EXHIBIT A
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS 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
COMPANIES. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: May ___, 2005
$------------
AMENDED AND RESTATED 12% CONVERTIBLE DEBENTURE
DUE SEPTEMBER 30, 2006
THIS 12% CONVERTIBLE DEBENTURE is one of a series of duly authorized and
issued 12% Convertible Debentures of (i) Azur International, Inc., a Nevada
corporation, having a principal place of business at 101 N.E. 3rd Avenue, Suite
1220, Fort Lauderdale, Florida 33301 (the "Company") and Azur Holdings, Inc., a
Delaware corporation having a principal place of business at 101 N.E. 3rd
Avenue, Suite 1220, Fort Lauderdale, Florida 33301 (the "Parent"), designated as
their 12% Convertible Debenture, due September 30, 2006 (the "Debenture(s)").
FOR VALUE RECEIVED, the Company and the Parent jointly and severally
promise to pay to _____________ or its registered assigns (the "Holder"), or
shall have paid pursuant to the terms hereunder, the principal sum of
_____________________ by September 30, 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 in accordance with the
provisions hereof. All payments shall be made by certified check to the address
of the Holder as provided in Section 9(a) or by wire transfer of immediately
available funds pursuant to instructions as may be provided from time to time by
Holder. This Debenture is subject to the following additional provisions:
Section 1. 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:
1
"Alternate Consideration" shall have the meaning set forth in Section
5(a).
"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.
"Buy-In" shall have the meaning set forth in Section 4(d)(v).
"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 or the Parent, by contract or
otherwise) of in excess of 33% of the voting securities of the Company, or
Parent, as applicable or (ii) the Company or Parent merges into or consolidates
with any other Person, or any Person merges into or consolidates with the
Company or Parent and, after giving effect to such transaction, the stockholders
of the Company or Parent immediately prior to such transaction own less than 33%
of the aggregate voting power of the Company or Parent, as applicable, or the
successor entity of such transaction, or (iii) the Company or Parent sells or
transfers its assets, as an entirety or substantially as an entirety, to another
Person and the stockholders of the Company or Parent immediately prior to such
transaction own less than 33% of the aggregate voting power of the acquiring
entity immediately after the transaction, (iv) a replacement at one time or
within a three year period of more than one-half of the members of the Company's
or Parent'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
(v) the execution by the Company or Parent of an agreement to which the Company
or Parent, as applicable, is a party or by which it is bound, providing for any
of the events set forth above in (i) or (iv).
"Company Common Stock" means the common stock, par value $.0001 per share,
of the Company and stock of any other class of securities into which such
securities may hereafter have been reclassified or changed into.
"Conversion Date" shall have the meaning set forth in Section 4(a).
"Conversion Price" shall have the meaning set forth in Section 4(b).
"Conversion Shares" means the shares of Company Common Stock or Parent
Common Stock issuable upon conversion of Debentures.
2
"Debenture Register" shall have the meaning set forth in Section 2(c).
"Event of Default" shall have the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Fundamental Transaction" shall have the meaning set forth in Section
5(a).
"Interest Payment Date" shall have the meaning set forth in Section 2(a).
"Late Fees" shall have the meaning set forth in Section 2(d).
"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 Conversion 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.
"New York Courts" shall have the meaning set forth in Section 9(d).
"Notice of Conversion" shall have the meaning set forth in Section 4(a).
"Optional Redemption" shall have the meaning set forth in Section 6(a).
"Optional Redemption Amount" shall mean the sum of (i) 100% of the
principal amount of the Debenture then outstanding, (ii) accrued but unpaid
interest and (iii) all liquidated damages and other amounts due in respect of
the Debenture.
"Optional Redemption Notice" shall have the meaning set forth in Section
6(a).
"Optional Redemption Notice Date" shall have the meaning set forth in
Section 6(a).
"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.
3
"Parent Common Stock" means the common stock, par value $.0001per share,
of the Parent and stock of any other class of securities into which such
securities may hereafter have been reclassified or changed into
"Permitted Indebtedness" means the Indebtedness of up to $_________
incurred pursuant to that certain Construction Loan Agreement, dated January 5,
2005, between 48 Hendricks, LLC and Colonial Bank, N.A. and the Indebtedness
incurred in connection with that certain Loan Agreement, dated November 2, 2005,
by and among the borrowers thereto, including the Company, and the signatories
thereto, in the original principal amount of $6,000,000.
"Permitted Lien" mean (a) Liens with respect to the payment of taxes or
governmental charges in all cases which are not yet due or which are subject to
a good faith contest; (b) any Liens incurred in connection with Permitted
Indebtedness provided that such liens are not secured by assets of the Company,
the Parent or their respective Subsidiaries other than the assets so acquired or
leased; and (c) statutory Liens of landlords or equipment lessors against any
property of the Company, the Parent or their respective Subsidiaries existing as
of the date of the Purchase Agreement in favor of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen.
"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
May 31, 2005, to which the Company, the Parent and the original Holder are
parties, as amended, modified or supplemented from time to time in accordance
with its terms.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" shall have the meaning given to such term in the Purchase
Agreement.
"Trading Market" means, as applicable, the following markets or exchanges
on which the Company Common Stock or Parent Common Stock, as applicable, is
listed or quoted for trading on the date in question: the American Stock
Exchange, the New York Stock Exchange, the Nasdaq National Market, the Nasdaq
SmallCap Market or the OTC Bulletin Board.
"Transaction Documents" shall have the meaning set forth in the Purchase
Agreement.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Company Common Stock or Parent Common
Stock is then listed or quoted on a Trading Market, the daily volume weighted
average price of the Company Common Stock or Parent Common Stock, as applicable
for such date (or the nearest preceding date) on the Trading Market on which the
Company Common Stock or Parent Common Stock is then listed or quoted as reported
by Bloomberg Financial L.P. (based on a Business Day from 9:30 a.m. Eastern Time
to 4:02 p.m. Eastern Time); (b) if the Company Common Stock or Parent Common
Stock is not then listed or quoted on a Trading Market and if prices for the
Company Common Stock or Parent Common Stock, as applicable, are then reported in
the "Pink Sheets" published by the Pink Sheets LLC (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Company Common Stock or Parent Common Stock so reported;
or (c) in all other cases, the fair market value of a share of Company Common
Stock or Parent Common Stock, as applicable, as determined by an independent
appraiser selected in good faith by the Holders and reasonably acceptable to the
Company or Parent, as applicable.
4
Section 2. Interest.
a) Payment of Interest. The Company or Parent shall pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of 12% per annum, payable monthly on the first of
each calendar month beginning on July __, 2005, beginning on the first such date
after the Original Issue Date, on each Conversion Date (as to that principal
amount then being converted), on each Optional Redemption Date (as to that
principal amount being redeemed) 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.
b) Interest Calculations. 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.
Interest shall cease to accrue with respect to any principal amount converted,
provided that either the Company or Parent in fact delivers the Conversion
Shares within the time period required by Section 4(d)(ii). Interest hereunder
will be paid to the Person in whose name this Debenture is registered on the
records of the Company and the Parent regarding registration and transfers of
Debentures (the "Debenture Register").
c) Late Fee. 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
Fees") which will accrue daily, from the date such interest is due hereunder
through and including the date of payment.
d) Prepayment. Except as otherwise set forth in this Debenture,
neither the Company nor the Parent may prepay any portion of the principal
amount of this Debenture without the prior written consent of the Holder.
5
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. 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.
b) Investment Representations. 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.
c) Reliance on Debenture Register. Prior to due presentment to the
Company and Parent for transfer of this Debenture, the Parent and Company and
any of their agents 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, Parent nor any such agent
shall be affected by notice to the contrary.
Section 4. Conversion.
a) Voluntary Conversion. At any time after the Original Issue Date
until this Debenture is no longer outstanding, this Debenture shall be
convertible into either shares of Company Common Stock or Parent Common Stock,
or a combination thereof, 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(c) hereof). The Holder shall effect conversions by delivering
to the Company or Parent, as applicable 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 or Parent 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, the
Parent and the Company shall maintain records showing the principal amount
converted and the date of such conversions. The Company or Parent, as applicable
shall deliver any objection to any Notice of Conversion within 2 Business Days
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.
6
b) Conversion Price. The conversion price (the "Conversion Price")
in effect on any Conversion Date shall be equal to (A) with respect to Company
Common Stock, the lesser of (i) $1.00 (subject to forward and reverse stock
splits and the like) and (ii) the price determined by dividing $45,000,000 by,
as of the Business Day immediately prior to the applicable Conversion Date, the
sum of (i) the total number of then issued and outstanding shares of Common
Stock and all other classes of capital stock of the Company, plus (ii) the total
number of shares of all Common Stock and all other classes of capital stock of
the Company into which all then issued and outstanding and fully-vested Common
Stock Equivalents and other securities convertible, exchangeable or otherwise
into other classes of capital stock of the Company may be converted,
exchangeable or otherwise (subject to adjustment herein) ("Fully-Diluted
Outstanding Company Capital Stock") or (B) with respect to Parent Common Stock,
the lesser of (i) $3.00 (subject to forward and reverse stock splits and the
like) and (ii) the price determined by dividing $45,000,000 by, as of the
Business Day immediately prior to the applicable Conversion Date, the sum of (i)
the total number of then issued and outstanding shares of Common Stock and all
other classes of capital stock of the Parent, plus (ii) the total number of
shares of all Common Stock and all other classes of capital stock of the Parent
into which all then issued and outstanding and fully-vested Common Stock
Equivalents and other securities convertible, exchangeable or otherwise into
other classes of capital stock of the Parent may be converted, exchangeable or
otherwise (subject to adjustment herein) ("Fully-Diluted Outstanding Parent
Capital Stock") . Within 2 Business Days of the request of the Holder, the
Company or the Parent, as applicable, shall provide the Holder an Officer's
Certificate stating the number of issued and outstanding shares of Fully-Diluted
Outstanding Company Capital Stock or Fully-Diluted Outstanding Parent Capital
Stock.
c) Holder's Restriction on Conversion. Neither the Company nor the
Parent shall 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) 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 4.99% of
the number of shares of the Company Common Stock or Parent Common Stock, as
applicable, outstanding immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of Company Common Stock
or Parent Common Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Company Common Stock or Parent Common Stock, as
applicable, 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 Company Common Stock or Parent 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 or Parent, as applicable, (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(c), 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 or Parent, as applicable, each
time it delivers a Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and neither the Company
nor the Parent shall have any obligation to verify or confirm the accuracy of
such determination. For purposes of this Section 4(c), in determining the number
of outstanding shares of Company Common Stock or Parent Common Stock, as
applicable, the Holder may rely on the number of outstanding shares of Company
Common Stock and Parent Common Stock as reflected in (x) Schedule 3.1(g) to the
Purchase Agreement, (y) a more recent public announcement by the Company or
Parent or (z) any other notice by the Company, Parent or their respective
Transfer Agent setting forth the number of shares of Company Common Stock or
Parent Common Stock outstanding. Upon the written or oral request of the Holder,
the Company and Parent shall within two Business Days confirm orally and in
writing to the Holder the number of shares of Company Common Stock or Parent
Common Stock then outstanding. In any case, the number of outstanding shares of
Company Common Stock or Parent Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company or Parent, as
applicable, including this Debenture, by the Holder or its affiliates since the
date as of which such number of outstanding shares of Company Common Stock or
Parent Common Stock was reported. The provisions of this Section 4(c) may be
waived by the Holder, at the election of the Holder, upon not less than 61 days'
prior notice to the Company or Parent, as applicable, and the provisions of this
Section 4(c) 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).
7
d) Mechanics of Conversion
i. Conversion Shares Issuable Upon Conversion of Principal
Amount. The number of shares of Company Common Stock or Parent Common Stock, as
applicable issuable upon a conversion hereunder shall be determined by the
quotient obtained by dividing (x) the outstanding principal amount of this
Debenture to be converted by (y) the Conversion Price.
ii. Delivery of Certificate Upon Conversion. Not later than
three Business Days after any Conversion Date, the Company will deliver or cause
to be delivered to the Holder (A) a certificate or certificates representing the
Conversion 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 Company Common Stock or Parent Common Stock being
acquired upon the conversion of Debentures and (B) a bank check in the amount of
accrued and unpaid interest. The Company or Parent, as applicable, 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 or Parent under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions.
8
iii. Failure to Deliver Certificates. 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 third Business Day after a Conversion
Date, the Holder shall be entitled by written notice to the Company or Parent,
as applicable, at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the Company
or Parent shall immediately return the certificates representing the principal
amount of Debentures tendered for conversion.
iv. Obligation Absolute; Partial Liquidated Damages. If the
Company or Parent fails for any reason to deliver to the Holder such certificate
or certificates pursuant to Section 4(d)(ii) by the fifth Business Day after the
Conversion Date, the Company or Parent shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $1000 of principal amount
being converted, $10 per Business Day (increasing to $20 per Business Day after
5 Business Days after such damages begin to accrue) for each Business Day after
such fifth Business Day until such certificates are delivered. The Company's and
Parent's obligations to issue and deliver the Conversion 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, the Parent 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 and Parent to the Holder in
connection with the issuance of such Conversion Shares; provided, however, such
delivery shall not operate as a waiver by the Company or Parent of any such
action the Company or Parent 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, neither the Company nor the Parent may refuse conversion based on
any claim that the Holder or any one associated or affiliated with the Holder
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 either the Company or Parent 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 or
Parent, as applicable, 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 8
herein for the Company's or Parent'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 Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.
9
v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. In addition to any other rights available to the
Holder if the Company or Parent fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(d)(ii) by the third
Business Day after the Conversion Date, and if after such third Business Day the
Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise) Company Common Stock or Parent Common Stock to deliver
in satisfaction of a sale by such Holder of the Conversion Shares which the
Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company
or Parent 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 Company
Common Stock or Parent Common Stock so purchased exceeds (y) the product of (1)
the aggregate number of shares of Company Common Stock or Parent Common Stock
that such Holder anticipated receiving from the conversion at issue multiplied
by (2) the actual sale price of the Company Common Stock or Parent 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 Company Common Stock
or Parent Common Stock that would have been issued had the Company timely
complied with its delivery requirements under Section 4(d)(ii). For example, if
the Holder purchases Company 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 Conversion 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 or Parent, as applicable, 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 or Parent to make payment in respect of a Buy-In for the failure to
timely deliver certificates hereunder and the Company or Parent timely pays in
full such payment, neither the Company nor the Parent shall be required to pay
such Holder liquidated damages under Section 4(d)(iv) in respect of the
certificates resulting in such Buy-In.
10
vi. Reservation of Shares Issuable Upon Conversion. The
Company and Parent each covenant that it will at all times reserve and keep
available out of its authorized and unissued shares of Company Common Stock and
Parent Common Stock, as applicable, 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
(and the other Holders of the Debentures), not less than such number of shares
of the Company Common Stock or Parent Common Stock, as applicable, as shall
(subject to any additional requirements of the Company or Parent as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 5) upon the
conversion of the outstanding principal amount of the Debentures. The Company
and Parent each covenants that all shares of Company Common Stock and Parent
Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if a Registration
Statement is then effective under the Securities Act, registered for public sale
in accordance with such Registration Statement.
vii. Fractional Shares. Upon a conversion hereunder neither
the Company nor the Parent shall be required to issue stock certificates
representing fractions of shares of the Company Common Stock or Parent Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP of the Company Common Stock or
Parent Common Stock, as applicable, at such time. If the Company or Parent
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 Company Common Stock or Parent Common Stock, as applicable.
viii. Transfer Taxes. The issuance of certificates for shares
of the Company Common Stock and Parent Common Stock on conversion of this
Debenture shall be made without charge to the Holder hereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that neither the Company nor the Parent shall 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 neither the
Company nor the Parent shall 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 or Parent, as applicable, the amount of such tax or shall
have established to the satisfaction of the Company or Parent that such tax has
been paid.
Section 5.
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(a) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (A) the Company or Parent effects any merger or consolidation of
the Company or Parent with or into another Person, (B) the Company or Parent
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, the Parent or another Person) is completed pursuant to which holders of
Company Common Stock or Parent Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (D) the Company or
Parent effects any reclassification of the Company Common Stock or Parent Common
Stock, as applicable, or any compulsory share exchange pursuant to which the
Company Common Stock or Parent 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 Conversion Share
that would have been issuable upon such conversion immediately prior to the
occurrence of 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 Company Common Stock or
Parent Common Stock, as applicable (the "Alternate Consideration"). For purposes
of any such conversion, the determination of the Conversion 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 Company
Common Stock or Parent Common Stock, as applicable, in such Fundamental
Transaction, and the Parent or Company, as applicable, shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Company Common Stock or Parent Common Stock, as
applicable, 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, Parent 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 (d) and insuring that this Debenture (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.
(b) Notice of Events. If (A) the Company or Parent shall declare a
dividend (or any other distribution) on the Company Common Stock or Parent
Common Stock, as applicable; (B) the Company or Parent shall declare a special
nonrecurring cash dividend on or a redemption of the Company Common Stock or
Parent Common Stock; (C) the Company or Parent shall authorize the granting to
all holders of the Company Common Stock or Parent Common Stock, as applicable,
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
or Parent shall be required in connection with any reclassification of the
Company Common Stock or Parent Common Stock, any consolidation or merger to
which the Company or Parent is a party, any sale or transfer of all or
substantially all of the assets of the Company or Parent, of any compulsory
share exchange whereby the Company Common Stock or Parent Common Stock is
converted into other securities, cash or property; (E) the Company or Parent
shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company or Parent; then, in each case, the Company or
Parent, as applicable, 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 or Parent, as applicable, 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 Company Common Stock or Parent
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 Company Common Stock or Parent 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.
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(c) Stock Dividends and Stock Splits. If the Company or Parent, at
any time while this Debenture is outstanding: (A) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares of Company
Common Stock or Parent Common Stock, as applicable or any securities
exercisable, exchangeable or convertible into capital stock of the Company or
Parent (which, for avoidance of doubt, shall not include any shares of Company
Common Stock or Parent Common Stock issued upon conversion of, or payment of
interest on, this Debenture); (B) subdivides outstanding shares of Company
Common Stock or Parent into a larger number of shares; (C) combines (including
by way of a reverse stock split) outstanding shares of Company Common Stock or
Parent Common Stock into a smaller number of shares; or (D) issues, in the event
of a reclassification of shares of the Company Common Stock or Parent Common
Stock, any shares of capital stock of the Company or Parent, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Company Common Stock or Parent Common Stock, as applicable
(excluding any treasury shares of the Company or Parent, as applicable)
outstanding immediately before such event and of which the denominator shall be
the number of shares of Company Common Stock or Parent Common Stock, as
applicable, outstanding immediately 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.
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Section 6. Optional Redemption.
a) Optional Redemption at Election of Company. Subject to the
provisions of this Section 6, at any time after the Closing Date, the Company or
Parent may deliver a notice to the Holders (an "Optional Redemption Notice" and
the date such notice is deemed delivered hereunder, the "Optional Redemption
Notice Date") of its irrevocable election to redeem some or all of the then
outstanding Debentures, for an amount, in cash, equal to the Optional Redemption
Amount on the 30th calendar day following the Optional Redemption Notice Date
(such date, the "Optional Redemption Date" and such redemption, the "Optional
Redemption"). The Optional Redemption Amount is due in full on the Optional
Redemption Date. The Company and Parent each covenants and agrees that it will
honor all Notice of Conversions tendered from the time of delivery of the
Optional Redemption Notice through the date all amounts owing thereon are due
and paid in full.
b) Redemption Procedure. The payment of cash pursuant to an Optional
Redemption shall be made on the Optional Redemption Date. If any portion of the
cash payment for an Optional Redemption shall not be paid by the Company or
Parent by the due date, interest shall accrue thereon at the rate of 18% per
annum (or the maximum rate permitted by applicable law, whichever is less) until
the payment of the Optional Redemption Amount plus all amounts owing thereon is
paid in full. Alternatively, if any portion of the Optional Redemption Amount
remains unpaid after such date, the Holders subject to such redemption may
elect, by written notice to the Company or Parent, given at any time thereafter,
to invalidate ab initio such redemption, notwithstanding anything herein
contained to the contrary, and, with respect the failure to honor the Optional
Redemption neither the Company nor the Parent shall have any further right to
exercise such Optional Redemption. Notwithstanding anything to the contrary in
this Section 6, the Company's and Parent's determination to redeem in cash or
its elections under Section 6(b) shall be applied among the Holders of
Debentures ratably. The Holder may elect to convert the outstanding principal
amount of the Debenture pursuant to Section 4 prior to actual payment in cash
for any redemption under this Section 6 by fax delivery of a Notice of
Conversion to the Company or Parent.
Section 7. Negative Covenants. So long as any portion of this Debenture is
outstanding, neither the Parent, the Company nor any of their respective
Subsidiaries will directly or indirectly:
a) other than the Permitted Indebtedness as it exists on the date of
the Purchase Agreement, enter into, create, incur, assume, guarantee or suffer
to exist any indebtedness for borrowed money of any kind, including but not
limited to, a guarantee, on or with respect to any of the property or assets of
48 Hendricks, LLC now owned or hereafter acquired or any interest therein or any
income or profits therefrom;
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b) other than the Liens incurred in connection with Permitted
Indebtedness, enter into, create, incur, assume or suffer to exist any liens of
any kind, on or with respect to any of property or assets of 48 Hendricks, LLC
now owned or hereafter acquired or any interest therein or any income or profits
therefrom;
c) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holder;
d) repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its capital stock or
securities exercisable, exchangeable or convertible into its capital stock other
than as to the Conversion Shares to the extent permitted or required under the
Transaction Documents or as otherwise permitted by the Transaction Documents;
e) enter into any agreement with respect to any of the foregoing; or
f) pay cash dividends on any equity securities of the Company or
Parent.
Section 8. Events of Default.
a) "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 amount of
any Debenture, or (B) interest (including Late Fees) on, or liquidated damages
in respect of, any Debenture, 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 3 Business Days;
ii. the Company or Parent shall fail to observe or perform any
other covenant or agreement contained in this Debenture (other than a breach by
the Company or Parent of its respective obligations to deliver shares of Common
Stock to the Holder upon conversion which breach is addressed in clause (viii)
below) which failure is not cured, if possible to cure, within the earlier to
occur of (A) 5 Business Days after notice of such default sent by the Holder or
by any other Holder and (B)10 Business Days after the Company or Parent shall
become or should have become aware of such failure;
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iii. a default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document or instrument)
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, the Parent or any Subsidiary is bound;
iv. any representation or warranty made herein, in any other
Transaction Documents, 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. (i) the Company, the Parent or any of their respective
Subsidiaries shall commence, or there shall be commenced against the Company,
Parent 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, Parent 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, the Parent or any Subsidiary
thereof or (ii) there is commenced against the Company, the Parent or any
Subsidiary thereof any such bankruptcy, insolvency or other proceeding which
remains undismissed for a period of 60 days; or (iii) the Company, the Parent or
any Subsidiary thereof is adjudicated by a court of competent jurisdiction
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or (iv) the Company, the Parent 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 (v) the Company, the Parent or any Subsidiary thereof
makes a general assignment for the benefit of creditors; or (vi) the Company or
the Parent 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 (vii) the Company,
the Parent 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
(viii) the Company, the Parent 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 (ix) any corporate or other action is taken by the
Company, the Parent or any Subsidiary thereof for the purpose of effecting any
of the foregoing;
vi. the Company, the Parent 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 or Parent in an amount exceeding $150,000, 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;
16
vii. the Company or Parent shall be a party to any Change of
Control Transaction or Fundamental 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 Company
Common Stock, Parent Common Stock or other equity securities of the Company or
Parent (other than redemptions of Conversion Shares and repurchases of shares of
Company Common Stock, Parent Common Stock or other equity securities of
departing officers and directors of the Company or Parent; provided such
repurchases shall not exceed $100,000, in the aggregate, for all officers and
directors during the term of this Debenture);
viii. a Registration Statement shall not have been declared
effective by the Commission on or before June 30, 2006;
ix. the Parent Common Stock shall not be eligible for
quotation on or quoted for trading on a Trading Market on or before June 30,
2006; or
x. the Company or Parent shall fail for any reason to deliver
certificates to a Holder prior to the 7th Business Day after a Conversion Date
pursuant to and in accordance with Section 4(d) or the Company or Parent 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.
b) Remedies Upon Event of Default. 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 or Parent. The Holder need not provide and the Company and Parent each
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.
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Section 9. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder 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 or Parent, as applicable, at the address set
forth above, facsimile number (954) 763-1516, Attn: Donald Winfrey, President or
such other address or facsimile number as the Company or Parent 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 or Parent 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 Parent, 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.
b) Absolute Obligation. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligations of the Company
and Parent, which are 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 both the Company and Parent. This Debenture ranks pari
passu with all other Debentures now or hereafter issued under the terms set
forth herein.
c) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company and Parent 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 and Parent.
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d) Governing Law. 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.
e) Waiver. Any waiver by the Company, the Parent 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, the Parent 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.
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f) Severability. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances. 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 and Parent each 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 and the
Parent 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 and Parent (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.
g) Next Business Day. 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.
h) Headings. The headings contained herein are for convenience only,
do not constitute a part of this Debenture and shall not be deemed to limit or
affect any of the provisions hereof.
*********************
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IN WITNESS WHEREOF, the Company and the Parent have caused this Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
AZUR INTERNATIONAL, INC.
By:
--------------------
Name:
Title:
AZUR HOLDINGS, INC.
By:
--------------------
Name:
Title:
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ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 12%
Convertible Debenture of Azur International, Inc., a Nevada corporation (the
"Company") and Azur Holdings, Inc. a Delaware corporation (the "Parent"), due on
September 30, 2006, into shares of common stock of the Parent or Company, as
specified below 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 or Parent, as applicable 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 and Parent that its ownership of the common stock of
such entity does not exceed the amounts determined in accordance with Section
13(d) of the Exchange Act, specified under Section 4 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:
Number of shares of Azur International, Inc.
Common Stock to be issued:
Number of shares of Azur Holdings, Inc. Common
Stock to be issued:
Signature:
Name:
Address:
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Schedule 1
CONVERSION SCHEDULE
The 12% Convertible Debentures due on September 30, 2006, in the aggregate
principal amount of $____________ issued by Azur International, Inc. and Azur
Holdings, Inc. This Conversion Schedule reflects conversions made under Section
4 of the above referenced Debenture.
Dated:
Aggregate Principal
Amount Remaining
Subsequent to
Date of Conversion Conversion
(or for first entry, Original (or original
Issue Date) Amount of Conversion Principal Amount) Company and Parent Attest
- ------------------------------- ------------------------- ----------------------- ------------------------------
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- ------------------------------- ------------------------- ----------------------- ------------------------------
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