<PAGE> 1
EXHIBIT 4.9
8% CONVERTIBLE DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED,
RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
NO. US $
AFFINITY TECHNOLOGY GROUP, INC.
8% CONVERTIBLE DEBENTURE DUE MARCH __, 2002
THIS DEBENTURE is issued by Affinity Technology Group, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company") and is designated as its 8% Convertible Debenture Due March __,
2002.
FOR VALUE RECEIVED, the Company promises to pay to [ ] or permitted
assigns (the "Holder"), the principal sum of _____________ Dollars and 00/100
(US $xxx,000) Dollars on ________ __, 2002 (18 MTHS) (the "Maturity Date") and
to pay interest on the principal sum outstanding from time to time quarterly in
arrears at the rate of 8% per annum accruing from the date of initial issuance.
Accrual of interest shall commence on the first business day to occur after the
date of initial issuance and continue until payment in full of the principal
sum has been made or duly provided for. Quarterly interest payments shall be
due and payable on September 1, December 1, March 1 and June 1 of each year,
commencing with December 1, 2000. If any interest payment date or the Maturity
Date is not a business day in the State of New York, then such payment shall be
made on the next succeeding business day. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Debenture to the
extent of the sum represented by such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Company shall be entitled to withhold from all
payments of interest on this Debenture any amounts required to be withheld
under the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
2. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. The Holder
shall deliver written notice to the Company of any proposed transfer of this
Debenture. In the event of any proposed transfer of this Debenture, the Company
may require, prior to issuance of a new Debenture in the name of such other
person, that it receive reasonable transfer documentation including legal
opinions that the issuance of the Debenture in such other name does not and
will not cause a violation of the Act or any applicable state or foreign
securities laws. Prior to due presentment for transfer of this Debenture, the
Company and any agent of the Company may treat the person in whose name this
Debenture is duly registered on the Company's Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture be overdue, and
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neither the Company nor any such agent shall be affected by notice to the
contrary. This Debenture has been executed and delivered pursuant to the
Convertible Debenture and Warrants Purchase Agreement dated as of September __,
2000 between the Company and the original Holder (the "Purchase Agreement"),
and is subject to the terms and conditions of the Purchase Agreement, which
are, by this reference, incorporated herein and made a part hereof. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
for such terms in the Purchase Agreement.
3. The Holder of this Debenture is entitled, at its
option, to convert at any time commencing on the date hereof, the principal
amount of this Debenture or any portion thereof, plus any accrued and unpaid
interest, into shares of Common Stock of the Company ("Conversion Shares") at a
conversion price for each share of Common Stock ("Conversion Price") equal to
the lesser of (i) $1.00 (the "Set Price") (subject to adjustment for stock
splits and the like) and (ii) 75% of the Market Price on the Conversion Date
(the "Variable Price"); provided, however, if the Principal Market is the OTC
Bulletin Board, the Variable Price shall be 65% of the Market Price on the
Conversion Date. Notwithstanding anything herein to the contrary, in no event
shall the Conversion Price be less than $0.0001. If, upon any conversion of this
Debenture, the Company's issuance of Conversion Shares would cause it to violate
any listing requirement of the Principal Market, then in lieu of such stock
issuance, the Company shall pay the Holder cash in an amount equal to the
closing price of the Common Stock on the Conversion Date multiplied by the
number of shares which would otherwise have been issuable upon such conversion
(the "Cash Amount") within five (5) calendar days.
4. The rate of interest on this Debenture shall be eight
percent (8%), per annum, on the outstanding principal until paid or converted.
The Holder shall have the right to cause the Company to issue Common Stock in
exchange for interest otherwise payable in cash pursuant to this Debenture. The
exact number of Common Stock into which such interest payment is convertible
shall be determined as set forth in Section 3.
5. The Company shall use 25% of the net proceeds of any
subsequent equity financing (each a "Subsequent Sale") to redeem all or any
part of the entire outstanding amount of this Debenture at a price of 120% of
the outstanding principal balance, plus all accrued but unpaid interest. The
Company shall have the right to use up to an additional 25% of the net proceeds
of any such Subsequent Sale to redeem all or any part of the entire outstanding
amount of this Debenture at a price of 120% of the outstanding principal
balance, plus all accrued but unpaid interest. The Company shall give the
Holder at least five (5) Trading Days' notice prior to the closing date of any
such Subsequent Sale (each a "Subsequent Sale Closing Date") and shall include
in such notice the outstanding principal amount of this Debenture or portion
hereof it shall redeem pursuant to this Section. The Company shall make
redemption payments to the Holder on such Subsequent Sale Closing Date out of
the proceeds of any such Subsequent Sale. The Holder shall have the right to
convert this Debenture or any portion hereof as set forth in Section 3 of this
Debenture until the Trading Day prior to any Subsequent Sale Closing Date.
6. Intentionally omitted.
7. On the Maturity Date, the Company will pay the
principal of and any accrued but unpaid interest due upon this Debenture, less
any amounts required by law to be deducted, to the registered holder of this
Debenture and addressed to such holder at the last address appearing on the
Debenture Register.
8. (a) Conversion shall be effectuated by
surrendering this Debenture to the Company (if such Conversion will convert all
outstanding principal) together with the form of conversion notice attached
hereto as Exhibit A (the "Notice of Conversion"), executed by the Holder of
this Debenture evidencing such Holder's intention to convert this Debenture or
a specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. If this Debenture shall have
been converted in part, the Company shall, within five (5) Trading Days from
the date of delivery of this Debenture, deliver to Holder a new Debenture
evidencing the rights of Holder to convert the unconverted portion of this
Debenture, which new Debenture shall in all other respects be
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identical with this Debenture. Interest accrued or accruing from the date of
issuance to the date of conversion shall be paid as set forth above. No
fraction of a share or scrip representing a fraction of a share will be issued
on conversion, but the number of shares issuable shall be rounded to the
nearest whole share. The date on which Notice of Conversion is given (the
"Conversion Date") shall be deemed to be the date on which the Holder faxes the
Notice of Conversion duly executed to the Company. Facsimile delivery of the
Notice of Conversion shall be accepted by the Company at facsimile number (803)
255-4350, Attn: Joseph A. Boyle. Certificates representing Common Stock upon
conversion will be delivered to the Holder within three (3) Trading Days from
the date the Notice of Conversion is delivered to the Company. Delivery of
shares upon conversion shall be made to the address specified by the Holder in
the Notice of Conversion.
(b) The Company understands that a delay in the
issuance of shares of Common Stock upon a conversion and, in the case of
partial conversion, a delay in the delivery a new Debenture beyond the five (5)
Trading Day period described in Paragraph 8(a) could result in economic loss to
the Holder. As compensation to the Holder for such loss, the Company agrees to
pay late payments to the Holder for late issuance of shares of Common Stock
upon conversion and delivery of a new Debenture in accordance with the
following schedule (where "No. Trading Days Late" is defined as the number of
Trading Days beyond five (5) Trading Days from the date the Notice of
Conversion or date of delivery of new Debenture is delivered to the Company).
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
No. Trading Days Late Late Payment for Each
$5,000 of Principal Amount
Being Converted
----------------------------------------------------------------------------------------------------------------------
<S> <C>
1 $100
----------------------------------------------------------------------------------------------------------------------
2 $200
----------------------------------------------------------------------------------------------------------------------
3 $300
------------------------------------------------------------ ---------------------------------------------------------
4 $400
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5 $500
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6 $600
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7 $700
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8 $800
----------------------------------------------------------------------------------------------------------------------
9 $900
----------------------------------------------------------------------------------------------------------------------
10 $1,000
----------------------------------------------------------------------------------------------------------------------
More than 10 $1,000+$200 for each Trading Day
Late beyond 10 Trading Days
----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company shall pay any payments incurred under this
Paragraph 8(b) in immediately available funds upon demand. Nothing herein shall
limit Holder's right to pursue injunctive relief and/or actual damages for the
Company's failure to issue and deliver Common Stock or a new Debenture to the
holder, including, without limitation, the Holder's actual losses occasioned by
any "buy-in" of Common Stock necessitated by such late delivery. Furthermore,
in addition to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of such shares
of Common Stock within five (5) Trading Days from the date the Notice of
Conversion is delivered to the Company, the Holder will be entitled to revoke
the relevant Notice of Conversion by delivering a notice to such effect to the
Company, whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion, and in such event no late payments shall be due in connection with
such withdrawn conversion. If at any time (a) the Company challenges, disputes
or denies the right of the Holder to effect the conversion of this Debenture
into Common Stock or otherwise dishonors or rejects any Notice of Conversion
properly delivered in accordance with this Paragraph 8 or (b) any Company
stockholder who is not and has never been an Affiliate (as defined in Rule 405
under the Securities Act of 1933, as amended) of the Holder obtains a judgment
or any injunctive relief from any court or public or governmental authority
which denies, enjoins, limits, modifies, delays or disputes the right of the
holder hereof to effect the conversion of this Debenture into Common Stock,
then the Holder shall have the right,
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by written notice, to require the Company to promptly redeem this Debenture for
cash at a redemption price equal to one hundred thirty percent (130%) of the
outstanding principal amount hereof and all accrued and unpaid interest hereon.
Under any of the circumstances set forth above, the Corporation shall indemnify
and hold harmless the Holder and be responsible for the payment of all costs
and expenses of the Holder, including its reasonable legal fees and expenses,
as and when incurred in disputing any such action or pursuing its rights
hereunder (in addition to any other rights of 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 has
been engaged in any violation of law, unless an injunction from a court
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 130% 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 of any shares of the
Debenture to the extent it obtains judgment. In the absence of an injunction
precluding the same, the Company shall issue shares upon a properly noticed
conversion.
9. No provision of this Debenture shall alter or impair\
the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate, and
in the coin or currency herein prescribed. This Debenture is a direct
obligation of the Company.
10. No recourse shall be had for the payment of the
principal of, or the interest on, this Debenture, or for any claim based
hereon, or otherwise in respect hereof, against any incorporator, shareholder,
employee, officer or director, as such, past, present or future, of the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.
11. In case of any (1) merger or consolidation of the
Company into another Person, or (2) sale by the Company of more than one-half
of the assets of the Company (on an as valued basis) in one or a series of
related transactions, the Holder shall have the right to (A) deem such an
occurrence an Event of Default and exercise its rights of prepayment pursuant
to Paragraph 14 herein, (B) convert its aggregate principal amount of this
Debenture then outstanding into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, (x) require the
surviving entity to issue convertible debentures in such face amount, as the
case may be, equal to the aggregate principal amount of this Debenture then
held by the Holder, plus all accrued and unpaid interest and other amounts
owing thereon, which newly issued debentures shall have terms identical
(including with respect to conversion) to the terms of this Debenture and shall
be entitled to all of the rights and privileges of the Holder of this Debenture
set forth herein and the agreements pursuant to which this Debenture was issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock or other
securities issuable upon conversion thereof), and (y) simultaneously with the
issuance of such convertible debentures, shall have the right to convert such
instrument only into shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger or consolidation. In the case of clause (C), the conversion price
applicable for the newly issued convertible debentures shall be based upon the
amount of securities, cash and property that each share of Common Stock would
receive in such transaction and the Conversion Price in effect immediately
prior to the effectiveness or closing date for such transaction. The terms of
any such merger, sale or consolidation shall include such terms so as to
continue to give the Holder the right to receive the securities, cash and
property set forth in this Paragraph upon any conversion or redemption
following such event. This Paragraph shall similarly apply to successive such
events.
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12. The Holder of the Debenture, by acceptance hereof,
agrees that this Debenture is being acquired for investment and that such
Holder will not offer, sell or otherwise dispose of this Debenture or the
Shares of Common Stock issuable upon conversion thereof except under
circumstances which will not result in a violation of the Act or any applicable
state Blue Sky or foreign laws or similar laws relating to the sale of
securities.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in
the City of New York in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
14. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of
principal or interest on this Debenture and same
shall continue for a period of ten (10) business
days; or
b. Any of the material representations or warranties
made by the Company herein, in the Purchase
Agreement, the Registration Rights Agreement, or in
any agreement, certificate or financial statements
heretofore or hereafter furnished by the Company in
connection with the execution and delivery of this
Debenture or the Purchase Agreement shall be false
or misleading in any material respect at the time
made; or
c. The Company fails to issue shares of Common Stock to
the Holder or to cause its Transfer Agent to issue
shares of Common Stock upon proper exercise by the
Holder of the conversion rights of the Holder in
accordance with the terms of this Debenture, fails
to transfer or to cause its Transfer Agent to
transfer any certificate for shares of Common Stock
issued to the Holder upon conversion of this
Debenture as and when required by this Debenture or
the Registration Rights Agreement, and such transfer
is otherwise lawful, or fails to remove any
restrictive legend or to cause its Transfer Agent to
transfer any certificate or any shares of Common
Stock issued to the Holder upon conversion of this
Debenture as and when required by this Debenture,
the Purchase Agreement or the Registration Rights
Agreement and such legend removal is otherwise
lawful, and any such failure shall continue uncured
for ten (10) business days; or
d. The Company shall fail to perform or observe, in any
material respect, any other material covenant, term,
provision, condition, agreement or obligation of the
Company under the Purchase Agreement, the
Registration Rights Agreement or this Debenture and
such failure shall continue uncured for a period of
thirty (30) days after written notice from the
Holder of such failure; or
e. The Company shall (1) admit in writing its inability
to pay its debts generally as they mature; (2) make
an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3)
apply for or consent to the appointment of a
trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
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g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment,
or similar process in excess of One Hundred Thousand
($100,000) Dollars in the aggregate shall be entered
or filed against the Company or any of its
properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of
sixty (60) days; or
i. Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against
the Company and, if instituted against the Company,
shall not be dismissed within sixty (60) days after
such institution or the Company shall by any action
or answer approve of, consent to, or acquiesce in
any such proceedings or admit the material
allegations of, or default in answering a petition
filed in any such proceeding; or
j. The Company shall have its Common Stock suspended or
delisted from trading on the Principal Market for in
excess of five (5) Trading Days;
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
15. Nothing contained in this Debenture shall be
construed as conferring upon the Holder the right to vote or to receive
dividends or to consent or receive notice as a shareholder in respect of any
meeting of shareholders or any rights whatsoever as a shareholder of the
Company, unless and to the extent converted in accordance with the terms
hereof.
16. In no event shall the Holder be permitted to convert
this Debenture for shares of Common Stock to the extent that (x) the number of
shares of Common Stock owned by such Holder (other than shares of Common Stock
issuable upon conversion of this Debenture) plus (y) the number of shares of
Common Stock issuable upon conversion of this Debenture, would be equal to or
exceed 9.9% of the number of shares of Common Stock then issued and
outstanding, including shares issuable upon conversion of this Debenture held
by such Holder after application of this Paragraph 16. As used herein,
beneficial ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. To the extent that the limitation contained in this Paragraph 16
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,
and the submission of a Notice of Conversion shall be deemed to be such
Holder's determination of whether this Debenture is convertible (in relation to
other securities owned by such holder) and of which portion of this Debenture
is convertible, in each case subject to such aggregate percentage limitation,
and the Company shall have no obligation to verify or confirm the accuracy of
such determination. Nothing contained herein shall be deemed to restrict the
right of a Holder to convert this Debenture into shares of Common Stock at such
time as such conversion will not violate the provisions of this Paragraph 16.
The provisions of this Paragraph 16 may be waived by the Holder of this
Debenture upon not less than 75 days' prior notice to the Company, and the
provisions of this Paragraph 16 shall continue to apply until such 75th day (or
such later date as may be specified in such notice of waiver). No conversion of
this Debenture in violation of this Paragraph 16 but otherwise in accordance
with this Debenture shall affect the status of the Common Stock issued upon
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such conversion as validly issued, fully-paid and nonassessable. If instead of
receiving cash on the Maturity Date the Holder instead exercises its right to
convert this Debenture into Common Stock pursuant to Paragraph 3 by delivery of
a Notice of Conversion prior to receipt of payment, and such conversion would
cause the limit contained in the first sentence of this Paragraph 16 to be
exceeded, such conversion of this Debenture shall occur up to such limit and
the remaining unconverted portion of this Debenture shall be converted into
Common Stock (1) in accordance with one or more Notices of Conversion delivered
by the Holder or (2) 65 days after the Maturity Date, whichever is earlier.
Notwithstanding anything contained herein to the contrary, no interest shall
accrue after the Maturity Date on any such unconverted portion of this
Debenture.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: September __, 2000
AFFINITY TECHNOLOGY GROUP, INC.
By:
--------------------------------------
Joseph A. Boyle, President & CEO
Attest:
-----------------------
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert
$ ________________ of the principal amount of the above Debenture No. ___ into
Shares of Common Stock of Affinity Technology Group, Inc. (the "Company")
according to the conditions hereof, as of the date written below.
Date of Conversion*
------------------------------------------------------------
Conversion Price *
-------------------------------------------------------------
Accrued Interest
----------------------------------------------------------------
Signature
-----------------------------------------------------------------------
[Name]
Address:
------------------------------------------------------------------------
*If such conversion represents the remaining principal balance of the
Debenture, the original Debenture must accompany this notice within three
Trading Days.
