No. ___ $__________ USD
EYECITY.COM, INC.
10% Secured Convertible Debenture Due ______________, 2003
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE STATE SECURITIES LAWS AND
HAS BEEN ISSUED IN RELIANCE UPON REGULATION D PROMULGATED UNDER THE SECURITIES
ACT. THIS DEBENTURE SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF
AN OFFER TO BUY THE DEBENTURE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
THIS DEBENTURE MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS.
THIS 10% CONVERTIBLE DEBENTURE is one of a duly authorized issue of
10% Secured Convertible Debentures (the "Debenture") of Eyecity.com, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(the "ISSUER"), issued on ____________, 2000 (the "Issuance Date"), and
designated as its 10% Secured Convertible Debenture due ____________, 2003 and
in principal amount for all such Debentures not exceeding $15,000,000.
This Debenture is being issued, together with a warrant (the
"Warrant"), as the components of a unit of the ISSUER'S securities ("Units")
pursuant to the terms of the ISSUER'S Private Placement Memorandum dated
_________, 2000 (the "Memorandum") and the offering described therein (the
"Offering"), and is subject to all the conditions and limitations set forth in
the Memorandum and the subscription documents attached as exhibits to the
Memorandum.
FOR VALUE RECEIVED, the ISSUER promises to pay to:
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the registered holder hereof or its registered permitted assigns, if any (the
"HOLDER"), the principal sum of: ______________________ United States Dollars
($_______), on the day prior to the third anniversary of the date of issuance
hereof (the "Maturity Date"), and to pay interest, as outlined below, at the
rate of ten percent (10%) per annum on the principal sum outstanding for the
term of this Debenture. Accrual of interest shall commence on the date hereof.
Interest shall be payable by the ISSUER, in cash, semi-annually commencing on
the first anniversary of the date hereof and every six (6) months thereafter
that this Debenture
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remains outstanding. The ISSUER, at its sole option, may pay interest on the
Debentures in shares of the common stock, par value $.001 per share ("Common
Stock"), of the ISSUER (the "Interest Shares"), provided that such Interest
Shares have been registered for re-sale pursuant to the Securities Act, and are
freely tradable without restriction or legend ("Registered") and are valued at
the closing bid price of the Common Stock for the previous ten (10) trading days
prior to the required date of issuance and delivery of such Interest Shares. The
ISSUER must issue the Interest Shares, if applicable, within 30 calendar days
from the date the applicable interest payment is due. The interest so payable
will be paid to the person in whose name this Debenture is registered on the
records of the ISSUER regarding registration and transfers of the Debenture (the
"Debenture Register"); provided, however, that the ISSUER'S obligation to a
transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions contained in
this Debenture. The principal of this Debenture is payable as provided below at
any time prior to the Maturity Date, or upon redemption, or as may be converted
by the HOLDER upon the exercise of HOLDER'S conversion rights as set forth below
into shares of Common Stock. In the event this Debenture is not paid in full
within thirty (30) days of its Maturity Date, it may, at the election of the
HOLDER, be converted into freely tradable shares of Common Stock at a price per
share calculated pursuant to the conversion formula contained below. Principal
and interest on this Debenture are payable at the address last appearing on the
Debenture Register as designated in writing by the HOLDER hereof from time to
time. The ISSUER will, at all times until all Debentures have been redeemed or
converted, reserve from the proceeds of the Offering an amount equal to three
(3) months' interest due on each Debenture, to the extent then outstanding.
As further described in Sections 8 through 11 herein, the ISSUER agrees to
use its reasonable best efforts to file a registration statement ("Registration
Statement") on proper form in order to register under the Securities Act with
the Securities and Exchange Commission (the "Commission") for resale all shares
of Common Stock into which the Debentures are convertible pursuant to the terms
and conditions hereof (collectively, the "Debenture Shares") and all Interest
Shares within 60 days after the date of the final issuance of any Debentures
(the "Final Issuance Date"). The ISSUER further agrees to use its best efforts
to cause such Registration Statement to become effective within 120 days after
the Final Issuance Date ("Effectiveness"). If the ISSUER fails to achieve
Effectiveness within such 120 day period, the then-outstanding Debentures shall
be in default and shall bear interest at the rate of fourteen percent (14%) per
annum until the earlier of such time as (x) such default is cured or (y) the
Debenture Shares and Interest Shares may otherwise be publicly sold without
volume restrictions applicable thereto. In the event any Debentures have already
been converted into unregistered Debenture Shares at the time of such default,
the holders of such shares shall be entitled to receive, at the end of each
30-day period following such default, until the earlier of such time as (x) such
default is cured or (y) the Debenture Shares and Interest Shares may otherwise
be publicly sold without volume restrictions applicable thereto, additional
shares of Common Stock, which such shares must be Registered within 120 days
from the date of Effectiveness, in an amount equal to 10% of the number of
unregistered Debenture Shares owned by such holder on the date of default. As an
example, if a holder owns 10,000 Debenture Shares on the day of default, 90 days
thereafter he shall have received 3,000 additional shares of Common Stock. The
ISSUER shall maintain the effectiveness of the Registration Statement until the
earlier of (i) such time as the Debenture Shares and
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Interest Shares can be sold pursuant to Rule 144 under the Securities Act or
(ii) a period of two (2) years from the later of the date of Effectiveness and
the date the Common Stock is listed for quotation by the Nasdaq National Market
or Nasdaq SmallCap Market (but not including the NASDAQ OTC Bulletin Board) or
traded on the New York Stock Exchange, the American Stock Exchange, the London
Stock Exchange or the Neuer Markt, and actually trading thereon ("Listed").
The Debenture is subject to the following additional provisions:
1. The Debenture is exchangeable for like Debentures in equal
aggregate principal amount of authorized denominations, as requested by
the HOLDER surrendering the same. No service charge will be made for such
registration or transfer or exchange, although the HOLDER shall be
responsible for its own expenses associated with complying with the
restrictions on transfer of the Debenture.
2. This Debenture has been issued subject to investment
representations of the original HOLDER hereof and may be transferred or
exchanged in the United States only in compliance with the Securities Act
and applicable state securities laws and in compliance with the
restrictions on transfer provided in this Debenture. Prior to the due
presentment for such transfer of this Debenture, the ISSUER and any agent
of the ISSUER 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 all other purposes, whether or
not this Debenture is overdue, and neither the ISSUER nor any such agent
shall be affected by notice to the contrary. The transferee shall be
bound, as the original HOLDER, by the same representations and terms
described herein and under any related agreements.
3. (a) The HOLDER is entitled, at its option, at any time after the
Issuance Date, to convert this Debenture, in whole or in part in
accordance with the following terms and conditions:
(i) The HOLDER may exercise its right to convert the Debenture
into Debenture Shares by telecopying an executed and completed
notice of conversion in the form attached hereto as Exhibit A (the
"Notice of Conversion") to the ISSUER and delivering the original
Notice of Conversion and the original Debenture to the ISSUER by
express courier. Each business date on which a Notice of Conversion
is telecopied to and received by the ISSUER in accordance with the
provisions hereof shall be deemed a "Conversion Date." The ISSUER
will transmit the certificates representing the Debenture Shares to
the HOLDER via express courier, by electronic transfer (if
applicable) or otherwise within ten (10) business days after the
Conversion Date ("Delivery Date") if the ISSUER has received the
original Notice of Conversion and Debenture being so converted by
such date. In addition to any other remedies which may be available
to the HOLDER, in the event that the ISSUER fails to effect delivery
of such shares of Common Stock by the Delivery Date, the HOLDER will
be entitled to revoke the Notice of Conversion by delivering a
notice to such effect to the ISSUER, whereupon the ISSUER and the
HOLDER shall each be restored
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to their respective positions immediately prior to delivery of the
Notice of Conversion. The Notice of Conversion and Debenture
representing the portion of the Debenture converted shall be
delivered as follows:
To the ISSUER: Eyecity.com, Inc.
79 Express Street
Plainview, New York 11803
Attention: Mark Levin, CEO
Telephone: (516) 822-5000
Facsimile: (516) 822-5520
In the event that the Debenture Shares are not delivered, by the
Delivery Date, the interest rate for this Debenture shall be
increased to 14% per annum.
(ii) The HOLDER may, at its sole option, convert, in whole or
in part, the principal amount of, and accrued but unpaid interest
on, the Debenture at any time from the date of issuance, into
Debenture Shares at a conversion rate of $.50 per share (the
"Conversion Price").
(b) The number of shares of Common Stock issuable upon the
conversion of this Debenture shall be subject to adjustment as follows,
with the date of such adjustment referred to herein as the "Adjustment
Date":
(i) In case the ISSUER shall (A) pay a dividend on Common
Stock in Common Stock or securities convertible into, exchangeable
for, or otherwise entitling a HOLDER thereof to receive Common
Stock, (B) declare a dividend payable in cash on its Common Stock
and at substantially the same time offer its shareholders the right
to purchase new Common Stock (or securities convertible into,
exchangeable for, or otherwise entitling a holder thereof to receive
Common Stock) from proceeds of such dividends (all Common Stock so
issued shall be deemed to have been issued as a stock dividend), (C)
subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (D) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock, or
(E) issue by reclassification of its Common Stock any shares of
Common Stock of the ISSUER, the number of Debenture Shares into
which this Debenture is convertible shall be adjusted so that the
HOLDERS of this Debenture shall be entitled to receive after the
happening of any of the events described above that percentage of
issued and outstanding shares of Common Stock and kind of shares of
Common Stock as the HOLDERS would have received had such Debenture
been converted immediately prior to the happening of such event or
any record date with respect thereto. Any adjustment made pursuant
to this subdivision shall become effective immediately after the
close of business on the record date in the case of a stock
dividend, stock split, subdivision, combination or reclassification.
If any adjustment under this Section would create a fractional share
of Common Stock or a right to acquire a fractional share of Common
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Stock, such fractional share shall be disregarded and the number of
shares subject to this Debenture shall be the next higher number of
shares, rounding all fractions upward.
(ii) Whenever the Conversion Price of this Debenture is
adjusted, as herein provided, such adjustment shall be effected (to
the nearest cent) by multiplying such Conversion Price immediately
prior to such adjustment by a fraction of which the numerator shall
be the number of shares of Common Stock issuable upon the exercise
of each share of Debenture immediately prior to such adjustment, and
of which the denominator shall be the number of shares of Common
Stock issuable immediately thereafter.
(iii) If the ISSUER has issued, or shall be deemed to have
issued, Additional Shares of Common Stock (as hereinafter defined)
without consideration or for a consideration per share less than
$.50 (as adjusted to reflect stock splits, stock dividends,
recapitalizations and the like) ("Adjustment Price"), then and in
such event, such Conversion Price shall be reduced concurrently with
such issue to a price (calculated to the nearest cent) to an amount
determined by multiplying the Conversion Price by a fraction:
(A) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the
issuance of Additional Shares of Common Stock, plus (b) the
number of shares of Common Stock which could be purchased at
the Adjustment Price using the net aggregate consideration
received by the ISSUER for the purchase of the total number of
such Additional Shares of Common Stock so issued, and
(B) the denominator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock, plus (b)
the number of Additional Shares of Common Stock so issued.
(C) As used herein:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued or deemed to be issued (pursuant to the
following sentence) by the ISSUER after the date hereof;
provided, however, that, "Additional Shares of Common Stock"
shall not include (i) the issuance of up to an aggregate of
twenty percent (20%) of the issued and outstanding Common
Stock of the ISSUER, on a fully diluted basis, to officers,
directors or employees of, or consultants to, the ISSUER,
pursuant to a stock
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purchase or option plan or other incentive program approved by
the Board of Directors, or pursuant to an employee's
employment agreement with the ISSUER, (ii) the Debenture
Shares, Interest Shares, Clawback Shares (as defined herein),
Shares (as defined in that certain Common Stock Purchase
Warrant being issued to each investor in the Offering),
Placement Agent Shares (as defined in that certain placement
agent agreement between the ISSUER and the Placement Agent
(the "Placement Agent Agreement"), (iii) issuances or deemed
issuances described in subsection 3 (b)(i) or 3(b)(ii) for
which the HOLDER receives an adjustment pursuant thereto, (iv)
securities issued to strategic partners, licensees,
distribution partners, technology or service vendors or
content providers, provided, however, that any issuances
pursuant to this clause (iv) do not exceed 2% (without regard
to such issuance) of the then-issued and outstanding Common
Stock in any single, or group of related transactions or
transactions with one such entity or any affiliate thereof, or
10% (without regard to such issuance) of the then-issued and
outstanding Common Stock in the aggregate. If the ISSUER
issues any Options or Convertible Securities (as hereinafter
defined), the maximum number of shares of Common Stock
issuable thereunder shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, if the
consideration per share of such Additional Shares of Common
Stock is less than the Adjustment Price then in effect, until
such time as such Options or Convertible Securities shall
terminate or be exercised or converted into Common Stock, upon
which time the number of shares of Common Stock actually
thereupon issued shall be deemed to be Additional Shares of
Common Stock. Consideration per share of Additional Shares of
Common Stock shall be determined by adding the consideration
received upon issuance of the Options or Convertible
Securities to the maximum possible consideration to be
received upon exercise, conversion or exchange of such Options
or Convertible Securities for shares of Common Stock. If any
Consideration consists of property other than cash, the value
of such property shall be computed at the fair market value at
the time of such issuance of Additional Shares of Common
Stock, as determined in good faith by the Board of Directors
of the ISSUER.
"Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire Common Stock.
"Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other
securities directly or indirectly convertible into or
exchangeable for Common Stock.
With respect to Options and Convertible Securities,
"Consideration" per share of Additional Shares of Common Stock
shall be determined
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by adding (x) the aggregate consideration received upon
issuance of the Options or Convertible Securities divided by
the number of shares receivable upon the exercise or
conversion thereof and (y) the minimum possible consideration
per share received upon the exercise, conversion or exchange
of such Options or Convertible Securities for shares of Common
Stock.
(iv) Notwithstanding the foregoing, if, prior to the
conversion of this Debenture and until 90 days after the
Debenture Shares, the shares of Common Stock into which the
Warrant is convertible (the "Warrant Shares") and the Interest
Shares (referred to collectively herein as the "Securities")
are Listed, the ISSUER implements a reverse stock split (or
multiple reverse stock splits in the aggregate) of 1:5 or
more, the shares of the Common Stock issuable upon conversion
of this Debenture, but not to the extent previously converted
into Debenture Shares, will be adjusted on a basis of no
greater than 1:5. The provision of this paragraph limiting the
reverse split shall apply to any cumulative multiple reverse
splits should they occur.
(c) On the date of any (i) consolidation or merger of the
ISSUER into any entity (other than a consolidation or merger that
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the ISSUER),
(ii) sale, transfer, lease or conveyance of all or substantially all
of the assets of the ISSUER as an entirety or substantially as an
entirety, or (iii) reclassification, capital reorganization or
change of the Common Stock (other than solely a change in par value,
or from par value to no par value), in each case as a result of
which shares of Common Stock shall be converted into the right to
receive stock, securities or other property (including cash or any
combination thereof), the ISSUER shall cause the holder of this
Debenture to have the right thereafter to convert this Debenture
into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of
shares of Common Stock into which such Debenture would have been
converted immediately prior to such consolidation, merger, sale,
transfer, capital reorganization or reclassification. If necessary,
appropriate adjustment shall be made in the application of the
provision set forth herein with respect to the rights and interest
thereafter of the HOLDER, to the end that the provisions set forth
herein shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock or
other securities or property thereafter deliverable on the
conversion of this Debenture.
(d) The ISSUER covenants and agrees that all Common Stock
which may be issued upon the conversion of this Debenture will, upon
issuance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all liens,
charges and preemptive rights, if any, with respect thereto or to
the issuance thereof. The ISSUER shall at all times reserve and keep
available for issuance upon the conversion of this Debenture such
number of authorized but unissued shares of Common Stock as will be
sufficient to permit the conversion, in full, of this Debenture.
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4. Redemption; Mandatory Conversion. The ISSUER shall have the right
to redeem this Debenture upon 30 days' written notice to the HOLDER,
during which such 30 day period the HOLDER may elect to convert the
Debenture into Debenture Shares in accordance with the terms and
conditions hereof ("Redemption"); provided, however, that if the closing
bid price for the Common Stock as reported by the National Association of
Securities' Dealers automated quotation system for any twenty-two (22)
consecutive trading day period within the thirty (30) day period
immediately prior to Redemption does not exceed $2.00 per share, at any
time within six (6) months following any Redemption former holders of the
Debentures shall have the right (the "Clawback Right") to purchase shares
of Common Stock ("Clawback Shares") in an amount equal to the amount of
principal so converted at a price equal to what would have been the
applicable Conversion Price on such date. Additionally, the ISSUER shall
have the right to require conversion ("ISSUER Conversion") of all or any
portion of the principal and interest on the Debentures into Debenture
Shares at a conversion rate equal to the Conversion Price, so long as (i)
the closing bid price for the Common Stock as reported by the National
Association of Securities' Dealers automated quotation system for any
twenty-two (22) consecutive trading day period within the thirty (30) day
period immediately prior to the time of such conversion exceeds $2.00 per
share (as adjusted to reflect stock splits, stock dividends,
recapitalizations and the like) and (ii) the Debenture Shares, Interest
Shares, Clawback Shares and the shares underlying the warrants granted to
Connecticut Capital Markets, LLC (the "Placement Agent") as consideration
for acting as placement agent for the Offering have been Registered (the
"Placement Agent Shares"). As used herein, "closing bid price" means, in
each case at the close of trading hours (not including extended trading
hours), (i) if the Common Stock is listed on the New York Stock Exchange
("NYSE") or the American Stock Exchange ("AMEX"), the last reported sale
price or (ii) if the Common Stock is listed on the Nasdaq National Market
System, SmallCap Market or over-the-counter bulletin board, the closing
bid price for the Common Stock as reported by the Nasdaq National Market
System, SmallCap Market or over-the-counter bulletin board, as applicable,
or (iii) if the Common Stock is not listed or admitted for trading on any
national securities exchange and is not reported by NYSE, AMEX, Nasdaq
National Market System, SmallCap Market or over-the-counter bulletin
board, or if the Common Stock is traded in the over-the-counter market but
bid quotations are not published on Nasdaq, the closing bid price for the
Common Stock as furnished by a broker-dealer which regularly furnishes
price quotations for the Common Stock; or (iv) if no such quotations are
available, as determined in good faith by the Board of Directors of the
ISSUER.
5. If one or more of the following described "Events of Default"
shall occur:
(a) Any of the representations or warranties made by the
ISSUER herein or in that certain placement agent agreement executed
by the ISSUER and the Placement Agent ("Placement Agent Agreement")
shall have been incorrect when made or at any Issuance Date (as
defined in the Placement Agent Agreement) in any material respect;
or
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(b) The ISSUER shall breach, fail to perform, or observe in
any material respect any covenant, term, provision, condition,
agreement or obligation of the ISSUER under this Debenture, the
Warrant and the Placement Agent Agreement, between the parties of
even date herewith and such breach or failure to perform shall not
have been cured within fifteen (15) business days following delivery
of notice of such breach or failure to perform, which such notice
shall only be required with respect to breaches or failures to
perform of which the HOLDER is actually aware; or
(c) A trustee, liquidator or receiver shall be appointed for
the ISSUER 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
(d) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume
custody or control of all the properties or assets of the ISSUER and
shall not be dismissed within sixty (60) days thereafter; or
(e) 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 ISSUER and, if instituted against the ISSUER, ISSUER
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
such proceedings shall not be dismissed within thirty (30) days
thereafter; or
(f) Failure of the ISSUER to use its best efforts to Register
the Securities within 120 days after the Final Issuance Date;
(g) Failure of the ISSUER to insure that all conversions
properly requested by the HOLDER are effected by the ISSUER; or
(h) Any default or breach in any material respect of the
ISSUER'S obligations pursuant to the Security Agreement of ISSUER
pursuant to which the indebtedness represented by this Debenture is
secured by certain assets of the ISSUER ("Security Agreement") and
such breach or failure to perform shall not have been cured within
fifteen (15) business days following delivery of notice of such
breach or failure to perform, which such notice shall only be
required with respect to breaches or failures to perform of which
the HOLDER is actually aware,
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), solely with respect to the failure to
Register the Securities within 120 days after the Final Issuance
Date, the interest rate of the Debentures shall be automatically
increased to 14% per annum until the Event of Default is cured,
provided that no such interest rate increase, or waiver thereof
shall constitute a waiver of any other rights the HOLDER may have as
a result of such Event of Default; and with respect to all Events of
Default
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described above, the HOLDER shall have the right to immediately
accelerate the maturity hereof and declare all due and unpaid
amounts hereon immediately due and payable.
6. This Debenture, together with the Memorandum and all documents
annexed hereto and referenced herein, embodies the full and entire
understanding and agreement between the ISSUER and HOLDER with respect to
the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof.
Neither this Debenture nor any terms hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the
ISSUER and the HOLDER. Any capitalized terms not otherwise defined herein
shall have the same meaning as given in the Memorandum. In the event of
any inconsistencies between this Debenture and the Memorandum, the
Memorandum shall control. No statement, representation, warranty, covenant
or agreement of any kind not expressly set forth in this Debenture or in
the Memorandum shall affect, or be used to interpret, change or restrict,
the express terms and provisions of this Debenture.
7. This Debenture will be construed and enforced in accordance with
and governed by the laws of the State of New York, except for matters
arising under the Securities Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the
District Court serving New York County, New York in connection with any
dispute arising under this Debenture 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. Each party hereby agrees that, if the other party to this
Debenture obtains a judgment against it in such a proceeding, the party
which obtained such judgment may enforce same by summary judgment in the
courts of any state or country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Debenture irrevocably consents to the service
of process in any such proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its
address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
8. Registration. Within sixty (60) days of the Final Issuance Date
(the "Filing Period"), the ISSUER shall use its reasonable best efforts to
file a Registration Statement registering for resale under the Securities
Act, the Securities and further agrees to cause Effectiveness within 120
days after the Final Issuance Date. The ISSUER shall pay the expenses
described in Section 10 for the Registration Statement filed pursuant to
this Section 8, except for underwriting discounts and commissions and
transfer taxes, which expenses shall be borne by the HOLDER.
9. Registration Procedures. In connection with the ISSUER's
obligations pursuant to Section 8, the ISSUER will:
(a) cause the Registration Statement to remain effective until
the earlier of (i) such time as the Debenture Shares and Interest
Shares can be sold pursuant to Rule 144 under the Securities Act or
(ii) a period of two (2) years from
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the later of the date of Effectiveness and the date the Debenture
Shares and Interest Shares are Listed; provided, however, that (i)
such two year period shall be extended for a period of time equal to
the period HOLDER refrains from selling any Debenture Shares or
Interest Shares included in such Registration Statement at the
request of an underwriter of securities of the ISSUER or at the
request of the ISSUER or the exchange on which the Securities are
Listed, and (ii) in the case of any registration of the Securities
on Form S-3 or comparable successor form which are intended to be
offered on a continuous or delayed basis, such two year period shall
be extended, if necessary, to keep the Registration Statement
effective until all Securities are sold, provided that applicable
rules and regulations under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (x) includes any prospectus
required by Section 10(a)(3) of the Securities Act or (y) reflects
facts or events representing a material or fundamental change in the
information set forth in the Registration Statement, the
incorporation by reference of information required to be included in
(x) and (y) hereof to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, (the "Exchange Act") in the Registration
Statement; (the "Effective Period");
(b) prepare and file with the Commission such amendments to
such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep such Registration
Statement effective for the Effective Period as may be reasonably
necessary to effect the sale of such securities;
(c) furnish to HOLDER such reasonable number of copies of the
Registration Statement and final prospectus as HOLDER may reasonably
request;
(d) use its best efforts to register or qualify the Securities
covered by such Registration Statement under such state securities
or Blue Sky laws of such jurisdictions as HOLDER may reasonably
request in writing within thirty (30) days following the original
filing of the Registration Statement, except that the ISSUER shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) Furnish to the HOLDER, and to the Placement Agent and its
legal counsel (i) promptly after the same is prepared and publicly
distributed, filed with the Commission or received by the HOLDER,
one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or
supplement thereto in both electronic and print format, and (ii)
such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto, and such
other documents as the HOLDER may reasonably request in order to
facilitate the disposition of the Securities owned by HOLDER;
(f) Notify HOLDER at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included
in such Registration Statement, as
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then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing, and at the
request of HOLDER, prepare and furnish to it a reasonable number of
copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to HOLDER, such
prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing;
(g) Use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal
of such order at the earliest possible moment and to notify HOLDER
(or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution
thereof;
(h) Provide a transfer agent and registrar for all Securities
and a CUSIP number for all such Securities, in each case not later
than the Effective Period;
(i) Make available for inspection by the HOLDER, any
underwriter participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by
the HOLDER or underwriter, all financial and other records,
pertinent corporate documents and properties of the ISSUER and cause
the ISSUER'S officers and directors to supply all information
reasonably requested by the HOLDER, any underwriter, attorney or
accountant in connection with such Registration Statement;
(j) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to the HOLDER, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve (12)
months, but not more than eighteen (18) months, beginning with the
first month after the Effective Period, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act;
(k) Enter into any underwriting agreement reasonably necessary
to effect the offer and sale of the Securities, provided such
underwriting agreement contains customary underwriting provisions
and provided, further, that if the underwriter so requests, the
underwriting agreement will contain customary indemnification and
contribution provisions; and
(l) Hold in confidence and not make any disclosure of
information concerning the HOLDER provided to the ISSUER unless (i)
disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is
ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction or (iv) such information
has been made generally available to
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the public other than by disclosure in violation of this or any
other agreement; and, upon learning that disclosure of such
information concerning the HOLDER is sought in or by a court or
governmental body of competent jurisdiction or through other means,
give prompt notice to the HOLDER and, at its expense, undertake
appropriate action to prevent disclosure of, or to obtain a
protective order for, such information.
10. Expenses. With respect to the inclusion of the Securities in a
Registration Statement, subject to Section 9(d) hereof, all fees, costs and
expenses of such registration including Blue Sky fees, shall be borne by the
ISSUER; provided, however, that HOLDER shall be responsible to pay for all
transfer taxes.
11. Indemnification.
(a) The ISSUER shall indemnify the HOLDER and any underwriter or
person deemed to be an underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, from and against any
and all losses, claims, damages and liabilities (including without
limitation reasonable attorney's fees and expenses) caused by any untrue
statement of a material fact contained in the Registration Statement, any
other registration statement filed by the ISSUER under the Exchange Act,
any post-effective amendment to such registration statements, or any
prospectus included therein required to be filed or furnished by reason of
this agreement or caused by any omission to state therein a material fact
required to be stated therein or required to make the statements therein
not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished
or required to be furnished in writing to the ISSUER by the HOLDER; which
indemnification shall include each person, if any, who controls any such
HOLDER within the meaning of the Exchange Act and each officer, director,
employee and agent of such HOLDER.
(b) The HOLDER shall indemnify the ISSUER and each person, if any,
who controls the ISSUER within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages or liabilities caused by any untrue statement or a
material fact contained in the Registration Statement, any other
registration statement filed by the ISSUER under the Act, any
post-effective amendment to such registration statements, or any
prospectus included therein required to be filed or furnished by reason of
this Agreement or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent and only to the
extent that such losses, claims, damages or liabilities are caused (i) by
any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished or required to be
furnished in writing to the ISSUER by the HOLDER or (ii) HOLDER'S failure
to deliver the prospectus or (iii) failure of the HOLDER to sell its
Securities as per the plan of distribution set forth in the prospectus;
which indemnification shall include each person, if any, who controls the
ISSUER within the meaning of the Act and each officer, director, employee
and agent of the ISSUER; provided, however, that the HOLDER shall only be
liable for such amounts up to the proceeds received from such HOLDER'S
sale of Debenture Shares and Interest Shares, if any.
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(c) Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against any
indemnifying party under Section 11 (a) or (b) above, the indemnified
party will notify the indemnifying party in writing of the commencement
thereof, and the indemnifying party will, subject to the provisions
hereinafter stated, assume the defense of such action (including the
employment of counsel reasonably satisfactory to the indemnified party and
the payment of expenses) insofar as such action relates to an alleged
liability in respect of which indemnity may be sought against the
indemnifying party. After notice from the indemnifying party of its
election to assume the defense of such claim or action, the indemnifying
party shall no longer be liable to the indemnified party under this
Section 11 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than
reasonable causes of investigation; provided, however, that if, in the
written opinion of counsel to the indemnified party or parties, it is
advisable for the indemnified party or parties to be represented by
separate counsel, the indemnified party or parties shall have the right to
employ a single counsel to represent the indemnified parties who may be
subject to liability arising out of any claim in respect of which
indemnity might be sought by the indemnified parties thereof against the
indemnifying party, in which event the reasonable fees and expenses of
such separate counsel shall be borne by the indemnifying party. Any party
against whom indemnification may be sought under this Section 11 shall not
be liable to indemnify any person that might otherwise be indemnified
pursuant hereto for any settlement of any action effected without such
indemnifying party's consent, which consent shall not be unreasonably
withheld.
(d) If for any reason the indemnification provided for in this
Section 11 is held by a court of competent jurisdiction to be unavailable
to an indemnified part with respect to any loss, claim, damage, liability
or expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party, as well as any other relevant equitable
considerations.
12. Security and Subordination. This Debenture shall be secured by a
first priority security interest in all assets of the ISSUER, provided, however,
that this Debenture shall not have any security interest in (x) those assets set
forth on Schedule A attached hereto, (y) accounts receivable factored with third
party institutional financial lenders with assets of $400 million or more and
regularly making such loans in their ordinary course of business ("Institutional
Lender") and (z) assets (including stock) acquired in transactions without the
use of the proceeds of the Offering, but only if such assets are subject to a
security interest granted by the ISSUER to an Institutional Lender providing
debt financing to acquire such assets. Further, the principal and interest on
this Debenture shall be (x) subordinate in right of payment and priority to (i)
the ISSUER'S currently outstanding 10% Subordinated Convertible Promissory Notes
due October, 2003 in the aggregate principal amount of $200,000 and (ii) all
collateralized loans (having no equity features other than securities or equity
of the ISSUER having minimal value as against the value of the
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indebtedness and which is incidental to the loan and serves as compensation to
the lender in exchange for making such loan) received from Institutional Lenders
and (y) subordinate in priority of lien with respect to assets securing
indebtedness incurred from non-Institutional Lenders to acquire assets
(including stock) in transactions consummated without the use of the proceeds of
the Offering.
EYECITY.COM, INC.
By:_____________________________________
Mark Levin
President and Chief Executive Officer
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EXHIBIT A
DEBENTURE CONVERSION FORM
To Be Executed by the Holder
in Order to Convert Debenture
The undersigned Holder hereby irrevocably elects to convert the Secured
Convertible Debenture issued to ________________________ (the "Debenture") and
to purchase such Debenture Shares (as defined in the Debenture) of Eyecity.com,
Inc. issuable upon conversion of such Debenture, and requests that certificates
for such securities shall be issued in the name of:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
________________________________________________________________________________
(please insert social security or other identifying number)
and be delivered as follows:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
________________________________________________________________________________
(please insert social security or other identifying number)
and if such number of Debenture Shares shall not be all securities evidenced by
the Debenture, that a new Debenture for the balance of such securities be
registered in the name of, and delivered to, Holder.
________________________________________
Signature of Holder
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