and (iii) if the Company
declares a stock dividend of one share of Common Stock for every 10 shares
outstanding, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such dividend, the Conversion Price
shall be deemed to be the amount of such Conversion Price calculated immediately
prior to such record date multiplied by a fraction, of which the numerator is
the number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
7. All payments contemplated hereby to be made "in cash" shall be made by
wire transfer of immediately available funds in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts. All payments of cash and each delivery of shares
of Common Stock issuable to the Holder as contemplated hereby shall be made to
the Holder to an account designated by the Holder to the Company and if the
Holder has not designated any such accounts at the address last appearing on the
Debenture Register of the Company as designated in writing by the Holder
from time to time; except that the Holder may designate, by notice to the
Company, a different delivery address for any one or more specific payments or
deliveries.
8. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except in compliance with the terms of the
Securities Purchase Agreement and the Registration Rights Agreement and under
circumstances which will not result in a violation of the Securities Act or any
applicable state Blue Sky or foreign laws or similar laws relating to the sale
of securities.
9. This Debenture shall be governed by and construed in accordance with the
laws of the State of New York. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non coveniens, to the bringing of any such proceeding
in such jurisdictions. To the extent determined by such court, the Company
shall reimburse the Holder for any reasonable legal fees and disbursements
incurred by the Holder in enforcement of or protection of any of its rights
under this Debenture or the Securities Purchase Agreement.
10. The following shall constitute an "Event of Default":
a. The Company fails in the payment of principal or interest on this
Debenture as required hereunder and the same shall continue for a period of
three (3) days; or
b. Any of the representations or warranties made by the Company herein, in
the Securities Purchase Agreement, the Registration Rights Agreement, dated
August 14, 2001 between the Company and the Investors therein (the "Registration
Rights Agreement"), or in any certificate or financial or other written
statements heretofore or hereafter furnished by the Company in connection with
the execution and delivery of this Debenture or the Securities Purchase
Agreement shall be false or misleading in any material respect at the time made;
or
c. The Company fails to issue shares of Common Stock to the Holder or to
cause its Transfer Agent to issue shares of Common Stock upon exercise by the
Holder of the conversion rights of the Holder in accordance with the terms of
this Debenture, fails to transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon conversion of
this Debenture and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove any
restrictive legend or to cause its Transfer Agent to transfer any certificate or
any shares of Common Stock issued to the Holder upon conversion of this
Debenture as and when required by this Debenture, the Agreement or the
Registration Rights Agreement and such legend removal is otherwise lawful, and
any such failure shall continue uncured for five (5) business days after written
notice from the Holder of such failure; or
d. The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation of the
Debenture and, except the case of Section 5, such failure shall continue uncured
for a period of thirty (30) days after written notice from the holder of such
failure. The Company shall fail to perform or observe, in any material respect,
any covenant, term, provision, condition, agreement or obligation of the Company
under the Securities Purchase Agreement or the Registration Rights Agreement and
such failure shall continue uncured for a period of thirty (30) days after
written notice from the Holder of such failure; or
e. The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a substantial
part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for the Company or
for a substantial part of its property or business without its consent and shall
not be discharged within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company and shall
not be dismissed within sixty (60) days thereafter; or
h. Any final money judgment, writ or warrant of attachment, or similar
process, not subject to appeal, in excess of One-Hundred Thousand ($100,000)
Dollars in the aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of sixty (60) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty (60) days after such
institution or the Company shall by any action or answer approve of, consent to,
or acquiesce in any such proceedings or admit the material allegations of, or
default in answering a petition filed in any such proceeding; or
j. The Company shall have its Common Stock suspended or delisted from an
exchange for a period in excess of five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by a majority in interest of
the Holders of the Debentures (which waiver shall not be deemed to be a waiver
of any subsequent default) at the option of a majority in interest of the
Holders and in the discretion of a majority in interest of the Holders, the
Holder may at its option and discretion declare this Debenture, together with
all accrued and unpaid interest herein, to be immediately due and payable,
without presentment, demand, protest or notice of any kinds, all of which are
hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and a majority in interest of the
Holders may immediately enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
11. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
12. This Debenture may be amended only by the written consent of the parties
hereto.
13. No waivers or consents in regard to any provision of this Debenture may
be given other than by an instrument in writing signed by the Holder.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by an officer thereunto duly authorized.
Dated: August ___, 2001
FLEXXTECH CORPORATION
By:_______________________________________
__________________________________________
(Print Name)
__________________________________________
(Title)