EXHIBIT 10.2
Dated: November ___, 2005
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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
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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.
No. CCP-3 $1,863,430
NS8 CORPORATION
Secured Convertible Debenture
Due November ___, 2008
This Amended and Restated Secured Convertible Debenture (the "Debenture")
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is issued by NS8 CORPORATION, a Delaware corporation (the "Obligor"), to CORNELL
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CAPITAL PARTNERS, LP (the "Holder"), pursuant to that certain Securities
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Purchase Agreement (the "Securities Purchase Agreement") of even date herewith.
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The Company issued to the Holder (i) on May 27, 2005 a promissory note in the
principal amount of Five Hundred Thousand Dollars ($500,000) (the "May 2005
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Note) and (ii) on June 9, 2005 a promissory note in the principal amount of One
Million Five Hundred Eighteen Thousand Two Hundred Ninety Dollars and Forty One
Cents ($1,518,290.41) (the "June 2005 Note"), which amended and restated the
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promissory note issued by the Company to the Holder on December 10, 2004, of
which $1,400,000 represented outstanding principal and $118,290.41 represented
accrued and unpaid interest through June 9, 2004 (collectively, the May 2005
Note and the June 2005 Note shall be referred to as the "Prior Notes"). This
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Debenture is being re-issued to consolidate the Prior Notes plus accrued and
unpaid interest to the date hereof ($500,000 of outstanding principal and
$27,616.44 as and for interest on the May 2005 Note through the date hereof, and
$1,218,290.41 of outstanding principal and $117,523.61 as and for interest on
the June 2005 Note through the date hereof), for the total principal of One
Million Eight Hundred Sixty Three Thousand Four Hundred Thirty Dollars
($1,863,430).
FOR VALUE RECEIVED on May 27, 2005 pursuant to the May 2005 Note and for
value received on June 9, 2005 pursuant to the June 2005 Note, both of which are
hereby terminated and replaced with this Debenture, the Obligor hereby promises
to pay to the Holder or its successors and assigns the principal sum of One
Million Eight Hundred Sixty Three Thousand Four Hundred Thirty Dollars
($1,863,430) together with accrued but unpaid interest on or before November
___, 2008 (the "Maturity Date") in accordance with the following terms:
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Interest. Interest shall accrue on the outstanding principal balance
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hereof at an annual rate equal to ten percent (10%). Interest shall be
calculated on the basis of a 360-day year and the actual number of days elapsed,
to the extent permitted by applicable law. Interest hereunder will be paid to
the Holder or its assignee (as defined in Section 4) in whose name this
Debenture is registered on the records of the Obligor regarding registration and
transfers of Debentures (the "Debenture Register").
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EX-2
Right of Redemption. The Obligor at its option shall have the right, with three
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(3) business days advance written notice (the "Redemption Notice"), to redeem a
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portion or all amounts outstanding under this Debenture prior to the Maturity
Date only if the closing bid price of the of the Obligor's Common Stock, as
reported by Bloomberg, LP, is less than the Fixed Price at the time of the
Redemption Notice the Obligor shall pay an amount equal to the principal amount
outstanding and accrued interest being redeemed, plus a redemption premium of
twenty percent (20%) ("Redemption Premium") of the amount redeemed (collectively
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referred to as the "Redemption Amount"). The Obligor shall deliver to the
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Holder the Redemption Amount on the third (3rd) business day after the
Redemption Notice.
Notwithstanding the foregoing in the event that the Obligor has elected to
redeem a portion of the outstanding principal amount and accrued interest under
this Debenture the Holder shall still be entitled to effectuate Conversions as
contemplated hereunder.
Security Agreements. This Debenture is secured by the Amended and Restated
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Security Agreement (the "Security Agreement") of even date herewith between the
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Obligor and the Holder, the Subsidiary Security Agreement by and among the
Obligor, the Holder and CanOnline Media Corporation and CanOnline Global Media,
Inc., each a direct or indirect wholly owned subsidiary of the Obligor, and a
Pledge and Escrow Agreement (the "Pledge Agreement") of even date herewith among
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the Obligor, the Holder, and the Escrow Agent.
Consent of Holder to Sell Capital Stock or Grant Security Interests. So
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long as any of the principal amount or interest on this Debenture remains unpaid
and unconverted, the Obligor shall not, without the prior consent of the Holder,
(i) issue or sell any common stock or preferred stock with or without
consideration, (ii) issue or sell any preferred stock, warrant, option, right,
contract, call, or other security or instrument granting the holder thereof the
right to acquire common stock with or without consideration, (iii) enter into
any security instrument granting the holder a security interest in any of the
assets of the Obligor, or (iv) file any registration statements on Form S-8.
Notwithstanding the foregoing, the above restriction shall not apply to only
those holders of the Obligor's stock options contained in the Stock Option
Grants (the "Stock Option Grants") attached as Exhibit F of the Securities
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Purchase Agreement of even date herewith hereto.
Rights of First Refusal. So long as any portion of this Debenture is
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outstanding (including principal or accrued interest), if the Obligor intends to
raise additional capital by the issuance or sale of capital stock of the
Obligor, including without limitation shares of any class of common stock, any
class of preferred stock, options, warrants or any other securities convertible
or exercisable into shares of common stock (whether the offering is conducted by
the Obligor, underwriter, placement agent or any third party) the Obligor shall
be obligated to offer to the Holder such issuance or sale of capital stock, by
providing in writing the principal amount of capital it intends to raise and
outline of the material terms of such capital raise, prior to the offering such
issuance or sale of capital stock to any third parties including, but not
limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents or
other third parties. The Holder shall have ten (10) business days from receipt
of such notice of the sale or issuance of capital stock to accept or reject all
or a portion of such capital raising offer.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate principal
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amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
Section 2. Events of Default.
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EX-3
(a) An "Event of Default", wherever used herein, means any one of the
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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 the principal of, interest on or other
charges in respect of this Debenture, 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);
(ii) The Obligor shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach or default of
any provision of this Debenture (except as may be covered by Section 2(a)(i)
hereof) or any Transaction Document (as defined in Section 4) which is not cured
with in the time prescribed;
(iii) The Obligor or any subsidiary of the Obligor shall commence, or there
shall be commenced against the Obligor or any subsidiary of the Obligor under
any applicable bankruptcy or insolvency laws as now or hereafter in effect or
any successor thereto, or the Obligor or any subsidiary of the Obligor 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 Obligor or any
subsidiary of the Obligor or there is commenced against the Obligor or any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or any
subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Obligor or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor
makes a general assignment for the benefit of creditors; or the Obligor or any
subsidiary of the Obligor shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Obligor or any subsidiary of the Obligor shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Obligor
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;
(iv) The Obligor or any subsidiary of the Obligor shall default in any of
its obligations under any other debenture or 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 Obligor or any subsidiary of the Obligor in an
amount exceeding $100,000, 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;
EX-4
(v) The Common Stock shall cease to be quoted for trading or listed for
trading on either the Nasdaq OTC Bulletin Board ("OTC"), Nasdaq SmallCap Market,
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New York Stock Exchange, American Stock Exchange or the Nasdaq National Market
(each, a "Subsequent Market") and shall not again be quoted or listed for
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trading thereon within five (5) Trading Days of such delisting;
(vi) The Obligor or any subsidiary of the Obligor shall be a party to any
Change of Control Transaction (as defined in Section 4);
(vii) The Obligor shall fail to file the Underlying Shares Registration
Statement (as defined in Section 4) with the Commission (as defined in Section
4), or the Underlying Shares Registration Statement shall not have been declared
effective by the Commission, in each case within the time periods set forth in
the Registration Rights Agreement of even date herewith between the Obligor and
the Holder;
(viii) If the effectiveness of the Underlying Shares Registration Statement
lapses for any reason or the Holder shall not be permitted to resell the shares
of Common Stock underlying this Debenture under the Underlying Shares
Registration Statement, in either case, for more than five (5) consecutive
Trading Days or an aggregate of eight Trading Days (which need not be
consecutive Trading Days);
(ix) The Obligor shall fail for any reason to deliver Common Stock
certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion
Date or the Obligor 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 this Debenture in accordance with the terms hereof;
(x) The Obligor shall fail for any reason to deliver the payment in cash
pursuant to a Buy-In (as defined herein) within three (3) days after notice is
claimed delivered hereunder;
(b) During the time that any portion of this Debenture is outstanding,
if any Event of Default has occurred and has not been cured by the Obligor
within ten (10) calendar days of , the full principal amount of this Debenture,
together with interest and other amounts owing in respect thereof, to the date
of acceleration shall become at the Holder's election, immediately due and
payable in cash, provided however, the Holder may request (but shall have no
obligation to request) payment of such amounts in Common Stock of the Obligor.
If an Event of Default occurs and remains uncured, the Conversion Price shall be
reduced to $0.015. In addition to any other remedies, the Holder shall have the
right (but not the obligation) to convert this Debenture at any time after (x)
an Event of Default or (y) the Maturity Date at the Conversion Price then
in-effect. The Holder need not provide and the Obligor 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. No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon. Upon an
Event of Default, notwithstanding any other provision of this Debenture or any
EX-5
Transaction Document, the Holder shall have no obligation to comply with or
adhere to any limitations, if any, on the conversion of this Debenture or the
sale of the Underlying Shares.
Section 3. Conversion.
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(a) (i) Conversion at Option of Holder.
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(A) 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, after the Original Issue Date (as defined in Section 4) (subject to
the limitations on conversion set forth in Section 3(a)(ii) hereof). The
number of shares of Common Stock issuable upon a conversion hereunder
equals the quotient obtained by dividing (x) the outstanding amount of this
Debenture to be converted by (y) the Conversion Price (as defined in
Section 3(c)(i)). The Obligor shall deliver Common Stock certificates to
the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.
(B) Notwithstanding anything to the contrary contained herein, if on
any Conversion Date: (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury
stock, is insufficient to pay principal and interest hereunder in shares of
Common Stock; (2) the Common Stock is not listed or quoted for trading on
the OTC or on a Subsequent Market; (3) the Obligor has failed to timely
satisfy its conversion; or (4) the issuance of such shares of Common Stock
would result in a violation of Section 3(a)(ii), then, at the option of the
Holder, the Obligor, in lieu of delivering shares of Common Stock pursuant
to Section 3(a)(i)(A), shall deliver, within three (3) Trading Days of each
applicable Conversion Date, an amount in cash equal to the product of the
outstanding principal amount to be converted plus any interest due therein
divided by the Conversion Price and multiplied by the highest closing price
of the stock from date of the conversion notice till the date that such
cash payment is made.
Further, if the Obligor shall not have delivered any cash due in respect of
conversion of this Debenture or as payment of interest thereon by the fifth
(5th) Trading Day after the Conversion Date, the Holder may, by notice to the
Obligor, require the Obligor to issue shares of Common Stock pursuant to Section
3(c), except that for such purpose the Conversion Price applicable thereto shall
be the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.
(C) The Holder shall effect conversions by delivering to the Obligor a
completed notice in the form attached hereto as Exhibit A (a "Conversion
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Notice"). The date on which a Conversion Notice is delivered is the
"Conversion Date." Unless the Holder is converting the entire principal
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amount outstanding under this Debenture, the Holder is not required to
physically surrender this Debenture to the Obligor in order to effect
conversions. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture plus all accrued and unpaid
interest thereon in an amount equal to the applicable conversion. The
Holder and the Obligor shall maintain records showing the principal amount
converted and the date of such conversions. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.
EX-6
(ii) Certain Conversion Restrictions.
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(A) A Holder may not convert this Debenture or receive shares of
Common Stock as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder, together
with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 4.9% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
interest on, this Debenture held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Obligor
the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.9% of the then
outstanding shares of Common Stock without regard to any other shares which
may be beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of
the principal amount of this Debenture is convertible shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Conversion Notice for a principal amount of this Debenture that, without
regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted
amount hereunder, the Obligor shall notify the Holder of this fact and
shall honor the conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with the periods described
in Section 3(a)(i)(A) and, at the option of the Holder, either retain any
principal amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal amount to
the Holder. The provisions of this Section may be waived by a Holder (but
only as to itself and not to any other Holder) upon not less than 65 days
prior notice to the Obligor. Other Holders shall be unaffected by any such
waiver.
(b) (i) Nothing herein shall limit a Holder's right to pursue actual damages or
declare an Event of Default pursuant to Section 2 herein for the Obligor 's
failure to deliver certificates representing shares of Common Stock upon
conversion 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,
in each case without the need to post a bond or provide other security. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
(ii) In addition to any other rights available to the Holder, if the
Obligor fails to deliver to the Holder such certificate or certificates pursuant
to Section 3(a)(i)(A) by the fifth (5th) Trading Day after the Conversion Date,
and if after such fifth (5th) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Obligor shall (A) pay in
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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 market
EX-7
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue a Debenture in
the 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 Obligor timely complied with its delivery requirements under
Section 3(a)(i)(A). 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 market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Obligor shall be required to pay
the Holder $1,000. The Holder shall provide the Obligor written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
(c) (i) The Holder is entitled, at its option, to convert, and sell
on the same day, at any time, until payment in full of this Debenture, all or
any part of the principal amount of the Debenture, plus accrued interest, into
shares of the Company's common stock, par value $0.001 per share, at the price
per share equal to the lesser of (a) $0.075 (the "Fixed Price") or (b) an amount
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equal to ninety percent (90%) of the average of the three (3) lowest volume
weighted average prices of the Common Stock, as quoted by Bloomberg, LP, for the
thirty (30) trading days immediately preceding the Conversion Date which may be
adjusted pursuant to the other terms of this Debenture. Subparagraphs (a) and
(b) above are individually referred to as a "Conversion Price."
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(ii) If the Obligor, at any time while this Debenture is outstanding,
shall (a) 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, (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 Obligor, then the Fixed Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Obligor, at any time while this Debenture is outstanding, shall
issue rights, options or warrants to all holders of Common Stock (and not to the
Holder) entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Fixed Price, then the Fixed Price shall be
multiplied by a fraction, of which the denominator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants (plus the number of additional shares of
Common Stock offered for subscription or purchase), and of which the numerator
shall be the number of shares of the Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants, plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at the Fixed Price. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
EX-8
such right, option or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Fixed Price pursuant to this
Section, if any such right, option or warrant shall expire and shall not have
been exercised, the Fixed Price shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Fixed Price made pursuant to the provisions of this Section after the issuance
of such rights or warrants) had the adjustment of the Fixed Price made upon the
issuance of such rights, options or warrants been made on the basis of offering
for subscription or purchase only that number of shares of the Common Stock
actually purchased upon the exercise of such rights, options or warrants
actually exercised.
(iv) If the Obligor or any subsidiary thereof, as applicable, at any time
while this Debenture is outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock ("Common Stock Equivalents")
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entitling any Person to acquire shares of Common Stock, at a price per share
less than the Fixed Price (if the holder of the Common Stock or Common Stock
Equivalent so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of Common Stock at
a price per share which is less than the Fixed Price, such issuance shall be
deemed to have occurred for less than the Fixed Price), then, at the sole option
of the Holder, the Fixed Price shall be adjusted to mirror the conversion,
exchange or purchase price for such Common Stock or Common Stock Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The Obligor
shall notify the Holder in writing, no later than one (1) business day
following the issuance of any Common Stock or Common Stock Equivalent subject to
this Section, indicating therein the applicable issuance price, or of applicable
reset price, exchange price, conversion price and other pricing terms. No
adjustment under this Section shall be made as a result of issuances and
exercises of options to purchase shares of Common Stock issued for compensatory
purposes pursuant to any of the Obligor's stock option or stock purchase plans.
(v) If the Obligor, at any time while this Debenture is outstanding, shall
distribute to all holders of Common Stock (and not to the Holder) evidences of
its indebtedness or assets or rights or warrants to subscribe for or purchase
any security, then in each such case the Fixed Price at which this Debenture
shall thereafter be convertible shall be determined by multiplying the Fixed
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 Bid Price determined as of the record date
mentioned above, and of which the numerator shall be such Closing Bid Price on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a
statement provided to the Holder 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.
EX-9
(vi) In case of any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is converted into other
securities, cash or property, the Holder shall have the right thereafter to, at
its option, (A) convert the then outstanding principal amount, together with
all accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of the Common Stock
following such reclassification or share exchange, and the Holder of this
Debenture shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Obligor
into which the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture could have been converted immediately prior to such reclassification
or share exchange would have been entitled, or (B) require the Obligor to prepay
the outstanding principal amount of this Debenture, plus all interest and other
amounts due and payable thereon. The entire prepayment price shall be paid in
cash. This provision shall similarly apply to successive reclassifications or
share exchanges.
(vii) The Obligor shall maintain a share reserve of not less than one
percent (100%) of the shares of Common Stock issuable upon conversion of this
Debenture; and within three (3) Business Days following the receipt by the
Obligor of a Holder's notice that such minimum number of Underlying Shares is
not so reserved, the Obligor shall promptly reserve a sufficient number of
shares of Common Stock to comply with such requirement.
(viii) All calculations under this Section 3 shall be rounded up to the
nearest $0.001 of a share.
(ix) Whenever the Fixed Price is adjusted pursuant to Section 3 hereof, the
Obligor shall promptly mail to the Holder a notice setting forth the Fixed Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(x) If (A) the Obligor shall declare a dividend (or any other distribution)
on the Common Stock; (B) the Obligor shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Obligor 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 Obligor shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Obligor is a party, any sale or transfer of all or substantially all
of the assets of the Obligor, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; or (E) the
Obligor shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Obligor; then, in each case, the Obligor shall
cause to be filed at each office or agency maintained for the purpose of
conversion of this Debenture, and shall cause to be mailed to the Holder at its
last address as it shall appear upon the stock books of the Obligor, at least
twenty (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
EX-10
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. The Holder is entitled to
convert this Debenture during the 20-day calendar period commencing the date of
such notice to the effective date of the event triggering such notice.
(xi) In case of any (1) merger or consolidation of the Obligor or any
subsidiary of the Obligor with or into another Person, or (2) sale by the
Obligor or any subsidiary of the Obligor of more than one-half of the assets of
the Obligor in one or a series of related transactions, a Holder shall have the
right to (A) exercise any rights under Section 2(b), (B) convert the aggregate
amount of this Debenture then outstanding into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, require the surviving
entity to issue to the Holder a convertible Debenture with a principal amount
equal to the aggregate principal amount of this Debenture then held by such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible Debenture shall have terms identical
(including with respect to conversion) to the terms of this Debenture, and shall
be entitled to all of the rights and privileges of the Holder of this Debenture
set forth herein and the agreements pursuant to which this Debentures were
issued. In the case of clause (C), the conversion price applicable for the newly
issued shares of convertible preferred stock or convertible Debentures shall be
based upon the amount of securities, cash and property that each share of Common
Stock would receive in such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as
to continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
(d) The Obligor 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 this Debenture and payment of
interest on this Debenture, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the Holder,
not less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Obligor as to reservation of such shares set
forth in this Debenture) be issuable (taking into account the adjustments and
restrictions of Sections 2(b) and 3(c)) upon the conversion of the outstanding
principal amount of this Debenture and payment of interest hereunder. The
Obligor 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 Underlying Shares Registration Statement has been
declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.
EX-11
(e) Upon a conversion hereunder the Obligor 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 Bid Price at such time. If the Obligor elects not,
or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of this Debenture shall be made without charge to the Holder 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 Obligor 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 Debenture so converted and the Obligor
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 Obligor
the amount of such tax or shall have established to the satisfaction of the
Obligor that such tax has been paid.
(g) Any notices, consents, waivers or other communications required or
permitted to be given under the terms hereof must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one (1) trading day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company, to: NS8 Corporation
000 Xxxxxxxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: XxXxxxxXxxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
EX-12
With a copy to: Xxxxx Xxxxxxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) business days prior to the effectiveness of such
change. Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
Section 4. Definitions. For the purposes hereof, the following terms
---------- -----------
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which shall be
-------------
a federal legal holiday in the United States or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Change of Control Transaction" means the occurrence of (a) 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 Obligor,
by contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of the Obligor (except that the acquisition of voting securities by
the Holder shall not constitute a Change of Control Transaction for purposes
hereof), (b) a replacement at one time or over time of more than one-half of the
members of the board of directors of the Obligor 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), (c) the merger, consolidation or sale of fifty percent (50%) or more of
the assets of the Obligor or any subsidiary of the Obligor in one or a series of
related transactions with or into another entity, or (d) the execution by the
Obligor of an agreement to which the Obligor is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c).
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the common stock, par value $0.0001, of the Obligor and
-------------
stock of any other class into which such shares may hereafter be changed or
reclassified.
EX-13
"Conversion Date" shall mean the date upon which the Holder gives the Obligor
----------------
notice of their intention to effectuate a conversion of this Debenture into
shares of the Company's Common Stock as outlined herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
-------------
"Original Issue Date" shall mean the date of the first issuance of this
---------------------
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.
"Closing Bid Price" means the price per share in the last reported trade of the
------------------
Common Stock on the OTC or on the exchange which the Common Stock is then
listed as quoted by Bloomberg, LP.
"Person" means a corporation, an association, a partnership, organization, a
------
business, an individual, a government or political subdivision thereof or a
governmental agency.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
---------------
and regulations promulgated thereunder.
"Trading Day" means a day on which the shares of Common Stock are quoted on the
------------
OTC or quoted or traded on such Subsequent Market on which the shares of Common
Stock are then quoted or listed; provided, that in the event that the shares of
Common Stock are not listed or quoted, then Trading Day shall mean a Business
Day.
"Transaction Documents" means the Securities Purchase Agreement or any other
----------------------
agreement delivered in connection with the Securities Purchase Agreement,
including, without limitation, the Amended and Restated Security Agreement, the
Subsidiary Agreement, the Pledge Agreement, the Irrevocable Transfer Agent
Instructions, the Investor Registration Rights Agreement and the Warrants of
even date herewith.
"Underlying Shares" means the shares of Common Stock issuable upon conversion of
-----------------
this Debenture or as payment of interest in accordance with the terms hereof.
"Underlying Shares Registration Statement" means a registration statement
-------------------------------------------
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a "selling stockholder" thereunder.
Section 5. Except as expressly provided herein, no provision of this
----------
Debenture shall alter or impair the obligations of the Obligor, which are
absolute and unconditional, to pay the principal of, interest and other charges
(if any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Obligor. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Obligor shall not and shall cause their subsidiaries not to,
without the consent of the Holder, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock or other equity securities other than as to
EX-14
the Underlying Shares to the extent permitted or required under the Transaction
Documents; or (iii) enter into any agreement with respect to any of the
foregoing.
Section 6. This Debenture shall not entitle the Holder to any of the rights
----------
of a stockholder of the Obligor, including without limitation, the right to
vote, to receive dividends and other distributions, or to receive any notice of,
or to attend, meetings of stockholders or any other proceedings of the Obligor,
unless and to the extent converted into shares of Common Stock in accordance
with the terms hereof.
Section 7. If this Debenture is mutilated, lost, stolen or destroyed, the
----------
Obligor shall execute and deliver, in exchange and substitution for and upon
cancellation of the 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 Obligor.
Section 8. No indebtedness of the Obligor is senior to this Debenture in
----------
right of payment, whether with respect to interest, damages or upon liquidation
or dissolution or otherwise. Without the Holder's consent, the Obligor will not
and will not permit any of their subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness 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 there from that is senior in
any respect to the obligations of the Obligor under this Debenture.
Section 9. This Debenture shall be governed by and construed in accordance
----------
with the laws of the State of New Jersey, without giving effect to conflicts of
laws thereof. Each of the parties consents to the jurisdiction of the Superior
Courts of the State of New Jersey sitting in Xxxxxx County, New Jersey and the
U.S. District Court for the District of New Jersey sitting in Newark, New
Jersey 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.
Section 10. If the Obligor fails to strictly comply with the terms of this
-----------
Debenture, then the Obligor shall reimburse the Holder promptly for all fees,
costs and expenses, including, without limitation, attorneys' fees and expenses
incurred by the Holder in any action in connection with this Debenture,
including, without limitation, those incurred: (i) during any workout, attempted
workout, and/or in connection with the rendering of legal advice as to the
Holder's rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any
counterclaim to any proceeding or appeal; or (iv) the protection, preservation
or enforcement of any rights or remedies of the Holder.
Section 11. Any waiver by 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 Holder to insist upon strict adherence to any term
of this Debenture on one or more occasions shall not be considered a waiver or
EX-15
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Debenture. Any waiver must be in writing.
Section 12. If any provision of this Debenture is invalid, illegal or
-----------
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Obligor 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 Obligor 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 Obligor (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section 13. Whenever any payment or other obligation hereunder shall be due
-----------
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
Section 14. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
-----------
WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS
AGREEMENT.
[REMAINDER OF PAGE INTENTIONLLY LEFT BLANK]
EX-16
IN WITNESS WHEREOF, the Obligor has caused this Secured Convertible
Debenture to be duly executed by a duly authorized officer as of the date set
forth above.
NS8 CORPORATION
By: /s/ Xxxxxxx Xxxx
----------------
Name: Xxxxxxx Xxxx
Title: CEO
EX-17
EXHIBIT "A"
-----------
NOTICE OF CONVERSION
--------------------
(To be executed by the Holder in order to convert the Debenture)
TO:
The undersigned hereby irrevocably elects to convert $
-------------
of the principal amount of the above Debenture into Shares of Common Stock of
NS8 Corporation, according to the conditions stated therein, as of the
Conversion Date written below.
Conversion Date:
--------------------------------------
Applicable Conversion Price:
--------------------------------------
Signature:
--------------------------------------
Name:
--------------------------------------
Address:
--------------------------------------
Amount to be converted: $
--------------------------------------
Amount of Debenture
unconverted: $
--------------------------------------
Conversion Price per share: $
--------------------------------------
Number of shares of Common
Stock to be issued:
--------------------------------------
Please issue the shares of
Common Stock in the following
name and to the following
address:
--------------------------------------
Issue to:
--------------------------------------
Authorized Signature:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Phone Number:
--------------------------------------
Broker DTC Participant Code:
--------------------------------------
Account Number:
--------------------------------------
EX-18
