EXHIBIT 10.31
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: March 31, 2005
Original Conversion Price (subject to adjustment herein): $1.25
$_______________
8% CONVERTIBLE DEBENTURE
THIS DEBENTURE is one of a series of duly authorized and issued 8%
Convertible Debentures of Ramp Corporation, a Delaware corporation, having a
principal place of business at 00 Xxxxxx Xxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Company"), designated as its 8% Convertible Debenture (the
"Debenture(s)").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ or such dates as the Debentures are required or
permitted to be repaid as provided hereunder, but in no event later than
February 1, 2006 (the "Maturity Date"), and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture in
accordance with the provisions hereof. This Debenture is subject to the
following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement,
and (b) the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in
Section 5(d).
"Base Conversion Price" shall have the meaning set forth in
Section 5(b).
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Buy-In" shall have the meaning set forth in Section 4(d)(v).
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 40% of the voting securities
of the Company, or (ii) a replacement at one time or within a two year
period of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who
are members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a
majority of the members of the board of directors who are members on
the date hereof), or (iii) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i) or (ii).
"Closing Price" means on any particular date (a) the last
reported closing bid price per share of Common Stock on such date on
the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
time), or (b) if there is no such price on such date, then the closing
bid price on the Trading Market on the date nearest preceding such date
(as reported by Bloomberg L.P. at 4:15 PM (New York time) for the
closing bid price for regular session trading on such day), or (c) if
the Common Stock is not then listed or quoted on a Trading Market and
if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the closing bid price of the Common Stock for such date (or the
nearest preceding date) on the OTC Bulletin Board (as reported by
Bloomberg L.P. at 4:15 PM (New York time), (d) if the Common Stock is
not then listed or quoted on the Trading Market and if prices for the
Common Stock are then reported in the "pink sheets" published by the
Pink Sheets LLC (formerly the National Quotation Bureau Incorporated
(or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common
Stock so reported, or (e) if the shares of Common Stock are not then
publicly traded the fair market value of a share of Common Stock as
determined by a qualified independent appraiser selected in good faith
by the Company, with the consent of the Purchasers of a majority in
interest of the Shares then outstanding, which consent shall not be
unreasonably withheld.
"Common Stock" means the common stock, par value $0.001 per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
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"Conversion Date" shall have the meaning set forth in Section
4(a).
"Conversion Price" shall have the meaning set forth in Section
4(b).
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance
with the terms.
"Debenture Register" shall have the meaning set forth in
Section 2(c).
"Effectiveness Period" shall have the meaning given to such
term in the Registration Rights Agreement.
"Equity Conditions" shall mean, during the period in question,
(i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notice of
Conversions, if any, (ii) all liquidated damages and other amounts
owing in respect of the Debentures shall have been paid; (iii) there is
an effective Registration Statement pursuant to which the Holder is
permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents (and the Company
reasonably believes, in good faith, that such effectiveness will
continue uninterrupted for the foreseeable future), (iv) the Common
Stock is trading on the Trading Market or the OTC Bulletin Board and
all of the shares issuable pursuant to the Transaction Documents are
listed for trading on a Trading Market or the OTC Bulletin Board (and
the Company reasonably believes, in good faith, that trading of the
Common Stock on a Trading Market or OTC Bulletin Board will continue
uninterrupted for the foreseeable future), (v) there is a sufficient
number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the shares issuable pursuant to
the Transaction Documents, (vi) there is then existing no Event of
Default or event which, with the passage of time or the giving of
notice, would constitute an Event of Default, (vii) all of the shares
issued or issuable pursuant to the transaction proposed would not
violate the limitations set forth in Sections 4(c)(i) and 4(c)(ii) and
(viii) no public announcement of a pending or proposed Fundamental
Transaction, Change of Control Transaction or acquisition transaction
has occurred that has not been consummated.
"Event of Default" shall have the meaning set forth in Section
8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(d).
"Interest Conversion Rate" means the lesser of (a) the
Conversion Price and (b) 90% of the lesser of (i) the average of the 10
Closing Prices immediately prior to the applicable Interest Payment
Date or (ii) the average of the 10 Closing Prices immediately prior to
the date the applicable interest payment shares are issued and
delivered if after the Interest Payment Date.
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"Interest Payment Date" shall have the meaning set forth in
Section 2(a).
"Late Fees" shall have the meaning set forth in Section 2(d).
"Mandatory Prepayment Amount" for any Debentures shall equal
the greater of: (A) 110% of the principal amount of Debentures to be
prepaid, plus all accrued and unpaid interest thereon, or (B) the
principal amount of Debentures to be prepaid, plus all other accrued
and unpaid interest hereon, divided by the Conversion Price on (x) the
date the Mandatory Prepayment Amount is demanded or otherwise due or
(y) the date the Mandatory Prepayment Amount is paid in full, whichever
is less, multiplied by the Closing Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is greater.
"Monthly Conversion Price" shall have the meaning set forth in
Section 6(a) hereof.
"Monthly Redemption" shall mean the redemption of the
Debenture pursuant to Section 6(a) hereof.
"Monthly Redemption Amount" shall mean, as to a Monthly
Redemption, $___________.(1)
"Monthly Redemption Date" means the 1st of each month,
commencing on the earlier of (a) the first such date following the
120th day after the date of the Purchase Agreement and (b) the first
such date following the 20th day after the Effective Date and ending
upon the full redemption of this Debenture.
"New York Courts" shall have the meaning set forth in Section
9(d).
"Notice of Conversion" shall have the meaning set forth in
Section 4(a).
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of March __, 2005, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
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1 One-fifth of the original principal amount of this Debenture.
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"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Conversion
Shares and naming the Holder as a "selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Shareholder Approval" shall have the meaning given to such
term in the Purchase Agreement.
"Subsidiary" shall have the meaning given to such term in the
Purchase Agreement.
"Threshold Period" shall have the meaning given to such term
in Section 6(d).
"Trading Day" means a day on which the Common Stock is traded
on a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date of
determination: the Nasdaq SmallCap Market, the American Stock Exchange,
the New York Stock Exchange or the Nasdaq National Market.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
Section 2. Interest.
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a) Payment of Interest in Cash or Kind. The Company shall pay
interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Debenture at the rate of eight
percent (8%) per annum, payable on each Conversion Date (as to that
principal amount then being converted) and on the Maturity Date (except
that, if any such date is not a Business Day, then such payment shall
be due on the next succeeding Business Day) and on each Monthly
Redemption Date (as to that principal amount then being redeemed) (each
such date, an "Interest Payment Date"), at the Company's option, in
cash or shares of Common Stock at the Interest Conversion Rate, or a
combination thereof; provided, however, payment in shares of Common
Stock may only occur if during the 10 Trading Days immediately prior to
the applicable Interest Payment Date all of the Equity Conditions have
been met and the Company shall have given the Holder notice in
accordance with the notice requirements set forth below.
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b) Company's Election to Pay Interest in Kind. Subject to the
terms and conditions herein, the decision whether to pay interest
hereunder in shares of Common Stock or cash shall be at the discretion
of the Company. Not less than 10 Trading Days prior to each Interest
Payment Date, the Company shall provide the Holder with written notice
of its election to pay interest hereunder either in cash or shares of
Common Stock (the Company may indicate in such notice that the election
contained in such notice shall continue for later periods until
revised). Within 10 Trading Days prior to an Interest Payment Date, the
Company's election (whether specific to an Interest Payment Date or
continuous) shall be irrevocable as to such Interest Payment Date.
Subject to the aforementioned conditions, failure to timely provide
such written notice shall be deemed an election by the Company to pay
the interest on such Interest Payment Date in cash.
c) Interest Calculations. Interest shall be calculated on the
basis of a 360-day year and shall accrue daily commencing on the
Original Issue Date until payment in full of the principal sum,
together with all accrued and unpaid interest and other amounts which
may become due hereunder, has been made. Payment of interest in shares
of Common Stock shall otherwise occur pursuant to Section 4(d)(ii) and
only for purposes of the payment of interest in shares, the Interest
Payment Date shall be deemed the Conversion Date. Interest shall cease
to accrue with respect to any principal amount converted, provided that
the Company in fact delivers the Conversion Shares within the time
period required by Section 4(d)(ii). Interest hereunder will be paid to
the Person in whose name this Debenture is registered on the records of
the Company regarding registration and transfers of Debentures (the
"Debenture Register"). Except as otherwise provided herein, if at any
time the Company pays interest partially in cash and partially in
shares of Common Stock, then such payment shall be distributed ratably
among the Holders based upon the principal amount of Debentures held by
each Holder.
d) Late Fee. All overdue accrued and unpaid interest to be
paid hereunder shall entail a late fee at the rate of 18% per annum (or
such lower maximum amount of interest permitted to be charged under
applicable law) ("Late Fees") which will accrue daily, from the date
such interest is due hereunder through and including the date of
payment. Notwithstanding anything to the contrary contained herein, if
on any Interest Payment Date the Company has elected to pay interest in
Common Stock and is not able to pay accrued interest in the form of
Common Stock because it does not then satisfy the conditions for
payment in the form of Common Stock set forth above, then, at the
option of the Holder, the Company, in lieu of delivering either shares
of Common Stock pursuant to this Section 2 or paying the regularly
scheduled cash interest payment, shall deliver, within three Trading
Days of each applicable Interest Payment Date, an amount in cash equal
to the product of the number of shares of Common Stock otherwise
deliverable to the Holder in connection with the payment of interest
due on such Interest Payment Date and the average of the Closing Prices
during the period commencing on the Interest Payment Date and ending on
the Trading Day prior to the date such payment is made.
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e) Prepayment. Except as otherwise set forth in this
Debenture, the Company may not prepay any portion of the principal
amount of this Debenture without the prior written consent of the
Holder.
Section 3. Registration of Transfers and Exchanges.
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a) Different Denominations. This Debenture is exchangeable for
an equal aggregate principal amount of Debentures of different
authorized denominations, of not less than $50,000, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged
only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment to
the Company for transfer of this Debenture, the Company and any agent
of the Company may treat the Person in whose name this Debenture is
duly registered on the Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other
purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
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a) Voluntary Conversion. At any time after the Original Issue
Date until this Debenture is no longer outstanding, this Debenture
shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time (subject
to the limitations on conversion set forth in Section 4(c) hereof). The
Holder shall effect conversions by delivering to the Company the form
of Notice of Conversion attached hereto as Annex A (a "Notice of
Conversion"), specifying therein the principal amount of Debentures to
be converted and the date on which such conversion is to be effected (a
"Conversion Date"). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of
Conversion is provided hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender Debentures to the
Company unless the entire principal amount of this Debenture plus all
accrued and unpaid interest thereon has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal
amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain detailed and
accurate records showing the principal amount converted and the date of
such conversions. The Company shall deliver any objection to any Notice
of Conversion within 2 Business Days of receipt of such notice. In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the
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unpaid and unconverted principal amount of this Debenture may be less
than the amount stated on the face hereof.
b) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $1.25 (subject to adjustment
herein)(the "Conversion Price").
c) Conversion Limitations.
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i. Trading Market Limitations. Notwithstanding anything
herein to the contrary, if the Company has not obtained
Shareholder Approval (as defined below), if required by the
applicable rules and regulations of the Trading Market (or any
successor entity), then the Company may not issue upon
conversion of the Debentures in excess of 19.999% of the
number of shares of Common Stock outstanding on the Trading
Day immediately preceding the Original Issue Date, less the
number of shares issued prior to such Conversion Date pursuant
to any Debentures and less the number of shares issued prior
to such Conversion Date pursuant to any Warrants (such number
of shares, the "Issuable Maximum"). Each Holder shall be
entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing (x) the aggregate principal
amount of the Debenture(s) issued and sold to such Holder on
the Original Issue Date by (y) the aggregate principal amount
of all Debentures issued and sold by the Company on the
Original Issue Date. If any Holder shall no longer hold the
Debenture(s), then such Holder's remaining portion of the
Issuable Maximum shall be allocated pro-rata among the
remaining Holders. If on any Conversion Date: (1) the
applicable Conversion Price then in effect is such that the
shares of Common Stock issuable under this Debenture on any
Conversion Date together with the aggregate number of shares
of Common Stock that would then be issuable upon conversion in
full of all then outstanding Debentures would exceed the
Issuable Maximum, and (2) the Company's shareholders shall not
have previously approved the transactions contemplated by the
Transaction Documents, as may be required by the applicable
rules and regulations of the Trading Market (or any successor
entity), if any (the "Shareholder Approval"), then the Company
shall issue to the Holder requesting a conversion a number of
shares of Common Stock equal to such Holder's pro-rata portion
(which shall be calculated pursuant to the terms hereof) of
the Issuable Maximum and, with respect to the remainder of the
aggregate principal amount of the Debentures (including any
accrued interest) then held by such Holder for which a
conversion in accordance with the applicable conversion price
would result in an issuance of shares of Common Stock in
excess of such Holder's pro-rata portion (which shall be
calculated pursuant to the terms hereof) of the Issuable
Maximum (the "Excess Principal"), the Company shall be
prohibited from converting such Excess Principal, and shall
notify the Holder of the reason therefor. This Debenture shall
thereafter be unconvertible to such extent until and unless
Shareholder Approval is subsequently obtained or is otherwise
not required, but this Debenture shall otherwise remain in
full force and effect.
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ii. Holder's Restriction on Conversion. The Company shall
not effect any conversion of this Debenture, and the Holder
shall not have the right to convert any portion of this
Debenture, pursuant to Section 4(a) or otherwise, to the
extent that after giving effect to such conversion, the Holder
(together with the Holder's affiliates), as set forth on the
applicable Notice of Conversion, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder and
its affiliates shall include the number of shares of Common
Stock issuable upon conversion of this Debenture with respect
to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would
be issuable upon (A) conversion of the remaining, nonconverted
portion of this Debenture beneficially owned by the Holder or
any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other
Debentures or the Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 4(c)(ii), beneficial ownership shall
be calculated in accordance with Section 13(d) of the Exchange
Act. To the extent that the limitation contained in this
section applies, the determination of whether this Debenture
is convertible (in relation to other securities owned by the
Holder) and of which a portion of this Debenture is
convertible shall be in the sole discretion of such Holder. To
ensure compliance with this restriction, the Holder will be
deemed to represent to the Company each time it delivers a
Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the
accuracy of such determination. For purposes of this Section
4(c)(ii), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (x) the Company's most
recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other
notice by the Company or the Company's Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon
the written request of the Holder, the Company shall within
two Trading Days confirm in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise
of securities of the Company, including this Debenture, by the
Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The
provisions of this Section 4(c)(ii) may be waived by the
Holder upon, at the election of the Holder, not less than 61
days' prior notice to the Company, and the provisions of this
Section 4(c)(ii) shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be
specified in such notice of waiver).
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d) Mechanics of Conversion
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i. Conversion Shares Issuable Upon Conversion of Principal
Amount. The number of shares of Common Stock issuable upon a
conversion hereunder shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of
this Debenture to be converted by (y) the Conversion Price.
ii. Delivery of Certificate Upon Conversion. Not later than
three Trading Days after any Conversion Date, assuming
Holder's compliance with Section 4(c) hereof, the Company will
deliver to the Holder (A) a certificate or certificates
representing the Conversion Shares which, if not otherwise
required to have a legend pursuant to Section 4.1(c) of the
Purchase Agreement, shall be free of restrictive legends and
trading restrictions, representing the number of shares of
Common Stock being acquired upon the conversion of Debentures
(including, if so timely elected by the Company, shares of
Common Stock representing the payment of accrued interest) and
(B) a bank check in the amount of accrued and unpaid interest
(if the Company is required to pay accrued interest in cash).
The Company shall, if available and if allowed under
applicable securities laws, use its best efforts to deliver
any certificate or certificates required to be delivered by
the Company under this Section electronically through the
Depository Trust Corporation or another established clearing
corporation performing similar functions.
iii. Failure to Deliver Certificates. If in the case of any
Notice of Conversion such certificate or certificates are not
delivered to or as directed by the applicable Holder by the
third Trading Day after a Conversion Date, the Holder shall be
entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing
the principal amount of Debentures tendered for conversion.
iv. Obligation Absolute; Partial Liquidated Damages. If the
Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 4(d)(ii) by
the third Trading Day after the Conversion Date, the Company
shall pay to such Holder, in cash, as liquidated damages and
not as a penalty, for each $1000 of principal amount being
converted, $5 per Trading Day (increasing to $10 per Trading
Day after 5 Trading Days after such damages begin to accrue)
for each Trading Day after such third Trading Day until such
certificates are delivered. The Company's obligations to issue
and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged
violation of law by the
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Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with the issuance of
such Conversion Shares; provided, however, such delivery shall
not operate as a waiver by the Company of any such action the
Company may have against the Holder. In the event a Holder of
this Debenture shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not
refuse conversion based on any claim that the Holder or any
one associated or affiliated with the Holder of has been
engaged in any violation of law, agreement or for any other
reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of this
Debenture shall have been sought and obtained and the Company
posts a surety bond for the benefit of the Holder in the
amount of 150% of the principal amount of this Debenture
outstanding, which is subject to the injunction, which bond
shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of
which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same,
the Company shall issue Conversion Shares or, if applicable,
cash, upon a properly noticed conversion. Nothing herein shall
limit a Xxxxxx's right to pursue actual damages or declare an
Event of Default pursuant to Section 8 herein for the
Company's failure to deliver Conversion Shares within the
period specified herein and such Holder shall have the right
to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under
applicable law.
v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. In addition to any other rights
available to the Holder, if the Company fails for any reason
to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after
the Conversion Date, and if after such third Trading Day the
Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise) Common Stock to deliver
in satisfaction of a sale by such Holder of the Conversion
Shares which the Holder anticipated receiving upon such
conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to
or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any)
for the Common Stock so purchased exceeds (y) the product of
(1) the aggregate number of shares of Common Stock that such
Holder anticipated receiving from the conversion at issue
multiplied by (2) the actual sale price of the Common Stock at
the time of the sale (including brokerage commissions, if any)
giving rise to such purchase obligation and (B) at the option
of the Holder, either reissue Debentures in principal amount
equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock
that would have been issued had the Company timely complied
with its delivery requirements under Section 4(d)(ii). For
example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
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attempted conversion of Debentures with respect to which the
actual sale price of the Conversion Shares at the time of the
sale (including brokerage commissions, if any) giving rise to
such purchase obligation was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall
be required to pay the Holder $1,000; provided, however, that
the Company shall have no obligation to pay Holder the Buy-In
Adjustment Amount if: (i) Holder shall not have delivered any
and all documentation required to be delivered to the
Company's transfer agent or its counsel in order to issue the
Warrant Shares as required under the Transaction Documents,
(ii) if the Buy-In, in the opinion of counsel to the Company,
would result in a violation of the federal securities laws, or
(iii) if the Buy-In is a result of the Holder's gross
negligence or willful misconduct. The Holder shall provide the
Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company shall not be
required to pay such Holder liquidated damages under Section
4(d)(iv) in respect of the certificates resulting in such
Buy-In.
vi. Reservation of Shares Issuable Upon Conversion. The
Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of
the Debentures and payment of interest on the Debenture, each
as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common
Stock as shall (subject to any additional requirements of the
Company as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion
of the outstanding principal amount of the Debentures and
payment of interest hereunder. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid,
nonassessable and, if the Registration Statement is then
effective under the Securities Act, registered for public sale
in accordance with such Registration Statement.
vii. Fractional Shares. Upon a conversion hereunder the
Company shall not be required to issue stock certificates
representing fractions of shares of the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Price at such
time. If the Company elects not, or is unable, to make such a
cash payment, the Holder shall be entitled to receive, in lieu
of the final fraction of a share, one whole share of Common
Stock.
viii. Transfer Taxes. The issuance of certificates for
shares of the Common Stock on conversion of the Debentures
shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be
-12-
payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of
such Debentures so converted and the Company shall not be
required to issue or deliver such certificates unless or until
the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax
has been paid.
Section 5. Certain Adjustments.
---------- --------------------
a) Stock Dividends and Stock Splits. If the Company, at any
time while the Debentures are outstanding: (A) shall pay a stock
dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall
not include any shares of Common Stock issued by the Company pursuant
to this Debenture, including as interest thereon), (B) subdivide
outstanding shares of Common Stock into a larger number of shares, (C)
combine (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issue by
reclassification of shares of the Common Stock any shares of capital
stock of the Company, then the Conversion Price shall be multiplied by
a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
b) [INTENTIONALLY DELETED]
c) Pro Rata Distributions. If the Company, at any time while
Debentures are outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security, then in
each such case the Conversion Price shall be determined by multiplying
such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the
Closing Price determined as of the record date mentioned above, and of
which the numerator shall be such Closing Price on such record date
less the then fair market value at such record date of the portion of
such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
-13-
d) Fundamental Transaction. If, at any time while this
Debenture is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the
Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or
property (in any such case, a "Fundamental Transaction"), then upon any
subsequent conversion of this Debenture, the Holder shall have the
right to receive, for each Conversion Share that would have been
issuable upon such conversion absent such Fundamental Transaction, the
same kind and amount of securities, cash or property as it would have
been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the "Alternate
Consideration"). For purposes of any such conversion, the determination
of the Conversion Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Conversion
Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any conversion of
this Debenture following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to the
Company or surviving entity in such Fundamental Transaction shall issue
to the Holder a new debenture consistent with the foregoing provisions
and evidencing the Holder's right to convert such debenture into
Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of
this paragraph (c) and insuring that this Debenture (or any such
replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
e) Calculations. All calculations under this Section 5 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. The number of shares of Common Stock outstanding at any
given time shall not includes shares of Common Stock owned or held by
or for the account of the Company, and the description of any such
shares of Common Stock shall be considered on issue or sale of Common
Stock. For purposes of this Section 5, the number of shares of Common
Stock deemed to be issued and outstanding as of a given date shall be
the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.
f) Exempt Issuance. Notwithstanding the foregoing, no
adjustment will be made under this Section 5 in respect of an Exempt
Issuance.
-14-
g) Notice to Holders.
-----------------
i. Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any of this Section 5, the
Company shall promptly mail to each Holder a notice setting
forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Conversion by Xxxxxx. If (A) the
Company shall declare a dividend (or any other distribution)
on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of
any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of
conversion of the Debentures, and shall cause to be mailed to
the Holders at their last addresses as they shall appear upon
the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange;
provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in
such notice. Holders are entitled to convert Debentures during
the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
Section 6. Monthly Redemption
---------- ------------------
a) Monthly Redemption. On each Monthly Redemption Date, the
Company shall redeem the Monthly Redemption Amount plus accrued but
unpaid interest, the sum of all liquidated damages and any other
amounts then owing to such Holder in respect of the Debenture. The
Monthly Redemption Amount due on each Monthly Redemption
-15-
Date shall be paid in cash; provided, however, as to any Monthly
Redemption and upon 20 Trading Days' prior written irrevocable notice,
in lieu of a cash redemption payment the Company may elect to pay all
or part of a Monthly Redemption in Conversion Shares based on a
conversion price equal to the lesser of (a) the then Conversion Price
and (b) 85% of the average of the 3 lowest Closing Prices during the 20
consecutive Trading Days immediately prior to the applicable Monthly
Redemption Date (subject to adjustment for any stock dividend, stock
split, stock combination or other similar event affecting the Common
Stock during such 20 Trading Day period) (the "Monthly Conversion
Price"); provided, however, that the Company may not pay the Monthly
Redemption Amount in Conversion Shares unless, on the Monthly
Redemption Date and during the 20 Trading Day period immediately prior
to the Monthly Redemption Date, the Equity Conditions have been
satisfied; except that, with respect to the first Monthly Redemption
Date, the Equity Conditions need only be met for the 10 Trading Days
prior to such first Monthly Redemption Date. The Holders may convert,
pursuant to Section 4(a), any principal amount of the Debenture subject
to a Monthly Redemption at any time prior to the date that the Monthly
Redemption Amount and all amounts owing thereon are due and paid in
full. Unless otherwise indicated by the Holder in the applicable Notice
of Conversion, any principal amount of Debenture converted during any
20 day period until the date the Monthly Redemption Amount is paid
shall be first applied to the principal amount subject to the Monthly
Redemption and such Holder's cash payment of the Monthly Redemption
Amount on such Monthly Redemption Date shall be reduced accordingly,
and any remaining principal amount so converted shall be applied
against the last principal scheduled to be repaid, in reverse time
order. The Company covenants and agrees that it will honor all Notice
of Conversions tendered up until such amounts are paid in full. The
Company's determination to pay a Monthly Redemption in cash or shares
of Common Stock shall be applied ratably to all Holders based on their
initial purchases of Debentures pursuant to the Purchase Agreement.
b) Redemption Procedure. The payment of cash and/or issuance
of Common Stock, as the case may be, pursuant to a Monthly Redemption
shall be made on the Monthly Redemption Date. If any portion of the
cash payment for a Monthly Redemption shall not be paid by the Company
by the respective due date, interest shall accrue thereon at the rate
of eighteen percent (18%) per annum (or the maximum rate permitted by
applicable law, whichever is less) until the payment of the Monthly
Redemption Amount, plus all amounts owing thereon is paid in full.
Section 7. Negative Covenants. So long as any portion of this Debenture
is outstanding, the Company will not and will not permit any of its Subsidiaries
to directly or indirectly:
a) enter into, create, incur, assume or suffer to exist any
indebtedness or liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom that is senior to, or pari
passu with (for purposes of clarification, any security interest of any
kind shall be deemed a lien that is senior to this Debenture and
therefore prohibited), in any respect, the Company's obligations under
the Debentures;
-16-
b) amend its certificate of incorporation, bylaws or to her
charter documents so as to adversely affect any rights of the Holder;
c) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of shares of its Common
Stock or other equity securities other than as to the Conversion Shares
to the extent permitted or required under the Transaction Documents or
as otherwise permitted by the Transaction Documents; or
d) enter into any agreement with respect to any of the
foregoing.
Section 8. Events of Default.
---------- ------------------
a) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount
of any Debenture, or (B) interest (including Late Fees) on, or
liquidated damages in respect of, any Debenture, in each case
free of any claim of subordination, as and when the same shall
become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise) which default
is not cured, within 10 Trading Days following written notice
of such default;
ii. the Company shall fail to materially observe or perform
any other covenant or agreement contained in this Debenture
(other than a breach by the Company of its obligations to
deliver shares of Common Stock to the Holder upon conversion
which breach is addressed in clause (xii) below) which failure
is not cured, if possible to cure, within the earlier to occur
of (A) 5 Trading Days after notice of such default sent by the
Holder or by any other Holder and (B)10 Trading Days after the
Company shall become or should have become aware of such
failure;
iii. a default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document
or instrument) shall occur under (A) any of the Transaction
Documents other than the Debentures, or (B) any other material
agreement, lease, document or instrument included as an
exhibit to the SEC Reports to which the Company or any
Subsidiary is bound provided such default or event of default
would result in a Material Adverse Effect on the Company;
iv. any representation or warranty made herein, in any
other Transaction Documents, in any written statement pursuant
hereto or thereto, or in any other report, financial statement
or certificate made or delivered to the Holder or any other
holder of Debentures shall be untrue or incorrect in any
material respect as of the date when made or deemed made;
-17-
v. (i) the Company or any of its Subsidiaries shall
commence, or there shall be commenced against the Company or
any such Subsidiary, a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary commences any other
proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any Subsidiary
thereof or (ii) there is commenced against the Company or any
Subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 90 days;
or (iii) the Company or any Subsidiary thereof is adjudicated
by a court of competent jurisdiction insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary
thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 90 days; or (v) the
Company or any Subsidiary thereof makes a general assignment
for the benefit of creditors; or (vi) the Company shall fail
to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or
(vii) any corporate or other action is taken by the Company or
any Subsidiary thereof for the purpose of effecting any of the
foregoing;
vi. the Company or any Subsidiary shall default in any of
its obligations under any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed
money or money due under any long term leasing or factoring
arrangement of the Company in an amount exceeding $250,000,
whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable;
vii. the Common Stock shall not be eligible for quotation
on or quoted for trading on a Trading Market or the OTC
Bulletin Board and shall not again be eligible for and quoted
or listed for trading thereon within ten Trading Days;
viii. the Company shall be a party to any Change of Control
Transaction or Fundamental Transaction, shall agree to sell or
dispose of all or in excess of 40% of its assets in one or
more transactions (whether or not such sale would constitute a
Change of Control Transaction) or shall redeem or repurchase
more than a de minimis number of its outstanding shares of
Common Stock or other equity securities of the Company (other
than redemptions of Conversion Shares and repurchases of
shares of Common Stock or other equity securities of departing
officers and directors of the Company; provided such
repurchases shall not exceed $100,000, in the aggregate, for
all officers and directors during the term of this Debenture);
-18-
ix. a Registration Statement shall not have been declared
effective by the Commission on or prior to the 180th calendar
day after the Closing Date;
x. if, during the Effectiveness Period (as defined in the
Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder
shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under the
Registration Statement, in either case, for more than 30
consecutive Trading Days or 90 non-consecutive Trading Days
during any 12 month period; provided, however, that in the
event that the Company is negotiating a merger, consolidation,
acquisition or sale of all or substantially all of its assets
or a similar transaction and in the written opinion of counsel
to the Company, the Registration Statement, would be required
to be amended to include information concerning such
transactions or the parties thereto that is not available or
may not be publicly disclosed at the time, the Company shall
be permitted an additional 10 consecutive Trading during any
12 month period relating to such an event;
xi. the Company shall fail for any reason to deliver
certificates to a Holder prior to the seventh Trading Day
after a Conversion Date pursuant to and in accordance with
Section 4(d) or the Company shall provide notice to the
Holder, including by way of public announcement, at any time,
of its intention not to comply with requests for conversions
of any Debentures in accordance with the terms hereof;
xii. any Person shall breach the agreements delivered to
the initial Holders pursuant to Section 2.2(a)(iv) of the
Purchase Agreement and the Company does not obtain Shareholder
Approval.
b) Remedies Upon Event of Default. If any Event of Default
occurs, the full principal amount of this Debenture, together with
interest and other amounts owing in respect thereof, to the date of
acceleration shall become, at the Holder's election, immediately due
and payable in cash. The aggregate amount payable upon an Event of
Default shall be equal to the Mandatory Prepayment Amount plus all
other amounts, costs, expenses and liquidated damages due in respect of
such Debentures. Commencing 5 days after the occurrence of any Event of
Default that results in the eventual acceleration of this Debenture,
the interest rate on this Debenture shall accrue at the rate of
eighteen percent (18%) per annum, or such lower maximum amount of
interest permitted to be charged under applicable law. All Debentures
for which the full Mandatory Prepayment Amount hereunder shall have
been paid in accordance herewith shall promptly be surrendered to or as
directed by the Company. The Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any
kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Xxxxxx at any time prior
to payment hereunder and the Holder shall have all rights as a
-19-
Debenture holder until such time, if any, as the full payment under
this Section shall have been received by it. No such rescission or
annulment shall affect any subsequent Event of Default or impair any
right consequent thereon.
Section 9. Miscellaneous.
---------- --------------
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, facsimile number 000-000-0000, Attn: Chief Executive Officer or
such other address or facsimile number as the Company may specify for
such purposes by notice to the Holders delivered in accordance with
this Section. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Xxxxxx appearing on the books of
the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New York
City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required
to be given.
b) Absolute Obligation. Except as expressly provided herein,
no provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal
of, interest and liquidated damages (if any) on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed.
This Debenture is a direct debt obligation of the Company. This
Debenture ranks pari passu with all other Debentures now or hereafter
issued under the terms set forth herein.
c) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount
of this Debenture so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
d) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to
-20-
the principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by any of the Transaction
Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the City
of New York, Borough of Manhattan (the "New York Courts"). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the
New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, or such
New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Debenture and agrees that such
service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby. If either party shall commence an
action or proceeding to enforce any provisions of this Debenture, then
the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such
action or proceeding.
e) Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this Debenture shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach
of any other provision of this Debenture. The failure of the Company or
the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
f) Severability. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of
interest. The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the
Company from paying all or any portion of the principal of
-21-
or interest on this Debenture as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefits or
advantage of any such law, and covenants that it will not, by resort to
any such law, hinder, delay or impeded the execution of any power
herein granted to the Holder, but will suffer and permit the execution
of every such as though no such law has been enacted.
g) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
h) Headings. The headings contained herein are for convenience
only, do not constitute a part of this Debenture and shall not be
deemed to limit or affect any of the provisions hereof.
*********************
-22-
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
RAMP CORPORATION
By:___________________________________
Name:
Title:
-23-
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 8%
Convertible Debenture of Ramp Corporation, a Delaware corporation (the
"Company"), into shares of common stock, par value $0.001 per share (the "Common
Stock"), of the Company according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts determined in accordance with Section 13(d) of the Exchange
Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection with any
transfer of the aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued on Account of
Conversion at Issue.
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
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Schedule 1
CONVERSION SCHEDULE
The 8% Convertible Debentures, in the aggregate principal amount of
$____________ issued by Ramp Corporation, a Delaware corporation. This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.
Dated:
Aggregate
Principal
Amount
Remaining
Subsequent to
Date of Conversion Conversion
(or for first entry, Amount of (or original
Original Issue Date) Conversion Principal Amount) Company Attest
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