DATED: DECEMBER 23, 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 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. MEP-1 $993,969
AMERICANA PUBLISHING, INC.
SECURED CONVERTIBLE DEBENTURE
DUE DECEMBER 23, 2006
This Secured Convertible Debenture (the "Debenture") is issued by AMERICANA
PUBLISHING, INC., a Colorado corporation (the "Obligor"), to XXXXXXXXXX EQUITY
PARTNERS, LTD (the "Holder"), pursuant to that certain Securities Purchase
Agreement (the "Securities Purchase Agreement") of even date herewith. The
Obligor issued to the Holder on March 31, 2005 a Promissory Note in the original
principal amount of Eight Hundred Twenty Thousand Dollars ($820,000) (the
"Note"). This Debenture is being issued to the Holder in satisfaction of the
Note plus accrued and unpaid interest in the amount of Ninety One Thousand Nine
Hundred Sixty Nine Dollars ($91,969) and to reflect the fee of Eighty Two
Thousand Dollars ($82,000) as and for waiving the default and the restructuring
of the Note, for a total principal sum of Nine Hundred Ninety Three Thousand
Nine Hundred Sixty Nine Dollars ($993,969).
FOR VALUE RECEIVED on March 31, 2005 pursuant to the Note, the Obligor
hereby promises to pay to the Holder or its successors and assigns the principal
sum of Nine Hundred Ninety Three Thousand Nine Hundred Sixty Nine Dollars
($993,969) together with accrued but unpaid interest on or before December 23,
2006 (the "Maturity Date") in accordance with the following terms:
Interest. Interest shall accrue on the outstanding principal balance hereof
at an annual rate equal to fifteen percent (15%). 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 5) 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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Right of Redemption. The Obligor at its option shall have the right, with
three (3) business days advance written notice (the "Redemption Notice"), to
redeem a portion or all amounts outstanding under this Debenture prior to the
Maturity Date provided that the Closing Bid Price of the Obligor's Common Stock,
as reported by Bloomberg, LP, is less than the Fixed Conversion Price at the
time of the Redemption Notice. The Obligor shall pay an amount equal to the
principal amount being redeemed plus a redemption premium (the "Redemption
Premium") equal to twenty percent (20%) of the principal amount being redeemed,
and accrued interest, (collectively referred to as the "Redemption Amount"). The
Obligor shall deliver to the Holder the Redemption Amount on the third (3rd)
business day after the Redemption Notice.
In the event the Obligor exercises a redemption of either all or a portion
of the outstanding principal amounts plus accrued interest due and outstanding
under this Debenture as set forth herein, the Holder shall receive a warrant to
purchase one million (1,000,000) shares of the Obligor's Common Stock for every
One Hundred Thousand Dollars ($100,000) redeemed, pro rata. (the "Warrant") The
Warrant shall be exercisable on a "cash basis" and have an exercise price of the
of one hundred and ten percent (110%) of the Closing Bid Price of the Obligor's
Common Stock on the Closing Date, as quoted by Bloomberg, LP, per share. The
Warrant shall have "piggy-back" and demand registration rights and shall survive
for five (5) years from the Closing Date.
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 be permitted to convert all or any portion of
this Debenture during such three (3) business day period.
Security Agreements. This Debenture is secured by an Amended and Restated
Security Agreement of even date herewith between the Obligor and the Holder (the
"Security Agreement") and an Amended and Restated Pledge and Escrow Agreement
(the "Pledge Agreement") of even date herewith among the Obligor, the Holder,
and the Escrow Agent.
Consent of Holder to Sell Capital Stock or Grant Security Interests. So
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 shares of Common Stock or preferred stock without
consideration or for consideration per share less than the Closing Bid Price of
the Common Stock determined immediately prior to its issuance, (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 without consideration or for consideration per share less than the Closing
Bid Price of the Common Stock determined immediately prior to its issuance,
(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.
Rights of First Refusal. So long as any portion of this Debenture is
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
2
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
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.
---------- -------------------
(a) An "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 the principal of, interest on
or other charges in respect of this Debenture, or the Debenture issued
on the date hereof in the principal amount of One Hundred Sixty
Thousand Dollars ($160,000), 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 5) 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,
3
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;
(v) The Common Stock shall cease to be quoted for trading or
listed for trading on either the Nasdaq OTC Bulletin Board ("OTC"),
Nasdaq Capital Market, 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 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 5);
(vii) The Obligor shall fail to file the Underlying Shares
Registration Statement (as defined in Section 5) with the Commission
(as defined in Section 5), 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 Investor
Registration Rights Agreement ("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;
4
(b) During the time that any portion of this Debenture is outstanding,
if any Event of Default has occurred, 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.
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 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.
---------- ----------
(a) Conversion at Option of Holder.
----------------------------------
(i) 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 5) (subject to the limitations on conversion set forth in
Section 3(b) 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.
(ii) 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(b), then, at the option of the Holder, the Obligor, in lieu
of delivering shares of Common Stock pursuant to Section 3(a)(i),
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, chosen by the Holder, 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
5
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.
(iii) The Holder shall effect conversions by delivering to the
Obligor a completed notice in the form attached hereto as Exhibit A (a
"Conversion Notice"). The date on which a Conversion Notice is
delivered is the "Conversion Date." Unless the Holder is converting
the entire principal 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.
(b) Certain Conversion Restrictions.
---------------------------------
(i) 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) 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.
(c) Conversion Price and Adjustments to Conversion Price.
----------------------------------------------------------
(i) The Holder shall be entitled to convert, at its sole option,
at any time a portion or all amounts of principal and interest due and
6
outstanding under this Debenture into shares of the Obligor's Common
Stock at the lesser of (i) at a price equal to $0.001 ( the "Fixed
Conversion Price") or (ii) seventy five percent (75%) of the lowest
Closing Bid Price of the Common Stock during the ten (10) trading days
immediately preceding the Conversion Date as quoted by Bloomberg, LP
(the "Market Conversion Price"). The Fixed Conversion Price and the
Market Conversion Price are collectively referred to as the
"Conversion Price." The Conversion Price may be adjusted pursuant to
the other terms of this Debenture.
(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
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.
(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 Conversion Price, then the Fixed Conversion 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
Conversion 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 such right, option or warrant to purchase shares of the Common
Stock the issuance of which resulted in an adjustment in the Fixed
Conversion Price pursuant to this Section, if any such right, option
or warrant shall expire and shall not have been exercised, the Fixed
Conversion 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 Conversion Price made pursuant to the provisions of this
Section after the issuance of such rights or warrants) had the
adjustment of the Fixed Conversion 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
7
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") entitling any Person to acquire shares of
Common Stock, at a price per share less than the Fixed Conversion
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 Conversion Price, such issuance shall be deemed
to have occurred for less than the Fixed Conversion Price), then, at
the sole option of the Holder, the Fixed Conversion 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 Conversion Price at which this Debenture shall
thereafter be convertible shall be determined by multiplying the Fixed
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 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.
(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
8
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 at all times reserve and keep available
out of its authorized Common Stock the full number of shares of Common
Stock issuable upon conversion of all outstanding amounts under 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 or whole share.
(ix) Whenever the Conversion Price is adjusted pursuant to
Section 3 hereof, the Obligor shall promptly mail to the Holder a
notice setting forth the Conversion 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 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
9
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) Other Provisions.
-----------------
(i) 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.
(ii) 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.
10
(iii) 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.
(iv) 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.
(v) 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) 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 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 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). 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.
Section 4. Notices. 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:
11
If to the Company, to: Americana Publishing, Inc.
c/o Anslow & Xxxxxx, LLP
000 Xxxxx 0 Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx, LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder: Xxxxxxxxxx Equity Partners, Ltd
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
With a copy to: Xxxxx Xxxxxxxx, 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 5. 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.
12
"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 $0.001, of the Obligor and
stock of any other class into which such shares may hereafter be changed or
reclassified.
"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.
"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.
"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.
"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 Pledge Agreement, the
13
Irrevocable Transfer Agent Instructions, the Amended and Restated Security
Agreement and the Investor Registration Rights Agreement.
"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 6. 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
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 7. 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 8. 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 9. 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 10. 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
14
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 11. 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 12. 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
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 13. 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 14. 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 15. 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
15
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]
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.
AMERICANA PUBLISHING, INC.
By:
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
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 Americana
Publishing, Inc., 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: ------------------------------------------------
