Exhibit 4.1
EXHIBIT A
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: June 13, 2005
Original Conversion Price (subject to adjustment herein): $1.1992
$
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7.5% CONVERTIBLE DEBENTURE
DUE JUNE 13, 2008
THIS 7.5% CONVERTIBLE DEBENTURE is one of a series of duly
authorized and issued 7.5% Convertible Debentures of Secured Services, Inc., a
Delaware corporation, having a principal place of business at 000 Xxxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 (the "COMPANY"), designated as its 7.5%
Convertible Debenture, due June 13, 2008 (the "DEBENTURE(S)").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "HOLDER"), or shall have
paid pursuant to the terms hereunder, the principal sum of $_______________ by
June 13, 2008, or such earlier date as the Debentures are required or permitted
to be repaid as provided hereunder (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:
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"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) the Company merges into or consolidates with
any other Person, or any Person merges into or consolidates with the
Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 60%
of the aggregate voting power of the Company or the successor entity of
such transaction, or (iii) the Company sells or transfers its assets,
as an entirety or substantially as an entirety, to another Person and
the stockholders of the Company immediately prior to such transaction
own less than 60% of the aggregate voting power of the acquiring entity
immediately after the transaction, (iv) a replacement at one time or
within a three 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 (v) 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 (iv).
"COMMON STOCK" means the common stock, par value $0.0001 per
share, of the Company and stock of any other class of securities into
which such securities may hereafter have been reclassified or changed
into.
"CONVERSION DATE" shall have the meaning set forth in Section
4(a).
"CONVERSION PRICE" shall have the meaning set forth in Section
4(b).
"CONVERSION SHARES" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance
with the terms.
"DEBENTURE REGISTER" shall have the meaning set forth in
Section 2(c).
"DILUTIVE ISSUANCE" shall have the meaning set forth in
Section 5(b).
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"DILUTIVE ISSUANCE NOTICE" shall have the meaning set forth in
Section 5(b).
"EFFECTIVENESS PERIOD" shall have the meaning given to such
term in the Registration Rights Agreement.
"EQUITY CONDITIONS" shall mean, during the period in question,
(i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notice of
Conversions of the Holder, if any, (ii) all liquidated damages and
other amounts owing to the Holder 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 believes, in good faith, that
such effectiveness will continue uninterrupted for the foreseeable
future), (iv) the Common Stock is trading on the Trading Market and all
of the shares issuable pursuant to the Transaction Documents are listed
for trading on a Trading Market (and the Company believes, in good
faith, that trading of the Common Stock on a Trading Market 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) the issuance of
the shares in question to the Holder would not violate the limitations
set forth in Section 4(c)(i) 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, and the rules and regulations promulgated thereunder.
"FUNDAMENTAL TRANSACTION" shall have the meaning set forth in
Section 5(d).
"INTEREST CONVERSION RATE" means 90% of the lesser of (a) the
average of the 20 VWAPs immediately prior to the applicable Interest
Payment Date or (b) the average of the 20 VWAPs immediately prior to
the date the applicable interest payment shares are issued and
delivered if after the Interest Payment Date.
"INTEREST PAYMENT DATE" shall have the meaning set forth in
Section 2(a).
"LATE FEES" shall have the meaning set forth in Section 2(d).
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal
the sum of (i) the greater of: (A) 130% 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
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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 VWAP 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, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"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 June 13, 2005, to which the Company and the original Holder
are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Conversion
Shares and naming the Holder as a "selling stockholder" thereunder.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SUBSIDIARY" shall have the meaning given to such term in the
Purchase Agreement.
"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 in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
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"TRANSACTION DOCUMENTS" shall have the meaning set forth in
the Purchase Agreement.
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the primary Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading
Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
function; (b) 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 (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 (c) in all other cases, the fair market value of a share
of Common Stock as determined by a nationally recognized-independent
appraiser selected in good faith by Purchasers holding a majority of
the Stated Value of the shares of Preferred Stock then outstanding.
SECTION 2. INTEREST.
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 7.5% per
annum, payable quarterly on March 31, June 30, September 30 and
December 31, beginning on the first such date after the Original Issue
Date, 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) (each such date, an "INTEREST PAYMENT DATE"),
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 20 Trading Days immediately prior to
the applicable Interest Payment Date and through and including the date
such shares of Common Stock are issued to the Holder all of the Equity
Conditions have been met and the Company shall have given the Holder
notice in accordance with the notice requirements set forth below.
b) COMPANY'S ELECTION TO PAY INTEREST IN KIND. Subject to the
terms and conditions herein, the decision whether to pay interest
hereunder in shares of Common Stock or cash shall be at the discretion
of the Company. Not less than 20 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 20 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. At
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any time the Company delivers a notice to the Holders of its election
to pay the interest in shares of Common Stock, the Company shall file a
prospectus supplement pursuant to Rule 424 disclosing such election.
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 highest VWAP during the
period commencing on the Interest Payment Date and ending on the
Trading Day prior to the date such payment is made.
e) PREPAYMENT. Except as otherwise set forth in this
Debenture, the Company may not prepay any portion of the principal
amount of this Debenture without the prior written consent of the
Holder.
SECTION 3. REGISTRATION OF TRANSFERS AND EXCHANGES.
a) DIFFERENT DENOMINATIONS. 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.
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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.
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 records showing
the principal amount converted and the date of such conversions. The
Company shall deliver any objection to any Notice of Conversion within
1 Business Day 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 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 $1.1992 (subject to adjustment
herein)(the "CONVERSION PRICE").
c) CONVERSION LIMITATIONS.
i. RESERVED.
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
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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-QSB or Form 10-KSB, 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 or oral request of the Holder,
the Company shall within two Trading Days confirm orally and
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) may be waived by the Holder, at the election of the
Holder, upon not less than 61 days' prior notice to the
Company, and the provisions of this Section 4(c) 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
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, the
Company will deliver or cause to be delivered to the Holder
(A) a certificate or certificates representing the Conversion
Shares which shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase
Agreement) 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 fifth 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 $2000 of principal
amount being converted, $10 per Trading Day (increasing to $20
per Trading Day after 5 Trading Days after such damages begin
to accrue) for each Trading Day after such fifth 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
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
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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
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 Holder 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 fifth Trading
Day after the Conversion Date, and if after such fifth 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 attempted conversion of Debentures
with respect to which the actual sale price of
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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. 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 Holder (and the other Holders of the
Debentures), 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 VWAP 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 this Debenture
shall be made without charge to the Holder hereof for any
documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided
that the Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issuance
and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debentures so converted
and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the
11
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 this Debenture is outstanding: (A) pays 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) subdivides
outstanding shares of Common Stock into a larger number of shares, (C)
combines (including by way of reverse stock split) outstanding shares
of Common Stock into a smaller number of shares, or (D) issues 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
immediately before such event and of which the denominator shall be the
number of shares of Common Stock outstanding immediately 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) SUBSEQUENT EQUITY SALES. If the Company or any Subsidiary
thereof, as applicable, at any time while this Debenture is
outstanding, shall offer, sell, grant any option to purchase or offer,
sell or grant any right to reprice its securities, or otherwise dispose
of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at
an effective price per share less than the then Conversion Price (such
lower price, the "BASE CONVERSION PRICE" and such issuances
collectively, a "DILUTIVE ISSUANCE"), as adjusted hereunder (if the
holder of the Common Stock or Common Stock Equivalents 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 an effective price per share which is less than the
Conversion Price, such issuance shall be deemed to have occurred for
less than the Conversion Price on such date of the Dilutive Issuance),
then the Conversion Price shall be reduced to equal the Base Conversion
Price. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of an Exempt
Issuance. The Company shall notify the Holder in writing, no later than
the Business Day following the issuance of any Common Stock or Common
Stock Equivalents subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms (such notice the
"DILUTIVE ISSUANCE NOTICE"). For purposes of
12
clarification, whether or not the Company provides a Dilutive Issuance
Notice pursuant to this Section 5(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder
is entitled to receive a number of Conversion Shares based upon the
Base Conversion Price regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of Conversion.
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
(including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security, then in each such case the Conversion
Price shall be adjusted 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 VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP 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.
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 immediately prior to the occurrence of
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
13
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 (d) 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. 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) 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. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or
exercise price at which such securities may be converted or
exercised in the case of a Variable Rate Transaction (as
defined in the Purchase Agreement).
ii. NOTICE TO ALLOW CONVERSION BY HOLDER. 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
14
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. RESERVED.
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, guarantee or suffer to
exist any indebtedness for borrowed money of any kind, including but
not limited to, a guarantee, 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,
in any respect, the Company's obligations hereunder;
b) enter into, create, incur, assume or suffer to exist any
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, in any
respect, the Company's obligations hereunder;
c) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder;
d) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a DE MINIMIS number of shares of its Common
Stock or Common Stock Equivalents 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;
e) enter into any agreement with respect to any of the
foregoing; or
f) pay cash dividends on any equity securities of the Company.
15
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, 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, solely in the case of an interest
payment or other default under clause (B) above, is not cured,
within 3 Trading Days;
ii. the Company shall fail to 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 (xi) 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 to
which the Company or any Subsidiary is bound;
iv. any representation or warranty made herein, in
any other Transaction Documents, in any written statement
pursuant hereto or thereto, or in any other report, financial
statement or certificate made or delivered to the Holder or
any other holder of Debentures shall be untrue or incorrect in
any material respect as of the date when made or deemed made;
v. (i) the Company or any of its Subsidiaries shall
commence, or there shall be commenced against the Company or
any such Subsidiary, a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary commences any other
proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any Subsidiary
thereof or (ii) there is commenced against the Company or any
Subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days;
or (iii) the Company or any Subsidiary thereof is adjudicated
by a court of competent jurisdiction insolvent or bankrupt; or
any
16
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 60 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) the Company or any Subsidiary thereof shall call a
meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or
(viii) the Company or any Subsidiary thereof shall by any act
or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or (ix) 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
$150,000, 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 and
shall not again be eligible for and quoted or listed for
trading thereon within five Trading Days;
viii. the Company shall be a party to any Change of
Control Transaction or Fundamental Transaction, shall agree to
sell or dispose of all or in excess of 40% of its assets in
one or more transactions (whether or not such sale would
constitute a Change of Control Transaction) or shall redeem or
repurchase more than a de minimis number of its outstanding
shares of Common Stock or other equity securities of the
Company (other than redemptions of Conversion Shares and
repurchases of shares of Common Stock or other equity
securities of departing officers and directors of the Company;
provided such repurchases shall not exceed $100,000, in the
aggregate, for all officers and directors during the term of
this Debenture);
ix. a Registration Statement shall not have been
declared effective by the Commission on or prior to the 180th
calendar day after the Closing Date;
x. if, during the Effectiveness Period (as defined in
the Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder
shall not be permitted to resell Registrable Securities (as
17
defined in the Registration Rights Agreement) under the
Registration Statement, in either case, for more than 10
consecutive Trading Days or 15 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 Days 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 tenth 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.
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. 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 18% per annum, or such lower
maximum amount of interest permitted to be charged under applicable
law. All Debentures for which the full Mandatory Prepayment Amount
hereunder shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The Holder need not
provide and the Company hereby waives any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have
all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
SECTION 9. MISCELLANEOUS.
a) NOTICES. Any and all notices or other communications or
deliveries to be provided by the Holder 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 888.445.4467, ATTN: KING X. XXXXX, PRESIDENT
AND
18
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 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
19
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 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.
20
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.
*********************
21
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.
SECURED SERVICES, INC.
By:___________________________________
Name:
Title:
22
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 7.5%
Convertible Debenture of Secured Services, Inc., a Delaware corporation (the
"COMPANY"), due on June 13, 2008, into shares of common stock, par value $0.0001
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:
23
SCHEDULE 1
CONVERSION SCHEDULE
The 7.5% Convertible Debentures due on June 13, 2005, in the aggregate principal
amount of $____________ issued by Secured Services, Inc., a Delaware
corporation. This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.
Dated:
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Aggregate
Principal
Amount
Remaining
Date of Conversion Amount of Subsequent to Company Attest
(or for first entry, Conversion Conversion
Original Issue Date) (or original
Principal
Amount)
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