Exhibit 10.2
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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
COMPANY. 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: January 12, 2005
Original Conversion Price (subject to adjustment herein): $2.40
$_______________
8% CONVERTIBLE DEBENTURE
THIS DEBENTURE is one of a series of duly authorized and issued 8%
Convertible Debentures of Ramp Corporation, a Delaware corporation, having a
principal place of business at _____________________________ (the "Company"),
designated as its 8% Convertible Debenture (the "Debenture(s)").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ or such dates as the Debentures are required or
permitted to be repaid as provided hereunder, but in no event later than
December 1, 2005 (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. 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:
"Alternate Consideration" shall have the meaning set forth in
Section 5(d).
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"Base Conversion Price" shall have the meaning set forth in
Section 5(b).
"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, by contract or otherwise) of in
excess of 40% of the voting securities of the Company, or (ii) a replacement at
one time or within a two year period of more than one-half of the members of the
Company's board of directors which is not approved by a majority of those
individuals who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date hereof), or
(iii) the execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set forth above
in (i) or (ii).
"Closing Price" means on any particular date (a) the last
reported closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if
there is no such price on such date, then the closing bid price on the Trading
Market on the date nearest preceding such date (as reported by Bloomberg L.P. at
4:15 PM (New York time) for the closing bid price for regular session trading on
such day), or (c) if the Common Stock is not then listed or quoted on a Trading
Market and if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the closing bid price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board (as reported by Bloomberg L.P. at 4:15
PM (New York time), (d) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the "pink
sheets" published by the Pink Sheets LLC (formerly the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported, or (e) if the shares of Common Stock are not then publicly traded the
fair market value of a share of Common Stock as determined by a qualified
independent appraiser selected in good faith by the Company, with the consent of
the Purchasers of a majority in interest of the Shares then outstanding, which
consent shall not be unreasonably withheld.
"Common Stock" means the common stock, par value $0.001 per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
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"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 Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance with the
terms.
"Debenture Register" shall have the meaning set forth in
Section 2(c).
"Dilutive Issuance" shall have the meaning set forth in
Section 5(b).
"Dilutive Issuance Notice" shall have the meaning set forth in
Section 5(b).
"Effectiveness Period" shall have the meaning given to such
term in the Registration Rights Agreement.
"Equity Conditions" shall mean, during the period in question,
(i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notice of Conversions,
if any, (ii) all liquidated damages and other amounts owing in respect of the
Debentures shall have been paid; (iii) there is an effective Registration
Statement pursuant to which the Holder is permitted to utilize the prospectus
thereunder to resell all of the shares issuable pursuant to the Transaction
Documents (and the Company reasonably believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (iv) the
Common Stock is trading on the Trading Market or the OTC Bulletin Board and all
of the shares issuable pursuant to the Transaction Documents are listed for
trading on a Trading Market or the OTC Bulletin Board (and the Company
reasonably believes, in good faith, that trading of the Common Stock on a
Trading Market or OTC Bulletin Board will continue uninterrupted for the
foreseeable future), (v) there is a sufficient number of authorized but unissued
and otherwise unreserved shares of Common Stock for the issuance of all of the
shares issuable pursuant to the Transaction Documents, (vi) there is then
existing no Event of Default or event which, with the passage of time or the
giving of notice, would constitute an Event of Default, (vii) all of the shares
issued or issuable pursuant to the transaction proposed would not violate the
limitations set forth in Sections 4(c)(i) and 4(c)(ii) and (viii) no public
announcement of a pending or proposed Fundamental Transaction, Change of Control
Transaction or acquisition transaction has occurred that has not been
consummated.
"Event of Default" shall have the meaning set forth in Section
8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(d).
"Interest Conversion Rate" means the lesser of (a) the
Conversion Price and (b) 90% of the lesser of (i) the average of the 10 Closing
Prices immediately prior to the
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applicable Interest Payment Date or (ii) the average of the 10 Closing Prices
immediately prior to the date the applicable interest payment shares are issued
and delivered if after the Interest Payment Date.
"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 greater of: (A) 110% 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 Closing 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 greater.
"Monthly Conversion Price" shall have the meaning set forth in
Section 6(a) hereof.
"Monthly Redemption" shall mean the redemption of the
Debenture pursuant to Section 6(a) hereof.
"Monthly Redemption Amount" shall mean, as to a Monthly
Redemption, $___________.(1)
"Monthly Redemption Date" means the 1st of each month,
commencing on the earlier of (a) the first such date following the 120th day
after the date of the Purchase Agreement and (b) the first such date following
the 20th day after the Effective Date and ending upon the full redemption of
this Debenture.
"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).
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
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(1) One-fifth of the original principal amount of this Debenture.
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"Purchase Agreement" means the Securities Purchase Agreement,
dated as of January 12, 2005, to which the Company and the original Holder are
parties, as amended, modified or supplemented from time to time in accordance
with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the Company
and the original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Conversion Shares and naming the
Holder as a "selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Shareholder Approval" shall have the meaning given to such
term in the Purchase Agreement.
"Subsidiary" shall have the meaning given to such term in the
Purchase Agreement.
"Threshold Period" shall have the meaning given to such term
in Section 6(d).
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date of
determination: the Nasdaq SmallCap Market, the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
Section 2. Interest.
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a) Payment of Interest in Cash or Kind. The Company shall pay
interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of eight percent (8%) per annum,
payable on each Conversion Date (as to that principal amount then being
converted) and on the Maturity Date (except that, if any such date is not a
Business Day, then such payment shall be due on the next succeeding Business
Day) and on each Monthly Redemption Date (as to that principal amount then being
redeemed) (each such date, an "Interest Payment Date"), at the Company's option,
in cash or shares of Common Stock at the Interest Conversion Rate, or a
combination thereof; provided, however, payment in shares of Common Stock may
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only occur if during the 10 Trading Days immediately prior to the applicable
Interest Payment Date all of the Equity Conditions have been met and the Company
shall have given the Holder notice in accordance with the notice requirements
set forth below.
b) Company's Election to Pay Interest in Kind. Subject to the
terms and conditions herein, the decision whether to pay interest hereunder in
shares of Common Stock or cash shall be at the discretion of the Company. Not
less than 10 Trading Days prior to each Interest Payment Date, the Company shall
provide the Holder with written notice of its election to pay interest hereunder
either in cash or shares of Common Stock (the Company may indicate in such
notice that the election contained in such notice shall continue for later
periods until revised). Within 10 Trading Days prior to an Interest Payment
Date, the Company's election (whether specific to an Interest Payment Date or
continuous) shall be irrevocable as to such Interest Payment Date. Subject to
the aforementioned conditions, failure to timely provide such written notice
shall be deemed an election by the Company to pay the interest on such Interest
Payment Date in cash.
c) 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.
Payment of interest in shares of Common Stock shall otherwise occur pursuant to
Section 4(d)(ii) and only for purposes of the payment of interest in shares, the
Interest Payment Date shall be deemed the Conversion Date. Interest shall cease
to accrue with respect to any principal amount converted, provided that the
Company in fact delivers the 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 regarding
registration and transfers of Debentures (the "Debenture Register"). Except as
otherwise provided herein, if at any time the Company pays interest partially in
cash and partially in shares of Common Stock, then such payment shall be
distributed ratably among the Holders based upon the principal amount of
Debentures held by each Holder.
d) 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. Notwithstanding anything to
the contrary contained herein, if on any Interest Payment Date the Company has
elected to pay interest in Common Stock and is not able to pay accrued interest
in the form of Common Stock because it does not then satisfy the conditions for
payment in the form of Common Stock set forth above, then, at the option of the
Holder, the Company, in lieu of delivering either shares of Common Stock
pursuant to this Section 2 or paying the regularly scheduled cash interest
payment, shall deliver, within three Trading Days of each applicable Interest
Payment Date, an amount in cash equal to the product of the number of shares of
Common Stock otherwise deliverable to the Holder in connection with the payment
of interest due on such Interest Payment Date and the average of the Closing
Prices during the period commencing on
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the Interest Payment Date and ending on the Trading Day prior to the date such
payment is made.
e) Prepayment. Except as otherwise set forth in this
Debenture, the Company may not prepay any portion of the principal amount of
this Debenture without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
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a) Different Denominations. This Debenture is exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, of not less than $50,000, 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 for transfer of this Debenture, the Company and any agent of the
Company may treat the Person in whose name this Debenture is duly registered on
the Debenture Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
Section 4. Conversion.
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a) Voluntary Conversion. At any time after the Original Issue
Date until this Debenture is no longer outstanding, this Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any time and from time to time (subject to the limitations on
conversion set forth in Section 4(c) hereof). The Holder shall effect
conversions by delivering to the Company the form of Notice of Conversion
attached hereto as Annex A (a "Notice of Conversion"), specifying therein the
principal amount of Debentures to be converted and the date on which such
conversion is to be effected (a "Conversion Date"). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date that
such Notice of Conversion is provided hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender Debentures
to the Company unless the entire principal amount of this Debenture plus all
accrued and unpaid interest thereon has been so converted. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this
Debenture in an amount equal to the applicable conversion. The Holder and the
Company shall maintain detailed and accurate records showing the principal
amount converted and the date of such conversions. The Company 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
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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.
b) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $2.40 (subject to adjustment herein)(the
"Conversion Price").
c) Conversion Limitations.
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i. Trading Market Limitations. Notwithstanding anything
herein to the contrary, if the Company has not obtained Shareholder
Approval (as defined below), if required by the applicable rules and
regulations of the Trading Market (or any successor entity), then the
Company may not issue upon conversion of the Debentures in excess of
19.999% of the number of shares of Common Stock outstanding on the
Trading Day immediately preceding the Original Issue Date, less the
number of shares issued prior to such Conversion Date pursuant to any
Debentures and less the number of shares issued prior to such
Conversion Date pursuant to any Warrants (such number of shares, the
"Issuable Maximum"). Each Holder shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the
aggregate principal amount of the Debenture(s) issued and sold to such
Holder on the Original Issue Date by (y) the aggregate principal amount
of all Debentures issued and sold by the Company on the Original Issue
Date. If any Holder shall no longer hold the Debenture(s), then such
Holder's remaining portion of the Issuable Maximum shall be allocated
pro-rata among the remaining Holders. If on any Conversion Date: (1)
the applicable Conversion Price then in effect is such that the shares
of Common Stock issuable under this Debenture on any Conversion Date
together with the aggregate number of shares of Common Stock that would
then be issuable upon conversion in full of all then outstanding
Debentures would exceed the Issuable Maximum, and (2) the Company's
shareholders shall not have previously approved the transactions
contemplated by the Transaction Documents, as may be required by the
applicable rules and regulations of the Trading Market (or any
successor entity), if any (the "Shareholder Approval"), then the
Company shall issue to the Holder requesting a conversion a number of
shares of Common Stock equal to such Holder's pro-rata portion (which
shall be calculated pursuant to the terms hereof) of the Issuable
Maximum and, with respect to the remainder of the aggregate principal
amount of the Debentures (including any accrued interest) then held by
such Holder for which a conversion in accordance with the applicable
conversion price would result in an issuance of shares of Common Stock
in excess of such Holder's pro-rata portion (which shall be calculated
pursuant to the terms hereof) of the Issuable Maximum (the "Excess
Principal"), the Company shall be prohibited from converting such
Excess Principal, and shall notify the Holder of the reason therefor.
This Debenture shall thereafter be unconvertible to such extent until
and unless Shareholder Approval is subsequently obtained or is
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otherwise not required, but this Debenture shall otherwise remain in
full force and effect.
ii. Holder's Restriction on Conversion. The Company shall
not effect any conversion of this Debenture, and the Holder shall not
have the right to convert any portion of this Debenture, pursuant to
Section 4(a) 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 Common Stock
outstanding immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of this
Debenture with respect to which the determination of such sentence is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) conversion of the remaining,
nonconverted portion of this Debenture beneficially owned by the Holder
or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Debentures or the
Warrants) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder or
any of its affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 4(c)(ii), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act. To the
extent that the limitation contained in this section applies, the
determination of whether this Debenture is convertible (in relation to
other securities owned by the Holder) and of which a portion of this
Debenture is convertible shall be in the sole discretion of such
Holder. To ensure compliance with this restriction, the Holder will be
deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have no
obligation to verify or confirm the accuracy of such determination. For
purposes of this Section 4(c)(ii), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (x) the Company's
most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by
the Company or the Company's Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written request of the
Holder, the Company shall within two Trading Days confirm in writing to
the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including this Debenture, by the Holder or
its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The provisions of this Section
4(c)(ii) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days' prior notice to the Company, and the
provisions of this Section 4(c)(ii) shall
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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).
d) Mechanics of Conversion
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i. Conversion Shares Issuable Upon Conversion of Principal
Amount. The number of shares of Common Stock 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 Trading Days after any Conversion Date, assuming Holder's
compliance with Section 4(c) hereof, the Company will deliver to the
Holder (A) a certificate or certificates representing the Conversion
Shares which, if not otherwise required to have a legend pursuant to
Section 4.1(c) of the Purchase Agreement, shall be free of restrictive
legends and trading restrictions, representing the number of shares of
Common Stock being acquired upon the conversion of Debentures
(including, if so timely elected by the Company, shares of Common Stock
representing the payment of accrued interest) and (B) a bank check in
the amount of accrued and unpaid interest (if the Company is required
to pay accrued interest in cash). The Company shall, if available and
if allowed under applicable securities laws, use its best efforts to
deliver any certificate or certificates required to be delivered by the
Company under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing
similar functions.
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 Trading Day
after a Conversion Date, the Holder shall be entitled by written notice
to the Company at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion, in which event
the Company shall immediately return the certificates representing the
principal amount of Debentures tendered for conversion.
iv. Obligation Absolute; Partial Liquidated Damages. If the
Company fails for any reason to deliver to the Holder such certificate
or certificates pursuant to Section 4(d)(ii) by the third Trading Day
after the Conversion Date, the Company shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, for each $1000 of
principal amount being converted, $5 per Trading Day (increasing to $10
per Trading Day after 5 Trading Days after such damages begin to
accrue) for each Trading Day after such third Trading Day until such
certificates are delivered. The Company's obligations to issue and
deliver the 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
10
provision hereof, the recovery of any judgment against any Person or
any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach
by the Holder or any other Person of any obligation to the Company or
any violation or alleged violation of law by the Holder or any other
person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares; provided,
however, such delivery shall not operate as a waiver by the Company of
any such action the Company may have against the Holder. In the event a
Holder of this Debenture shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not refuse
conversion based on any claim that the Holder or any one associated or
affiliated with the Holder of has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from a court,
on notice, restraining and or enjoining conversion of all or part of
this Debenture shall have been sought and obtained and the Company
posts a surety bond for the benefit of the Holder in the amount of 150%
of the principal amount of this Debenture outstanding, which is subject
to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of
which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same, the
Company shall issue Conversion Shares or, if applicable, cash, upon a
properly noticed conversion. Nothing herein shall limit a Xxxxxx's
right to pursue actual damages or declare an Event of Default pursuant
to Section 8 herein for the Company's failure to deliver Conversion
Shares within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit
the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
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 fails for any reason to deliver to the
Holder such certificate or certificates pursuant to Section 4(d)(ii) by
the third Trading Day after the Conversion Date, and if after such
third Trading Day the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion
Shares which the Holder anticipated receiving upon such conversion (a
"Buy-In"), then the Company shall (A) pay in cash to the Holder (in
addition to any remedies available to or elected by the Holder) the
amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common
Stock that such Holder anticipated receiving from the conversion at
issue multiplied by (2) the actual sale price of the Common Stock at
the time of the sale (including brokerage commissions, if any) giving
rise to such purchase obligation and (B) at the option of the Holder,
either reissue Debentures in
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principal amount equal to the principal amount of the attempted
conversion or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Company timely complied with
its delivery requirements under Section 4(d)(ii). For example, if the
Holder purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of Debentures
with respect to which the actual sale price of the 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; provided, however, that the Company
shall have no obligation to pay Holder the Buy-In Adjustment Amount if:
(i) Holder shall not have delivered any and all documentation required
to be delivered to the Company's transfer agent or its counsel in order
to issue the Warrant Shares as required under the Transaction
Documents, (ii) if the Buy-In, in the opinion of counsel to the
Company, would result in a violation of the federal securities laws, or
(iii) if the Buy-In is a result of the Holder's gross negligence or
willful misconduct. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder
requires the Company to make payment in respect of a Buy-In for the
failure to timely deliver certificates hereunder and the Company timely
pays in full such payment, the Company shall not be required to pay
such Holder liquidated damages under Section 4(d)(iv) in respect of the
certificates resulting in such Buy-In.
vi. Reservation of Shares Issuable Upon Conversion. The
Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of the Debentures and payment
of interest on the Debenture, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of
persons other than the Holders, not less than such number of shares of
the Common Stock as shall (subject to any additional requirements of
the Company as to reservation of such shares set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5) upon the conversion of the outstanding
principal amount of the Debentures and payment of interest hereunder.
The Company covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly and validly authorized, issued and
fully paid, nonassessable and, if the Registration Statement is then
effective under the Securities Act, registered for public sale in
accordance with such Registration Statement.
vii. Fractional Shares. Upon a conversion hereunder the
Company shall not be required to issue stock certificates representing
fractions of shares of the Common Stock, but may if otherwise
permitted, make a cash payment in respect of any final fraction of a
share based on the Closing Price at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder
12
shall be entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
viii. Transfer Taxes. The issuance of certificates for
shares of the Common Stock on conversion of the Debentures shall be
made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to
pay any tax that may be payable in respect of any transfer involved in
the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holder of such Debentures so converted and
the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
Section 5. Certain Adjustments.
---------- -------------------
a) Stock Dividends and Stock Splits. If the Company, at any
time while the Debentures are outstanding: (A) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company pursuant to this Debenture, including as interest
thereon), (B) subdivide outstanding shares of Common Stock into a larger number
of shares, (C) combine (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issue by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
b) [INTENTIONALLY DELETED]
c) Pro Rata Distributions. If the Company, at any time while
Debentures are outstanding, shall distribute to all holders of Common Stock (and
not to Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Conversion
Price shall be determined by multiplying such Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Closing Price determined as of the record date mentioned above, and
of which the numerator shall be such Closing Price on such record date less the
13
then fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share of
the Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided to the
Holders of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
d) Fundamental Transaction. If, at any time while this
Debenture is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any sale of all
or substantially all of its assets in one or a series of related transactions,
(C) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Conversion Share
that would have been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of one share of Common Stock (the "Alternate Consideration"). For
purposes of any such conversion, the determination of the 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 Common
Stock in such Fundamental Transaction, and the Company 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 Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new debenture consistent with the foregoing
provisions and evidencing the Holder's right to convert such debenture into
Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(c) and insuring that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
e) Calculations. All calculations under this Section 5 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be. The number of shares of Common Stock outstanding at any given time shall not
includes shares of Common
14
Stock owned or held by or for the account of the Company, and the description of
any such shares of Common Stock shall be considered on issue or sale of Common
Stock. For purposes of this Section 5, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.
f) Exempt Issuance. Notwithstanding the foregoing, no
adjustment will be made under this Section 5 in respect of an Exempt Issuance.
g) Notice to Holders.
-----------------
i. Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any of this Section 5, the Company shall
promptly mail to each Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
ii. Notice to Allow Conversion by Xxxxxx. If (A) the
Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of
the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets
of the Company, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each
case, the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of
the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity
of the corporate action required to be specified in such notice.
15
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.
Section 6. Monthly Redemption
---------- ------------------
a) Monthly Redemption. On each Monthly Redemption Date, the
Company shall redeem the Monthly Redemption Amount plus accrued but unpaid
interest, the sum of all liquidated damages and any other amounts then owing to
such Holder in respect of the Debenture. The Monthly Redemption Amount due on
each Monthly Redemption Date shall be paid in cash; provided, however, as to any
Monthly Redemption and upon 20 Trading Days' prior written irrevocable notice,
in lieu of a cash redemption payment the Company may elect to pay all or part of
a Monthly Redemption in Conversion Shares based on a conversion price equal to
the lesser of (a) the then Conversion Price and (b) 85% of the average of the 3
lowest Closing Prices during the 20 consecutive Trading Days immediately prior
to the applicable Monthly Redemption Date (subject to adjustment for any stock
dividend, stock split, stock combination or other similar event affecting the
Common Stock during such 20 Trading Day period) (the "Monthly Conversion
Price"); provided, however, that the Company may not pay the Monthly Redemption
Amount in Conversion Shares unless, on the Monthly Redemption Date and during
the 20 Trading Day period immediately prior to the Monthly Redemption Date, the
Equity Conditions have been satisfied; except that, with respect to the first
Monthly Redemption Date, the Equity Conditions need only be met for the 10
Trading Days prior to such first Monthly Redemption Date. The Holders may
convert, pursuant to Section 4(a), any principal amount of the Debenture subject
to a Monthly Redemption at any time prior to the date that the Monthly
Redemption Amount and all amounts owing thereon are due and paid in full. Unless
otherwise indicated by the Holder in the applicable Notice of Conversion, any
principal amount of Debenture converted during any 20 day period until the date
the Monthly Redemption Amount is paid shall be first applied to the principal
amount subject to the Monthly Redemption and such Holder's cash payment of the
Monthly Redemption Amount on such Monthly Redemption Date shall be reduced
accordingly, and any remaining principal amount so converted shall be applied
against the last principal scheduled to be repaid, in reverse time order. The
Company covenants and agrees that it will honor all Notice of Conversions
tendered up until such amounts are paid in full. The Company's determination to
pay a Monthly Redemption in cash or shares of Common Stock shall be applied
ratably to all Holders based on their initial purchases of Debentures pursuant
to the Purchase Agreement.
b) Redemption Procedure. The payment of cash and/or issuance
of Common Stock, as the case may be, pursuant to a Monthly Redemption shall be
made on the Monthly Redemption Date. If any portion of the cash payment for a
Monthly Redemption shall not be paid by the Company by the respective due date,
interest shall accrue thereon at the rate of eighteen percent (18%) per annum
(or the maximum rate permitted by applicable law, whichever is less) until the
payment of the Monthly Redemption Amount, plus all amounts owing thereon is paid
in full.
16
Section 7. Negative Covenants. So long as any portion of this Debenture
is outstanding, the Company will not and will not permit any of its Subsidiaries
to directly or indirectly:
a) enter into, create, incur, assume or suffer to exist any
indebtedness or liens of any kind, on or with respect to any of its property or
assets now owned or hereafter acquired or any interest therein or any income or
profits therefrom that is senior to, or pari passu with (for purposes of
clarification, any security interest of any kind shall be deemed a lien that is
senior to this Debenture and therefore prohibited), in any respect, the
Company's obligations under the Debentures;
b) amend its certificate of incorporation, bylaws or to her
charter documents so as to adversely affect any rights of the Holder;
c) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of shares of its Common Stock or
other equity securities other than as to the Conversion Shares to the extent
permitted or required under the Transaction Documents or as otherwise permitted
by the Transaction Documents; or
d) enter into any agreement with respect to any of the
foregoing.
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, in each case free of
any claim of subordination, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default is not cured, within 10
Trading Days following written notice of such default;
ii. the Company shall fail to materially observe or perform
any other covenant or agreement contained in this Debenture (other than
a breach by the Company of its obligations to deliver shares of Common
Stock to the Holder upon conversion which breach is addressed in clause
(xii) below) which failure is not cured, if possible to cure, within
the earlier to occur of (A) 5 Trading Days after notice of such default
sent by the Holder or by any other Holder and (B)10 Trading Days after
the Company shall become or should have become aware of such failure;
iii. a default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document or
instrument) shall occur
17
under (A) any of the Transaction Documents other than the Debentures,
or (B) any other material agreement, lease, document or instrument
included as an exhibit to the SEC Reports to which the Company or any
Subsidiary is bound provided such default or event of default would
result in a Material Adverse Effect on the Company;
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 or any of its Subsidiaries shall
commence, or there shall be commenced against the Company or any such
Subsidiary, a case under any applicable bankruptcy or insolvency laws
as now or hereafter in effect or any successor thereto, or the Company
or any Subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company
or any Subsidiary thereof or (ii) there is commenced against the
Company or any Subsidiary thereof any such bankruptcy, insolvency or
other proceeding which remains undismissed for a period of 90 days; or
(iii) the Company 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 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 90
days; or (v) the Company or any Subsidiary thereof makes a general
assignment for the benefit of creditors; or (vi) the Company shall fail
to pay, or shall state that it is unable to pay, or shall be unable to
pay, its debts generally as they become due; or (vii) any corporate or
other action is taken by the Company or any Subsidiary thereof for the
purpose of effecting any of the foregoing;
vi. the Company or any Subsidiary shall default in any of
its obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount
exceeding $250,000, 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;
18
vii. the Common Stock shall not be eligible for quotation
on or quoted for trading on a Trading Market or the OTC Bulletin Board
and shall not again be eligible for and quoted or listed for trading
thereon within ten Trading Days;
viii. the Company 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 40% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction) or shall redeem or repurchase more than a de minimis
number of its outstanding shares of Common Stock or other equity
securities of the Company (other than redemptions of Conversion Shares
and repurchases of shares of Common Stock or other equity securities of
departing officers and directors of the Company; provided such
repurchases shall not exceed $100,000, in the aggregate, for all
officers and directors during the term of this Debenture);
ix. a Registration Statement shall not have been declared
effective by the Commission on or prior to the 180th calendar day after
the Closing Date;
x. if, during the Effectiveness Period (as defined in the
Registration Rights Agreement), the effectiveness of the Registration
Statement lapses for any reason or the Holder shall not be permitted to
resell Registrable Securities (as defined in the Registration Rights
Agreement) under the Registration Statement, in either case, for more
than 30 consecutive Trading Days or 90 non-consecutive Trading Days
during any 12 month period; provided, however, that in the event
-------- ------- that the Company is negotiating a merger,
consolidation, acquisition or sale of all or substantially all of its
assets or a similar transaction and in the written opinion of counsel
to the Company, the Registration Statement, would be required to be
amended to include information concerning such transactions or the
parties thereto that is not available or may not be publicly disclosed
at the time, the Company shall be permitted an additional 10
consecutive Trading during any 12 month period relating to such an
event;
xi. the Company shall fail for any reason to deliver
certificates to a Holder prior to the seventh Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(d) or the
Company shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with requests
for conversions of any Debentures in accordance with the terms hereof;
xii. any Person shall breach the agreements delivered to
the initial Holders pursuant to Section 2.2(a)(iv) of the Purchase
Agreement and the Company does not obtain Shareholder Approval.
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
19
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 plus all
other amounts, costs, expenses and liquidated damages due in respect of such
Debentures. 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 eighteen percent (18%) per annum, or
such lower maximum amount of interest permitted to be charged under applicable
law. All Debentures for which the full Mandatory Prepayment Amount hereunder
shall have been paid in accordance herewith shall promptly be surrendered to or
as directed by the Company. The Holder need not provide and the Company hereby
waives any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to
it under applicable law. Such declaration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have all
rights as a Debenture holder until such time, if any, as the full payment under
this Section shall have been received by it. No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent
thereon.
Section 9. Miscellaneous.
---------- --------------
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at the address set forth above, facsimile
number ______________, Attn: ______________________________________or such other
address or facsimile number as the Company may specify for such purposes by
notice to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service addressed to each Holder at the
facsimile telephone number or address of such Xxxxxx appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
20
b) Absolute Obligation. Except as expressly provided herein,
no provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, interest
and liquidated damages (if any) on, this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. 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 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.
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.
21
e) Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
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 covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
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.
*********************
22
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
RAMP CORPORATION
By:___________________________________
Name:
Title:
23
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 8%
Convertible Debenture of Ramp Corporation, a Delaware corporation (the
"Company"), into shares of common stock, par value $0.001 per share (the "Common
Stock"), of the Company according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock 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:
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued on
Account of Conversion at Issue.
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
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Schedule 1
CONVERSION SCHEDULE
The 8% Convertible Debentures, in the aggregate principal amount of
$____________ issued by Ramp Corporation, a Delaware corporation. 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, Amount of (or original
Original Issue Date) Conversion Principal Amount) Company Attest
--------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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