EXHIBIT 4.2.A
SECURED CONVERTIBLE DEBENTURE
DUE APRIL __, 2006
EXHIBIT A
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 THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: April __, 2004
Original Conversion Price (subject to adjustment herein): $0.08
$_______________
SECURED CONVERTIBLE DEBENTURE
DUE APRIL __, 2006
THIS DEBENTURE is one of a series of duly authorized and issued
Convertible Debentures of Usurf America, Inc., a Nevada corporation, having a
principal place of business at 6005 Delmonico Drive, Suite 140, Colorado
Springs, Colorado, 80919 (the "Company"), designated as its Secured Convertible
Debenture, due April __, 2006 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ on April ___, 2006 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"Maturity Date"), and to pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 8% per
annum, payable quarterly on March 31, June 30, September 30 and December 31,
beginning on June 30, 2004 and on each Conversion Date (as to that principal
amount then being converted) and on the Maturity Date (except that, if any such
date is not a Business Day, then such payment shall be due on the next
succeeding Business Day) (each such date, an "Interest Payment Date"), in cash
or shares of Common Stock; provided, however, payment in shares of Common Stock
may only occur if during the 20 Trading Days immediately prior to the applicable
Interest Payment Date all of the Equity Conditions have been met and the Company
shall have give the Holder irrevocable notice in accordance with the notice
requirements set forth below. Subject to the terms and conditions herein, the
decision whether to pay interest hereunder in shares of Common Stock or cash
shall be at the discretion of the Company. Not less than 20 Trading Days prior
to each Interest Payment Date, the Company shall provide the Holder with
irrevocable written notice of its election to pay interest hereunder either in
cash or shares of Common Stock (the Company may indicate in such notice that the
election contained in such notice shall continue for later periods until
revised). Within 20 Trading Days prior to an Interest Payment Date, the
Company's election (whether specific to an Interest Payment Date or continuous)
shall be irrevocable as to such Interest Payment Date. Subject to the
aforementioned conditions, failure to timely provide such written notice shall
be deemed an election by the Company to pay the interest on such Interest
Payment Date in cash. Interest shall be calculated on the basis of a 360-day
year and shall accrue daily commencing on the Original Issue Date until payment
in full of the principal sum, together with all accrued and unpaid interest and
other amounts which may become due hereunder, has been made. Payment of interest
in shares of Common Stock shall otherwise occur pursuant to Section 4(b) and
only for purposes of the payment of interest in shares, the Interest Payment
Date shall be deemed the Conversion Date. Interest shall cease to accrue with
respect to any principal amount converted, provided that the Company in fact
delivers the Underlying Shares within the time period required by Section
4(b)(i). Interest hereunder will be paid to the Person in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of Debentures (the "Debenture Register"). Except as otherwise provided
herein, if at anytime the Company pays interest partially in cash and partially
in shares of Common Stock, then such payment shall be distributed ratably among
the Holders based upon the principal amount of Debentures held by each Holder.
All overdue accrued and unpaid interest to be paid hereunder shall entail a late
fee at the rate of 18% per annum (or such lower maximum amount of interest
permitted to be charged under applicable law) ("Late Fee") which will accrue
daily, from the date such interest is due hereunder through and including the
date of payment. Notwithstanding anything to the contrary contained herein, if
on any Interest Payment Date the Company has elected to pay interest in Common
Stock and is not able to pay accrued interest in the form of Common Stock
because it does not then satisfy the conditions for payment in the form of
Common Stock set forth above, then, at the option of the Holder, the Company, in
lieu of delivering either shares of Common Stock pursuant to this Section 4 or
paying the regularly scheduled cash interest payment, shall deliver, within
three Trading Days of each applicable Interest Payment Date, an amount in cash
equal to the product of the number of shares of Common Stock otherwise
deliverable to the Holder in connection with the payment of interest due such
Interest Payment Date and the highest VWAP during the period commencing on the
Interest Payment Date and ending on the Trading Day prior to the date such
payment is made. The Company may not prepay any portion of the principal amount
of this Debenture without the prior written consent of the Holder.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations. Prior to due
presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 3. Events of Default.
b) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i) any default in the payment of (A) the principal of
amount of any Debenture, or (B) interest (including Late Fees)
on, or liquidated damages in respect of, any Debenture, in
each case free of any claim of subordination, as and when the
same shall become due and payable (whether on a Conversion
Date or the Maturity Date or by acceleration or otherwise)
which default, solely in the case of an interest payment or
other default under clause (B) above, is not cured, within 10
Trading Days;
ii) the Company shall fail to observe or perform any
other covenant or agreement contained in this Debenture or any
of the other Transaction Documents (other than a breach by the
Company of its obligations to deliver shares of Common Stock
to the Holder upon conversion which breach is addressed in
clause (xii) below) which failure is not cured, if possible to
cure, within the earlier to occur of (A) 10 Trading Days after
notice of such default sent by the Holder or by any other
Holder and (B) 15 Trading Days after the Company shall become
or should have become aware of such failure;
iii)a default or event of default (subject to any
grace or cure period provided for in the applicable agreement,
document or instrument and subject to final resolution if such
breach is the subject of a bona-fide dispute) shall occur
under (A) any of the Transaction Documents other than the
Debentures, or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary
is bound;
iv) any representation or warranty made herein, in
any other Transaction Document, in any written statement
pursuant hereto or thereto, or in any other report, financial
statement or certificate made or delivered to the Holder or
any other holder of Debentures shall be untrue or incorrect in
any material respect as of the date when made or deemed made;
v) the Company or any of its subsidiaries shall
commence, or there shall be commenced against the Company or
any such subsidiary a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary 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 any subsidiary
thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days;
or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the
Company or any subsidiary thereof suffers any appointment of
any custodian or the like for it or any substantial part of
its property which continues undischarged or unstayed for a
period of 60 days; or the Company or any subsidiary thereof
makes a general assignment for the benefit of creditors; or
the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally
as they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to arranging
a composition, adjustment or restructuring of its debts; or
the Company or any subsidiary thereof shall by any act or
failure to act expressly indicate its consent to, approval of
or acquiescence in any of the foregoing; or any corporate or
other action is taken by the Company or any subsidiary thereof
for the purpose of effecting any of the foregoing;
vi) the Company or any Subsidiary shall default in
any of its obligations under any mortgage, credit agreement or
other facility, indenture agreement, factoring agreement or
other instrument under which there may be issued, or by which
there may be secured or evidenced any indebtedness for
borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding
$300,000, 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;
vii) the Common Stock shall not be eligible for
quotation on or quoted for trading on a Principal Market and
shall not again be eligible for and quoted or listed for
trading thereon within 10 Trading Days;
viii) the Company shall be a party to any Change of
Control Transaction, shall agree to sell or dispose of all or
in excess of 33% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction) or shall redeem or repurchase more than a de
minimis number of its outstanding shares of Common Stock or
other equity securities of the Company (other than redemptions
of Underlying Shares and repurchases of shares of Common Stock
or other equity securities of departing officers and directors
of the Company; provided such repurchases shall exceed
$250,000, in the aggregate, for all officers and directors
during the term of this Debenture);
ix) a Registration Statement shall not have been
declared effective by the Commission on or prior to the 210th
calendar day after the Original Issue Date or any other Event
(as defined in the Registration Rights Agreement) shall have
occurred;
x) if, during the Effectiveness Period (as defined in
the Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder
shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under the
Registration Statement, in either case, for more than 25
consecutive Trading Days or 35 non-consecutive Trading Days
during any 12 month period; provided, however, that in the
event that the Company is negotiating a merger, consolidation,
acquisition or sale of all or substantially all of its assets
or a similar transaction and in the written opinion of counsel
to the Company, the Registration Statement, would be required
to be amended to include information concerning such
transactions or the parties thereto that is not available or
may not be publicly disclosed at the time, the Company shall
be permitted an additional 15 consecutive Trading Days during
any 12 month period relating to such an event;
xi) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of
the Holder prior to the expiration of thirty days from the
Event Date (as defined in the Registration Rights Agreement)
relating thereto (other than an Event resulting from a failure
of an Registration Statement to be declared effective by the
Commission on or prior to the Effectiveness Date (as defined
in the Registration Rights Agreement), which shall be covered
by Section 3(a)(vii));
xii) the Company shall fail for any reason to deliver
certificates to a Holder prior to the 10th Trading Day after a
Conversion Date pursuant to and in accordance with Section
4(b) or the Company shall provide notice to the Holder,
including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of any
Debentures in accordance with the terms hereof; or
(xiv) the Company shall fail for any reason to
deliver the payment in cash pursuant to a Buy-In (as defined
herein) within 10 days after notice thereof is delivered
hereunder.
c) If any Event of Default occurs, the full principal amount
of this Debenture, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become, at the
Holder's election, immediately due and payable in cash. The aggregate
amount payable upon an Event of Default shall be equal to the Mandatory
Prepayment Amount. Commencing 5 days after the occurrence of any Event
of Default that results in the eventual acceleration of this Debenture,
the interest rate on this Debenture shall accrue at the rate of 18% per
annum, or such lower maximum amount of interest permitted to be charged
under applicable law. All Debentures for which the full Mandatory
Prepayment Amount hereunder shall have been paid in accordance herewith
shall promptly be surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and
all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded
and annulled by Holder at any time prior to payment hereunder and the
Holder shall have all rights as a Debenture holder until such time, if
any, as the full payment under this Section shall have been received by
it. No such rescission or annulment shall affect any subsequent Event
of Default or impair any right consequent thereon.
Section 4. Conversion.
a) i) At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture shall be convertible
into shares of Common Stock at the option of the Holder, in whole or in
part at any time and from time to time (subject to the limitations on
conversion set forth in Section 4(a)(ii) hereof). The Holder shall
effect conversions by delivering to the Company the form of Notice of
Conversion attached hereto as Annex A (a "Notice of Conversion"),
specifying therein the principal amount of Debentures to be converted
and the date on which such conversion is to be effected (a "Conversion
Date"). If no Conversion Date is specified in a Notice of Conversion,
the Conversion Date shall be the date that such Notice of Conversion is
provided hereunder. To effect conversions hereunder, the Holder shall
not be required to physically surrender Debentures to the Company
unless the entire principal amount of this Debenture plus all accrued
and unpaid interest thereon has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal
amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing
the principal amount converted and the date of such conversions. The
Company shall deliver any objection to any Notice of Conversion within
1 Business Day of receipt of such notice. In the event of any dispute
or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any
assignee, by acceptance of this Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of
a portion of this Debenture, the unpaid and unconverted principal
amount of this Debenture may be less than the amount stated on the face
hereof.
ii) Conversion Limitations.
(A) Reserved.
(B) The Company shall not effect any
conversion of this Debenture, and the Holder shall
not have the right to convert any portion of this
Debenture, pursuant to Section 4(a)(i) or otherwise,
to the extent that after giving effect to such
conversion, the Holder (together with the Holder's
affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of 9.99%
of the number of shares of the Common Stock
outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially
owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon
conversion of this Debenture with respect to which
the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock
which would be issuable upon (A) conversion of the
remaining, nonconverted portion of this Debenture
beneficially owned by the Holder or any of its
affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other
securities of the Company (including, without
limitation, any other Debentures or the Warrants)
subject to a limitation on conversion or exercise
analogous to the limitation contained herein
beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 4(a)(ii),
beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act. To
the extent that the limitation contained in this
section applies, the determination of whether this
Debenture is convertible (in relation to other
securities owned by the Holder) and of which a
portion of this Debenture is convertible shall be in
the sole discretion of such Holder. To ensure
compliance with this restriction, the Holder will be
deemed to represent to the Company each time it
delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 4(a)(ii),
in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in
(x) the Company's most recent Form 10-Q or Form 10-K,
as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice
by the Company or the Company's Transfer Agent
setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the
Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company,
including this Debenture, by the Holder or its
affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The
provisions of this Section 4(a)(ii) may be waived by
the Holder upon, at the election of the Holder, not
less than 61 days' prior notice to the Company, and
the provisions of this Section 4(a)(ii)(B) shall
continue to apply until such 61st day (or such later
date, as determined by the Holder, as may be
specified in such notice of waiver).
iii) Underlying Shares Issuable Upon
Conversion of Principal Amount. The number of shares
of Common Stock issuable upon a conversion shall be
determined by the quotient obtained by dividing (x)
the outstanding principal amount of this Debenture to
be converted by (y) the Set Price.
(b) i) Not later than three Trading Days after any Conversion
Date, the Company will deliver to the Holder a certificate or
certificates representing the Underlying Shares which shall be free of
restrictive legends and trading restrictions (other than those required
by the Purchase Agreement) representing the number of shares of Common
Stock being acquired upon the conversion of Debentures (including, if
so timely elected by the Company, shares of Common Stock representing
the payment of accrued interest) and (B) a bank check in the amount of
accrued and unpaid interest (if the Company is required to pay accrued
interest in cash). The Company shall, if available and if allowed under
applicable securities laws, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company
under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing
similar functions. If in the case of any Notice of Conversion such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the fifth Trading Day after a Conversion Date, the
Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company
shall immediately return the certificates representing the principal
amount of Debentures tendered for conversion.
ii) If the Company fails for any reason to deliver to
the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the third Trading Day after the Conversion
Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of
principal amount being converted, $50 per Trading Day
(increasing to $100 per Trading Day after 3 Trading Days after
such damages begin to accrue and increasing to $200 per
Trading Day 6 Trading Days after such after such damages begin
to accrue) for each Trading Day after such third Trading Day
until such certificates are delivered. The Company's
obligations to issue and deliver the Underlying Shares upon
conversion of this Debenture in accordance with the terms
hereof are absolute and unconditional, irrespective of any
action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by
the Holder or any other Person of any obligation to the
Company or any violation or alleged violation of law by the
Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with the issuance of
such Underlying Shares; provided, however, such delivery shall
not operate as a waiver by the Company of any such action the
Company may have against the Holder. In the event a Holder of
this Debenture shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not
refuse conversion based on any claim that the Holder or any
one associated or affiliated with the Holder of has been
engaged in any violation of law, agreement or for any other
reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of this
Debenture shall have been sought and obtained and the Company
posts a surety bond for the benefit of the Holder in the
amount of 150% of the principal amount of this Debenture
outstanding, which is subject to the injunction, which bond
shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of
which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same,
the Company shall issue Conversion Shares or, if applicable,
cash, upon a properly noticed conversion. Nothing herein shall
limit a Holder's right to pursue actual damages or declare an
Event of Default pursuant to Section 3 herein for the
Company's failure to deliver Conversion Shares within the
period specified herein and such Holder shall have the right
to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under
applicable law.
iii) In addition to any other rights available to the
Holder, if the Company fails for any reason to deliver to the
Holder such certificate or certificates pursuant to Section
4(b)(i) by the third Trading Day after the Conversion Date,
and if after such third Trading Day the Holder is required by
its brokerage firm to purchase (in an open market transaction
or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder
anticipated receiving upon such conversion (a "Buy-In"), then
the Company shall (A) pay in cash to the Holder (in addition
to any remedies available to or elected by the Holder) the
amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock
so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue multiplied by (2) the
actual sale price of the Common Stock at the time of the sale
(including brokerage commissions, if any) giving rise to such
purchase obligation and (B) at the option of the Holder,
either reissue Debentures in principal amount equal to the
principal amount of the attempted conversion or deliver to the
Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its delivery
requirements under Section 4(b)(i). For example, if the Holder
purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the actual sale
price of the Underlying Shares at the time of the sale
(including brokerage commissions, if any) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of
the immediately preceding sentence, the Company shall be
required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company shall not be
required to pay such Holder liquidated damages under Section
4(b)(ii) in respect of the certificates resulting in such
Buy-In.
iv) After the Effective Date, the Company may, within
5 Trading Days of the Effective Date, deliver a notice to the
Holder (a "Forced Conversion" and the date such notice is
received by the Holder, the "Forced Conversion Notice Date")
to cause the Holder to immediately convert all or part of the
then outstanding principal amount of Debentures pursuant to
Section 4(a)(i) and the Holder shall surrender this Debenture
to the Company for conversion within 30 Trading Days of the
Forced Conversion Notice Date. The Company may only effect a
Forced Conversion Notice if all of the Equity Conditions are
met from the period beginning on the Effective Date and ending
on the date of the Forced Conversion. Any Forced Conversion
shall be applied ratably to all Holders based on their initial
purchases of Debentures pursuant to the Purchase Agreement.
(c) i) The conversion price in effect on any Conversion Date
shall be equal to $0.08 (subject to adjustment herein)(the "Set
Price").
ii) If the Company, at any time while the Debentures
are outstanding: (A) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by
the Company pursuant to this Debenture, including as interest
thereon), (B) subdivide outstanding shares of Common Stock
into a larger number of shares, (C) combine (including by way
of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issue by
reclassification of shares of the Common Stock any shares of
capital stock of the Company, then the Set Price shall be
multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to
this Section 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 re-classification.
iii) If the Company or any subsidiary thereof, as
applicable, at any time while Debentures are outstanding,
shall offer, sell, grant any option to purchase or offer, sell
or grant any right to reprice its securities, or otherwise
dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Capital Shares or
Capital Shares Equivalents entitling any Person to acquire
shares of Common Stock, at an effective price per share less
than the then Set Price ("Dilutive Issuance"), as adjusted
hereunder (if the holder of the Capital Shares or Capital
Shares Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to
receive shares of Common Stock at an effective price per share
which is less than the Set Price, such issuance shall be
deemed to have occurred for less than the Set Price), then the
Set Price shall be reduced to equal the effective conversion,
exchange or purchase price for such Capital Shares or Capital
Shares Equivalents (including any reset provisions thereof) at
issue. Such adjustment shall be made whenever such Capital
Shares or Capital Shares Equivalents are issued. The Company
shall notify the Holder in writing, no later than the business
day following the issuance of any Capital Shares or Capital
Shares Equivalents subject to this section, indicating therein
the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms.
iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock
(and not to Holders) evidences of its indebtedness or assets
or rights or warrants to subscribe for or purchase any
security, then in each such case the Set Price shall be
determined by multiplying such price in effect immediately
prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined
as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date 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 the Common Stock as determined by
the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the
Holders 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.
v) All calculations under this Section 4 shall be
made to the nearest cent or the nearest 1/100th of a share, as
the case may be. For purposes of this Section 4, the number of
shares of Common Stock outstanding as of a given date shall be
the sum of the number of shares of Common Stock (excluding
treasury shares, if any) outstanding.
vi) Whenever the Set Price is adjusted pursuant to
any of Section 4(c)(ii) - (v), the Company shall promptly mail
to each Holder a notice setting forth the Set Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable
rate security, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Capital
Shares or Capital Shares Equivalents at the lowest possible
conversion or exercise price at which such securities may be
converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement), or the
lowest possible adjustment price in the case of an MFN
Transaction (as defined in the Purchase Agreement).
vii) If (A) the Company shall declare a dividend (or
any other distribution) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (D) the approval
of any stockholders of the Company shall be required in
connection with any reclassification of the 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, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the
purpose of conversion of the Debentures, and shall cause to be
mailed to the Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 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 the
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 or share exchange is
expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, 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. Holders are entitled
to convert Debentures during the 20-day period commencing the
date of such notice to the effective date of the event
triggering such notice.
viii) If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B)
the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (C) any
tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares
for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other
securities, cash or property (in any such case, a "Fundamental
Transaction"), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for
each Underlying Share that would have been issuable upon such
conversion absent such Fundamental Transaction, the same kind
and amount of securities, cash or property as it would have
been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of one share of
Common Stock (the "Alternate Consideration"). For purposes of
any such conversion, the determination of the Set Price shall
be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the
Set Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this
Debenture following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new
debenture consistent with the foregoing provisions and
evidencing the Holder's right to convert such debenture into
Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to
comply with the provisions of this paragraph (c) and insuring
that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
ix) Notwithstanding the foregoing, no adjustment will
be made under this paragraph (c) in respect of (A) the
granting or issuance of shares of capital stock or of options
to employees, officers and directors of the Company pursuant
to any stock option plan agreement or arrangement duly adopted
or approved by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members
of a committee of non-employee directors established for such
purpose, (B) upon the exercise of this Debenture or any other
Debenture of this series or of any other series or security
issued by the Company in connection with the offer and sale of
this Company's securities pursuant to the Purchase Agreement,
or (C) upon the exercise of or conversion of any Capital
Shares Equivalents, rights, options or warrants issued and
outstanding on the Original Issue Date, provided such
securities have not been amended since the date of the
Purchase Agreement except as a result of the Purchase
Agreement, or (D) issuance of securities in connection with
acquisitions, strategic investments, or strategic partnering
arrangements, the primary purpose of which is not to raise
capital.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the
Debentures and payment of interest on the Debenture, each as herein
provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders, not less than such
number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares
set forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 4(b)) upon the conversion
of the outstanding principal amount of the Debentures and payment of
interest hereunder. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Registration Statement is then effective under the Securities Act,
registered for public sale in accordance with such Registration
Statement.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the VWAP
at such time. If the Company elects not, or is unable, to make such a
cash payment, the Holder shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to
the Holders thereof for any documentary stamp or similar taxes that may
be payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than
that of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries
to be provided by the Holders hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at the address set forth above,
facsimile number (719) 260-6456, Attn: Douglas O. Mckinnon, President
or such other address or facsimile number as the Company may specify
for such purposes by notice to the Holders delivered in accordance with
this Section. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of
the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New York
City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required
to be given.
Section 5. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement,
and (b) the following terms shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 45% of the voting securities
of the Company (provided a Change of Control Transaction shall not have
occurred as a result of the transactions contemplated under the
Purchase Agreement or the acquisitions which may occur which have been
disclosed orally to the original Holder, or (ii) a replacement at one
time or within a three year period of more than one-half of the members
of the Company's board of directors which is not approved by a majority
of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the
board of directors on any date whose nomination to the board of
directors was approved by a majority of the members of the board of
directors who are members on the date hereof), or (iii) the execution
by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in
(i) or (ii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $.0001 par value per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conversion Date" shall have the meaning set forth in Section
4(a)(i) hereof.
"Equity Conditions" shall mean, during the period in question,
(i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Conversion
Notices, if any, (ii) all liquidated damages and other amounts owing in
respect of the Debentures shall have been paid; (iii) there is an
effective Registration Statement pursuant to which the Holder is
permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents (and the Company
believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is
trading on the Principal Market and all of the shares issuable pursuant
to the Transaction Documents are listed for trading on a Principal
Market (and the Company believes, in good faith, that trading of the
Common Stock on a Principal Market will continue uninterrupted for the
foreseeable future), (v) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is then existing no Event of Default or event
which, with the passage of time or the giving of notice, would
constitute and Event of Default and (vii) all of the shares issued or
issuable pursuant to the transaction documents in full, ignoring for
such purposes any conversion or exercise limitation therein, would not
violate the limitations set forth in Section 4(a)(ii)(B) and (ix) no
public announcement of a pending or proposed Fundamental Transaction or
acquisition transaction has occurred that has not been consummated.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Interest Conversion Rate" means the lesser of (a) the Set
Price and (b) 90% of the lesser of (i) the average of the 20 VWAPS
immediately prior to the applicable Interest Payment Date or (ii) the
average of the 20 VWAPs immediately prior to the date the applicable
interest payment shares are issued and delivered if after the Interest
Payment Date.
"Late Fees" shall have the meaning set forth in the second
paragraph to this Debenture.
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of (i) the greater of: (A) 130% of the principal amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon,
or (B) the principal amount of Debentures to be prepaid, plus all other
accrued and unpaid interest hereon, divided by the Set Price on (x) the
date the Mandatory Prepayment Amount is demanded or otherwise due or
(y) the date the Mandatory Prepayment Amount is paid in full, whichever
is less, multiplied by the VWAP on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures.
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of April ___, 2004, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying
Shares and naming the Holder as a "selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Set Price" shall have the meaning set forth in Section
4(c)(i).
"Trading Day" means (a) a day on which the shares of Common
Stock are traded on a Principal Market on which the shares of Common
Stock are then listed or quoted, or (b) if the shares of Common Stock
are not quoted on a Principal Market, a day on which the shares of
Common Stock are quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization
or agency succeeding its functions of reporting prices); provided, that
in the event that the shares of Common Stock are not listed or quoted
as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a
Business Day.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance
with the terms hereof.
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Principal Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Principal Market on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based on
a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Principal
Market and if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers and reasonably
acceptable to the Company.
Section 6. Reserved.
Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct debt obligation of the
Company and, pursuant to the Security Agreement is secured by a first priority
security interest in all of the assets of the Company for the benefit of the
Holders. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Company shall not and shall cause it subsidiaries not to,
without the consent of the Holder, (a) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (b) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than a de minimis number of shares of its Common Stock or other equity
securities other than as to the Underlying Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents; or (c) enter into any agreement with respect to any of
the foregoing.
Section 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 9. Except with respect to the possible acquisitions referred to
in the definition of "Change of Control Transaction", so long as any portion of
this Debenture is outstanding, the Company will not and will not permit any of
its subsidiaries to, directly or indirectly, enter into, create, incur, assume
or suffer to exist any indebtedness or liens of any kind, on or with respect to
any of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom that is senior to, or pari passu
with, in any respect, the Company's obligations under the Debentures without the
prior consent of the Holder, which consent shall not be unreasonably withheld.
Section 10. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture 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. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
*********************
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
USURF AMERICA, INC.
By: /s/ Douglas O. McKinnon
-----------------------------
Name: Douglas O. McKinnon
Title: President & CEO
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Convertible
Debenture of Usurf America, Inc. (the "Company"), due on April ____, 2006, into
shares of common stock, $0.0001 par value per share (the "Common Stock"), of the
Company according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that the conversion hereunder will not cause its
beneficial ownership of the Company's Common Stock to exceed the amount
determined in accordance with Section 4(a)(II)(B) of this Debenture.
The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued on
Account of Conversion at Issue.
Number of shares of Common Stock to
be issued:
Signature:
Name:
Address:
Schedule 1
CONVERSION SCHEDULE
Convertible Debentures due on April ____, 2006, in the aggregate principal
amount of $____________ issued by Usurf America, Inc.. This Conversion Schedule
reflects conversions made under Section 4 of the above referenced Debenture.
Dated:
AGGREGATE PRINCIPAL
AMOUNT REMAINING
DATE OF CONVERSION SUBSEQUENT TO
(OR FOR FIRST ENTRY, ORIGINAL CONVERSION
ISSUE DATE) AMOUNT OF CONVERSION (OR ORIGINAL COMPANY ATTEST
PRINCIPAL AMOUNT)
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