Contract
EXHIBIT
10.5
THIS
SECURITY HAS NOT 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
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Original
Issue Date: July 16, 2007
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$2,894,736.84
USD
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DUE
JULY 16, 2011
THIS
DEBENTURE is one of a series of duly authorized and validly issued 12% Senior
Secured Debentures of Oxford Media, Inc., a Nevada corporation, (the
“Company”), having its principal place of business at One Technology
Drive, Building H, Irvine, California, 92618, designated as its 12% Senior
Secured Debenture due July 16, 2011 (this debenture, the “Debenture” and,
collectively with the other debentures of such series, the
“Debentures”).
FOR
VALUE
RECEIVED, the Company promises to pay to XXXXXXX OFFICE CENTER, LLC, or its
registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of $2,894,736.84 in accordance with the
provision of this Debenture and particularly Section 2 below. 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 shall have the
meanings set forth in the Purchase Agreement and (b) the following terms shall
have the following meanings:
“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency
or
liquidation or similar law of any jurisdiction relating to the Company or any
Significant Subsidiary thereof; (b) there is commenced against the Company
or
any Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e) the
Company or any Significant Subsidiary thereof makes a general assignment for
the
benefit of creditors; (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
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“Business
Day” means any day except Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions
in
the State of New York are authorized or required by law or other governmental
action to close.
“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 33% 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 66% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers all or substantially all
of
its assets to another Person and the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power of
the
acquiring entity immediately after the transaction, or (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 in clauses (i) through (iv) above.
“Debenture
Register” shall have the meaning set forth in Section 2(c).
“Effectiveness
Period” shall have the meaning set forth in the Registration Rights
Agreement.
“Event
of Default” shall have the meaning set forth in Section 6.
“Interest
Payment Date” shall have the meaning set forth in Section 2(a).
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“Late
Fees” shall have the meaning set forth in Section 2(d).
“Mandatory
Default Amount” means the sum of (i) 130% of the outstanding principal
amount of this Debenture, plus 100% of all accrued and unpaid interest hereon
and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of this Debenture.
“New
York Courts” shall have the meaning set forth in Section 7(d).
“Original
Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number of
instruments which may be issued to evidence such Debentures.
“Permitted
Indebtedness” means the Indebtedness existing on the Original Issue Date and
set forth on Schedule 3.1(aa) attached to the Purchase
Agreement.
“Permitted
Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have
been
established in accordance with GAAP and (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from the
value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries
or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of July 16,
2007, among the Company and the original Holders, 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, among the Company and the original Holders,
as
amended, modified or supplemented from time to time in accordance with its
terms.
“Registration
Statement” means a registration statement that registers the resale of all
Underlying Shares of the Holder, names such Holder as a “selling stockholder”
therein, and meets the requirements of the Registration Rights
Agreement.
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“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Subsidiary”
shall have the meaning set forth in the Purchase Agreement.
“Trading
Day” means a day on which the principal Trading Market is open for
business.
“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 American Stock
Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
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Section
2.
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Interest and Repayment
Obligations.
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a) Payment
of Interest. The Company shall pay interest to the Holder on the aggregate
then outstanding principal amount of this Debenture at the rate of 12% per
annum, payable quarterly within 3 Business Days of January 1, April 1, July
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and October 1, beginning on the first such date after the Original Issue Date
and on each Maturity Date (each such date, an “Interest Payment Date”),
in cash.
b) Payment
of Principal. The Company shall repay principal to the Holder in
eight (8) equal installments at the same time interest payments are due
hereunder commencing on September 30, 2009, with all remaining amounts due
hereunder to be paid in full on July 16, 2011 (each such date as to the
applicable principal amount under this Debenture, a “Maturity Date” or
such earlier date as this Debenture is required or permitted to be repaid as
provided for under this Debenture.
c) Interest
Calculations. Interest shall be calculated on the basis of a 360-day year,
consisting of twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding principal,
together with all accrued and unpaid interest, liquidated damages and other
amounts which may become due hereunder, has been made. 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 this
Debenture (the “Debenture Register”).
d) Late
Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18% per
annum
or the maximum rate permitted by applicable law (“Late Fees”) which shall
accrue daily from the date such interest is due hereunder through and including
the date of payment in full.
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.
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Section
3.
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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, as
requested by the Holder surrendering the same. No service charge will
be payable for such registration of 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 for transfer to the Company
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.
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Section
4.
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[INTENTIONALLY
DELETED].
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Section
5. Negative
Covenants. As long as any portion of this Debenture remains outstanding,
unless the holders of at least 75% in principal amount of the then outstanding
Debentures shall have otherwise given prior written consent, the Company shall
not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
on the Original Issue Date) to, directly or indirectly:
a) other
than Permitted Indebtedness, 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;
b) other
than Permitted Liens, 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;
c) amend
its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;
d) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a
deminimis number of shares of its Common Stock or Common Stock
Equivalents other than as to (a) the Warrant Shares as permitted or required
under the Transaction Documents and (b) repurchases of Common Stock or Common
Stock Equivalents of departing officers and directors of the Company, provided
that such repurchases shall not exceed an aggregate of $100,000 for all officers
and directors during the term of this Debenture;
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e) pay
cash dividends or distributions on any equity securities of the
Company;
f) enter
into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or
g) enter
into any agreement with respect to any of the foregoing.
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Section
6.
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Events
of Default.
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a) “Event
of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event 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, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on a
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 the Debentures which failure is not cured, if possible to cure,
within the earlier to occur of (A) 5 Trading Days after notice of such failure
sent by the Holder or by any other Holder and (B) 10 Trading Days after the
Company has become or should have become aware of such failure;
iii. a
default or event of default (subject to any grace or cure period provided in
the
applicable agreement, document or instrument) shall occur under (A) any of
the
Transaction Documents or (B) any other material agreement, lease, document
or
instrument to which the Company or any Subsidiary is obligated (and not covered
by clause (vi) below);
iv. any
representation or warranty made in this Debenture, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other report,
financial statement or certificate made or delivered to the Holder or any other
Holder shall be untrue or incorrect in any material respect as of the date
when
made or deemed made;
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v. the
Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;
vi. the
Company or any Subsidiary shall default on 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 that (a) involves an
obligation greater than $150,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results 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 listing or quotation for trading on
a
Trading Market and shall not be eligible to resume listing or quotation for
trading thereon within five Trading Days;
viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33% of
its
assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);
ix. the
initial 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), either (a) the effectiveness of the Registration Statement lapses
for any reason or (b) the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Registration Statement for a period of more than 20 consecutive Trading Days
or
30 non-consecutive Trading Days during any 12 month period; provided,
however, that if 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 pending transaction(s) or the parties thereto which information
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 pursuant to this Section 8(a)(x); or
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xi. any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property or
other
assets for more than $50,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.
b) Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding
principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default 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 an interest rate equal to the lesser of 18% per annum or the maximum rate
permitted under applicable law. Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this Debenture
to
or as directed by the Company. In connection with such acceleration
described herein, 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 acceleration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have all
rights as a holder of the Debenture until such time, if any, as the Holder
receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
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Section
7.
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Miscellaneous.
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a) Notices. Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, shall be in writing and delivered personally, by facsimile,
or
sent by a nationally recognized overnight courier service, addressed to the
Company, at the address set forth above, or such other facsimile number or
address as the Company may specify for such purpose by notice to the Holder
delivered in accordance with this Section 7. 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, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Xxxxxx appearing on the books of the Company, or
if no
such facsimile 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 number specified in this Section 7 prior to 5:30 p.m. (New York City
time), (ii) the date immediately following the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section 9 between 5:30 p.m. (New York City time) and 11:59
p.m. (New York City time) on any 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.
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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, liquidated damages and accrued
interest, as applicable, 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
paripassu 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, 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 conflict of laws
thereof. Each party agrees that all legal proceedings concerning the
interpretation, 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 such New
York
Courts, 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 other manner permitted by applicable 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 in the investigation, preparation and
prosecution of such action or proceeding.
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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 by the Company or the Holder 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
the applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law. The Company covenants (to the extent that it
may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture
as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such
as
though no such law has been enacted.
g) Next
Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made
on
the next succeeding Business Day.
h) Headings. The
headings contained herein are for convenience only, do not constitute a part
of
this Debenture and shall not be deemed to limit or affect any of the provisions
hereof.
i) Assumption.
Any successor to the Company or any surviving entity in a Fundamental
Transaction shall (i) assume, prior to such Fundamental Transaction, all of
the
obligations of the Company under this Debenture and the other Transaction
Documents pursuant to written agreements in form and substance satisfactory
to
the Holder (such approval not to be unreasonably withheld or delayed) and (ii)
issue to the Holder a new debenture of such successor entity evidenced by a
written instrument substantially similar in form and substance to this
Debenture, including, without limitation, having a principal amount and interest
rate equal to the principal amount and the interest rate of this Debenture
and
having similar ranking to this Debenture, which shall be satisfactory to the
Holder (any such approval not to be unreasonably withheld or delayed). The
provisions of this Section 7(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.
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j) Secured
Obligation. The obligations of the Company under this Debenture
are secured by all assets of the Company and each Subsidiary pursuant to the
Security Agreement, dated as of July ____, 2007 between the Company, the
Subsidiaries of the Company and the Secured Parties (as defined
therein).
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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.
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By:__________________________________________
Name:
Title:
Facsimile
No. for delivery of Notices:
_______________
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THIS
SECURITY HAS NOT 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
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Original
Issue Date: July 16, 2007
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$263,157.89
USD
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DUE
JULY 16, 2011
THIS
DEBENTURE is one of a series of duly authorized and validly issued 12% Senior
Secured Debentures of Oxford Media, Inc., a Nevada corporation, (the
“Company”), having its principal place of business at One Technology
Drive, Building H, Irvine, California, 92618, designated as its 12% Senior
Secured Debenture due July 16, 2011 (this debenture, the “Debenture” and,
collectively with the other debentures of such series, the
“Debentures”).
FOR
VALUE
RECEIVED, the Company promises to pay to CRESCENT INTERNATIONAL, LTD.,
or its
registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of $263,157.89 in accordance with the
provision of this Debenture and particularly Section 2 below. 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 shall have
the
meanings set forth in the Purchase Agreement and (b) the following terms
shall
have the following meanings:
“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency
or
liquidation or similar law of any jurisdiction relating to the Company or
any
Significant Subsidiary thereof; (b) there is commenced against the Company
or
any Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the
Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e)
the
Company or any Significant Subsidiary thereof makes a general assignment
for the
benefit of creditors; (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes
any
corporate or other action for the purpose of effecting any of the
foregoing.
1
“Business
Day” means any day except Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions
in
the State of New York are authorized or required by law or other governmental
action to close.
“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 33% 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 66% of
the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers all or substantially
all of
its assets to another Person and the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power
of the
acquiring entity immediately after the transaction, or (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 in clauses (i) through (iv) above.
“Debenture
Register” shall have the meaning set forth in Section 2(c).
“Effectiveness
Period” shall have the meaning set forth in the Registration Rights
Agreement.
“Event
of Default” shall have the meaning set forth in Section 6.
“Interest
Payment Date” shall have the meaning set forth in Section 2(a).
2
“Late
Fees” shall have the meaning set forth in Section 2(d).
“Mandatory
Default Amount” means the sum of (i) 130% of the outstanding principal
amount of this Debenture, plus 100% of all accrued and unpaid interest hereon
and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of this Debenture.
“New
York Courts” shall have the meaning set forth in Section 7(d).
“Original
Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number
of
instruments which may be issued to evidence such Debentures.
“Permitted
Indebtedness” means the Indebtedness existing on the Original Issue Date and
set forth on Schedule 3.1(aa) attached to the Purchase
Agreement.
“Permitted
Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not
yet
due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have
been
established in accordance with GAAP and (b) Liens imposed by law which were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from
the
value of such property or assets or materially impair the use thereof in
the
operation of the business of the Company and its consolidated Subsidiaries
or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of July 16,
2007, among the Company and the original Holders, 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, among the Company and the original Holders,
as
amended, modified or supplemented from time to time in accordance with its
terms.
“Registration
Statement” means a registration statement that registers the resale of all
Underlying Shares of the Holder, names such Holder as a “selling stockholder”
therein, and meets the requirements of the Registration Rights
Agreement.
3
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Subsidiary”
shall have the meaning set forth in the Purchase Agreement.
“Trading
Day” means a day on which the principal Trading Market is open for
business.
“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 American Stock
Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global
Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
|
Section
2.
|
Interest and Repayment
Obligations.
|
a) Payment
of Interest. The Company shall pay interest to the Holder on the aggregate
then outstanding principal amount of this Debenture at the rate of 12% per
annum, payable quarterly within 3 Business Days of January 1, April 1, July
1
and October 1, beginning on the first such date after the Original Issue
Date
and on each Maturity Date (each such date, an “Interest Payment Date”),
in cash.
b) Payment
of Principal. The Company shall repay principal to the Holder in
eight (8) equal installments at the same time interest payments are due
hereunder commencing on September 30, 2009, with all remaining amounts due
hereunder to be paid in full on July 16, 2011 (each such date as to the
applicable principal amount under this Debenture, a “Maturity Date” or
such earlier date as this Debenture is required or permitted to be repaid
as
provided for under this Debenture.
c) Interest
Calculations. Interest shall be calculated on the basis of a 360-day year,
consisting of twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding principal,
together with all accrued and unpaid interest, liquidated damages and other
amounts which may become due hereunder, has been made. 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 this
Debenture (the “Debenture Register”).
d) Late
Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18% per
annum
or the maximum rate permitted by applicable law (“Late Fees”) which shall
accrue daily from the date such interest is due hereunder through and including
the date of payment in full.
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.
4
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|
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 payable for such registration of 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 for transfer to the Company
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.
|
[INTENTIONALLY
DELETED].
|
Section
5. Negative
Covenants. As long as any portion of this Debenture remains outstanding,
unless the holders of at least 75% in principal amount of the then outstanding
Debentures shall have otherwise given prior written consent, the Company
shall
not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
on the Original Issue Date) to, directly or indirectly:
a) other
than Permitted Indebtedness, 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;
b) other
than Permitted Liens, 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;
c) amend
its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;
d) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a
deminimis number of shares of its Common Stock or Common Stock
Equivalents other than as to (a) the Warrant Shares as permitted or required
under the Transaction Documents and (b) repurchases of Common Stock or Common
Stock Equivalents of departing officers and directors of the Company, provided
that such repurchases shall not exceed an aggregate of $100,000 for all officers
and directors during the term of this Debenture;
5
e) pay
cash dividends or distributions on any equity securities of the
Company;
f) enter
into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than
a
quorum otherwise required for board approval); or
g) enter
into any agreement with respect to any of the foregoing.
|
Section
6.
|
Events
of Default.
|
a) “Event
of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event 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, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on
a
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 the Debentures which failure is not cured, if possible to cure,
within the earlier to occur of (A) 5 Trading Days after notice of such failure
sent by the Holder or by any other Holder and (B) 10 Trading Days after the
Company has become or should have become aware of such failure;
iii. a
default or event of default (subject to any grace or cure period provided
in the
applicable agreement, document or instrument) shall occur under (A) any of
the
Transaction Documents or (B) any other material agreement, lease, document
or
instrument to which the Company or any Subsidiary is obligated (and not covered
by clause (vi) below);
iv. any
representation or warranty made in this Debenture, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other
report,
financial statement or certificate made or delivered to the Holder or any
other
Holder shall be untrue or incorrect in any material respect as of the date
when
made or deemed made;
6
v. the
Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;
vi. the
Company or any Subsidiary shall default on 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 that (a) involves an
obligation greater than $150,000, whether such indebtedness now exists or
shall
hereafter be created, and (b) results 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 listing or quotation for trading on
a
Trading Market and shall not be eligible to resume listing or quotation for
trading thereon within five Trading Days;
viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33%
of its
assets in one transaction or a series of related transactions (whether or
not
such sale would constitute a Change of Control Transaction);
ix. the
initial 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), either (a) the effectiveness of the Registration Statement lapses
for any reason or (b) the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Registration Statement for a period of more than 20 consecutive Trading Days
or
30 non-consecutive Trading Days during any 12 month period; provided,
however, that if 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 pending transaction(s) or the parties thereto which information
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 pursuant to this Section 8(a)(x); or
7
xi. any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property or
other
assets for more than $50,000, and such judgment, writ or similar final process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.
b) Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding
principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default 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 an interest rate equal to the lesser of 18% per annum or the maximum rate
permitted under applicable law. Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this Debenture
to
or as directed by the Company. In connection with such acceleration
described herein, 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 acceleration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have all
rights as a holder of the Debenture until such time, if any, as the Holder
receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
|
Section
7.
|
Miscellaneous.
|
a) Notices. Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, shall be in writing and delivered personally, by facsimile,
or
sent by a nationally recognized overnight courier service, addressed to the
Company, at the address set forth above, or such other facsimile number or
address as the Company may specify for such purpose by notice to the Holder
delivered in accordance with this Section 7. 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, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Xxxxxx appearing on the books of the Company, or
if no
such facsimile 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 number specified in this Section 7 prior to 5:30 p.m. (New York
City
time), (ii) the date immediately following the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section 9 between 5:30 p.m. (New York City time) and 11:59
p.m. (New York City time) on any 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.
8
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, liquidated damages and accrued
interest, as applicable, 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
paripassu 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, 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 conflict of laws
thereof. Each party agrees that all legal proceedings concerning the
interpretation, 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 such New
York
Courts, 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 other manner permitted by applicable 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 in the investigation, preparation and
prosecution of such action or proceeding.
9
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 by the Company or the Holder 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
the applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law. The Company covenants (to the extent that
it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture
as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or
which may affect the covenants or the performance of this indenture, and
the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by
resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every
such as
though no such law has been enacted.
g) Next
Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made
on
the next succeeding Business Day.
h) Headings. The
headings contained herein are for convenience only, do not constitute a part
of
this Debenture and shall not be deemed to limit or affect any of the provisions
hereof.
i) Assumption.
Any successor to the Company or any surviving entity in a Fundamental
Transaction shall (i) assume, prior to such Fundamental Transaction, all
of the
obligations of the Company under this Debenture and the other Transaction
Documents pursuant to written agreements in form and substance satisfactory
to
the Holder (such approval not to be unreasonably withheld or delayed) and
(ii)
issue to the Holder a new debenture of such successor entity evidenced by
a
written instrument substantially similar in form and substance to this
Debenture, including, without limitation, having a principal amount and interest
rate equal to the principal amount and the interest rate of this Debenture
and
having similar ranking to this Debenture, which shall be satisfactory to
the
Holder (any such approval not to be unreasonably withheld or delayed). The
provisions of this Section 7(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.
10
j) Secured
Obligation. The obligations of the Company under this Debenture
are secured by all assets of the Company and each Subsidiary pursuant to
the
Security Agreement, dated as of July ____, 2007 between the Company, the
Subsidiaries of the Company and the Secured Parties (as defined
therein).
*********************
11
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.
|
|
|
|
By:__________________________________________
Name:
Title:
Facsimile
No. for delivery of Notices:
_______________
|
12
THIS
SECURITY HAS NOT 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
|
Original
Issue Date: July 16, 2007
|
$526,315.79
USD
|
DUE
JULY 16, 2011
THIS
DEBENTURE is one of a series of duly authorized and validly issued 12%
Senior
Secured Debentures of Oxford Media, Inc., a Nevada corporation, (the
“Company”), having its principal place of business at One Technology
Drive, Building H, Irvine, California, 92618, designated as its 12% Senior
Secured Debenture due July 16, 2011 (this debenture, the “Debenture” and,
collectively with the other debentures of such series, the
“Debentures”).
FOR
VALUE
RECEIVED, the Company promises to pay to MIDSUMMER INVESTMENT, LTD.,
or its
registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of $526,315.79 in accordance with
the
provision of this Debenture and particularly Section 2 below. 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 shall have
the
meanings set forth in the Purchase Agreement and (b) the following terms
shall
have the following meanings:
“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)
thereof
commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency
or
liquidation or similar law of any jurisdiction relating to the Company
or any
Significant Subsidiary thereof; (b) there is commenced against the Company
or
any Significant Subsidiary thereof any such case or proceeding that is
not
dismissed within 60 days after commencement; (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of
relief
or other order approving any such case or proceeding is entered; (d) the
Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e)
the
Company or any Significant Subsidiary thereof makes a general assignment
for the
benefit of creditors; (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes
any
corporate or other action for the purpose of effecting any of the
foregoing.
1
“Business
Day” means any day except Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions
in
the State of New York are authorized or required by law or other governmental
action to close.
“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 33% 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 66%
of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers all or substantially
all of
its assets to another Person and the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power
of the
acquiring entity immediately after the transaction, or (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 in clauses (i) through (iv) above.
“Debenture
Register” shall have the meaning set forth in Section 2(c).
“Effectiveness
Period” shall have the meaning set forth in the Registration Rights
Agreement.
“Event
of Default” shall have the meaning set forth in Section 6.
“Interest
Payment Date” shall have the meaning set forth in Section 2(a).
2
“Late
Fees” shall have the meaning set forth in Section 2(d).
“Mandatory
Default Amount” means the sum of (i) 130% of the outstanding principal
amount of this Debenture, plus 100% of all accrued and unpaid interest
hereon
and (ii) all other amounts, costs, expenses and liquidated damages due
in
respect of this Debenture.
“New
York Courts” shall have the meaning set forth in Section 7(d).
“Original
Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number
of
instruments which may be issued to evidence such Debentures.
“Permitted
Indebtedness” means the Indebtedness existing on the Original Issue Date and
set forth on Schedule 3.1(aa) attached to the Purchase
Agreement.
“Permitted
Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not
yet
due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which
adequate
reserves (in the good faith judgment of the management of the Company)
have been
established in accordance with GAAP and (b) Liens imposed by law which
were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from
the
value of such property or assets or materially impair the use thereof in
the
operation of the business of the Company and its consolidated Subsidiaries
or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of July 16,
2007, among the Company and the original Holders, 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, among the Company and the original Holders,
as
amended, modified or supplemented from time to time in accordance with
its
terms.
“Registration
Statement” means a registration statement that registers the resale of all
Underlying Shares of the Holder, names such Holder as a “selling stockholder”
therein, and meets the requirements of the Registration Rights
Agreement.
3
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Subsidiary”
shall have the meaning set forth in the Purchase Agreement.
“Trading
Day” means a day on which the principal Trading Market is open for
business.
“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 American Stock
Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global
Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
|
Section
2.
|
Interest and Repayment
Obligations.
|
a) Payment
of Interest. The Company shall pay interest to the Holder on the aggregate
then outstanding principal amount of this Debenture at the rate of 12%
per
annum, payable quarterly within 3 Business Days of January 1, April 1,
July 1
and October 1, beginning on the first such date after the Original Issue
Date
and on each Maturity Date (each such date, an “Interest Payment Date”),
in cash.
b) Payment
of Principal. The Company shall repay principal to the Holder in
eight (8) equal installments at the same time interest payments are due
hereunder commencing on September 30, 2009, with all remaining amounts
due
hereunder to be paid in full on July 16, 2011 (each such date as to the
applicable principal amount under this Debenture, a “Maturity Date” or
such earlier date as this Debenture is required or permitted to be repaid
as
provided for under this Debenture.
c) Interest
Calculations. Interest shall be calculated on the basis of a 360-day year,
consisting of twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding principal,
together with all accrued and unpaid interest, liquidated damages and other
amounts which may become due hereunder, has been made. 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 this
Debenture (the “Debenture Register”).
d) Late
Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18%
per annum
or the maximum rate permitted by applicable law (“Late Fees”) which shall
accrue daily from the date such interest is due hereunder through and including
the date of payment in full.
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.
4
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|
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 payable for such registration of 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 for transfer to the Company
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.
|
[INTENTIONALLY
DELETED].
|
Section
5. Negative
Covenants. As long as any portion of this Debenture remains outstanding,
unless the holders of at least 75% in principal amount of the then outstanding
Debentures shall have otherwise given prior written consent, the Company
shall
not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
on the Original Issue Date) to, directly or indirectly:
a) other
than Permitted Indebtedness, 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;
b) other
than Permitted Liens, 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;
c) amend
its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;
d) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than
a
deminimis number of shares of its Common Stock or Common Stock
Equivalents other than as to (a) the Warrant Shares as permitted or required
under the Transaction Documents and (b) repurchases of Common Stock or
Common
Stock Equivalents of departing officers and directors of the Company, provided
that such repurchases shall not exceed an aggregate of $100,000 for all
officers
and directors during the term of this Debenture;
5
e) pay
cash dividends or distributions on any equity securities of the
Company;
f) enter
into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than
a
quorum otherwise required for board approval); or
g) enter
into any agreement with respect to any of the foregoing.
|
Section
6.
|
Events
of Default.
|
a) “Event
of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event 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, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on
a
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 the Debentures which failure is not cured, if possible to
cure,
within the earlier to occur of (A) 5 Trading Days after notice of such
failure
sent by the Holder or by any other Holder and (B) 10 Trading Days after
the
Company has become or should have become aware of such failure;
iii. a
default or event of default (subject to any grace or cure period provided
in the
applicable agreement, document or instrument) shall occur under (A) any
of the
Transaction Documents or (B) any other material agreement, lease, document
or
instrument to which the Company or any Subsidiary is obligated (and not
covered
by clause (vi) below);
iv. any
representation or warranty made in this Debenture, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other
report,
financial statement or certificate made or delivered to the Holder or any
other
Holder shall be untrue or incorrect in any material respect as of the date
when
made or deemed made;
6
v. the
Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;
vi. the
Company or any Subsidiary shall default on 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 that (a) involves
an
obligation greater than $150,000, whether such indebtedness now exists
or shall
hereafter be created, and (b) results 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 listing or quotation for trading
on a
Trading Market and shall not be eligible to resume listing or quotation
for
trading thereon within five Trading Days;
viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33%
of its
assets in one transaction or a series of related transactions (whether
or not
such sale would constitute a Change of Control Transaction);
ix. the
initial 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), either (a) the effectiveness of the Registration Statement
lapses
for any reason or (b) the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Registration Statement for a period of more than 20 consecutive Trading
Days or
30 non-consecutive Trading Days during any 12 month period; provided,
however, that if 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 pending transaction(s) or the parties thereto which information
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 pursuant to this Section 8(a)(x); or
7
xi. any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property
or other
assets for more than $50,000, and such judgment, writ or similar final
process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.
b) Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding
principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default 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 an interest rate equal to the lesser of 18% per annum or the maximum
rate
permitted under applicable law. Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this Debenture
to
or as directed by the Company. In connection with such acceleration
described herein, 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 acceleration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have
all
rights as a holder of the Debenture until such time, if any, as the Holder
receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of Default or
impair
any right consequent thereon.
|
Section
7.
|
Miscellaneous.
|
a) Notices. Any
and all notices or other communications or deliveries to be provided by
the
Holder hereunder, shall be in writing and delivered personally, by facsimile,
or
sent by a nationally recognized overnight courier service, addressed to
the
Company, at the address set forth above, or such other facsimile number
or
address as the Company may specify for such purpose by notice to the Holder
delivered in accordance with this Section 7. 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, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Xxxxxx appearing on the books of the Company,
or if no
such facsimile 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 number specified in this Section 7 prior to 5:30 p.m. (New York
City
time), (ii) the date immediately following the date of transmission, if
such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section 9 between 5:30 p.m. (New York City time) and
11:59
p.m. (New York City time) on any 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.
8
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, liquidated damages and accrued
interest, as applicable, 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
paripassu 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, 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 conflict of laws
thereof. Each party agrees that all legal proceedings concerning the
interpretation, 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 such
New York
Courts, 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 other manner permitted by applicable
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 in the investigation, preparation and
prosecution of such action or proceeding.
9
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 by the Company or the Holder 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
the applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law. The Company covenants (to the extent that
it may
lawfully do so) that it shall not at any time insist upon, plead, or in
any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture
as
contemplated herein, wherever enacted, now or at any time hereafter in
force, or
which may affect the covenants or the performance of this indenture, and
the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not,
by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every
such as
though no such law has been enacted.
g) Next
Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be
made on
the next succeeding Business Day.
h) Headings. The
headings contained herein are for convenience only, do not constitute a
part of
this Debenture and shall not be deemed to limit or affect any of the provisions
hereof.
i) Assumption.
Any successor to the Company or any surviving entity in a Fundamental
Transaction shall (i) assume, prior to such Fundamental Transaction, all
of the
obligations of the Company under this Debenture and the other Transaction
Documents pursuant to written agreements in form and substance satisfactory
to
the Holder (such approval not to be unreasonably withheld or delayed) and
(ii)
issue to the Holder a new debenture of such successor entity evidenced
by a
written instrument substantially similar in form and substance to this
Debenture, including, without limitation, having a principal amount and
interest
rate equal to the principal amount and the interest rate of this Debenture
and
having similar ranking to this Debenture, which shall be satisfactory to
the
Holder (any such approval not to be unreasonably withheld or delayed).
The
provisions of this Section 7(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.
10
j) Secured
Obligation. The obligations of the Company under this Debenture
are secured by all assets of the Company and each Subsidiary pursuant to
the
Security Agreement, dated as of July ____, 2007 between the Company, the
Subsidiaries of the Company and the Secured Parties (as defined
therein).
*********************
11
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.
|
|
|
|
By:__________________________________________
Name:
Title:
Facsimile
No. for delivery of Notices:
_______________
|
12
THIS
SECURITY HAS NOT 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
|
Original
Issue Date: July 16, 2007
|
$526,315.79
USD
|
DUE
JULY 16, 2011
THIS
DEBENTURE is one of a series of duly authorized and validly issued 12%
Senior
Secured Debentures of Oxford Media, Inc., a Nevada corporation, (the
“Company”), having its principal place of business at One Technology
Drive, Building H, Irvine, California, 92618, designated as its 12% Senior
Secured Debenture due July 16, 2011 (this debenture, the “Debenture” and,
collectively with the other debentures of such series, the
“Debentures”).
FOR
VALUE
RECEIVED, the Company promises to pay to PALISADES MASTER FUND, LP, or
its
registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of $526,315.79 in accordance with
the
provision of this Debenture and particularly Section 2 below. 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 shall have
the
meanings set forth in the Purchase Agreement and (b) the following terms
shall
have the following meanings:
“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)
thereof
commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency
or
liquidation or similar law of any jurisdiction relating to the Company
or any
Significant Subsidiary thereof; (b) there is commenced against the Company
or
any Significant Subsidiary thereof any such case or proceeding that is
not
dismissed within 60 days after commencement; (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of
relief
or other order approving any such case or proceeding is entered; (d) the
Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e)
the
Company or any Significant Subsidiary thereof makes a general assignment
for the
benefit of creditors; (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes
any
corporate or other action for the purpose of effecting any of the
foregoing.
1
“Business
Day” means any day except Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions
in
the State of New York are authorized or required by law or other governmental
action to close.
“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 33% 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 66%
of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers all or substantially
all of
its assets to another Person and the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power
of the
acquiring entity immediately after the transaction, or (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 in clauses (i) through (iv) above.
“Debenture
Register” shall have the meaning set forth in Section 2(c).
“Effectiveness
Period” shall have the meaning set forth in the Registration Rights
Agreement.
“Event
of Default” shall have the meaning set forth in Section 6.
“Interest
Payment Date” shall have the meaning set forth in Section 2(a).
2
“Late
Fees” shall have the meaning set forth in Section 2(d).
“Mandatory
Default Amount” means the sum of (i) 130% of the outstanding principal
amount of this Debenture, plus 100% of all accrued and unpaid interest
hereon
and (ii) all other amounts, costs, expenses and liquidated damages due
in
respect of this Debenture.
“New
York Courts” shall have the meaning set forth in Section 7(d).
“Original
Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number
of
instruments which may be issued to evidence such Debentures.
“Permitted
Indebtedness” means the Indebtedness existing on the Original Issue Date and
set forth on Schedule 3.1(aa) attached to the Purchase
Agreement.
“Permitted
Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not
yet
due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which
adequate
reserves (in the good faith judgment of the management of the Company)
have been
established in accordance with GAAP and (b) Liens imposed by law which
were
incurred in the ordinary course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and
which (x) do not individually or in the aggregate materially detract from
the
value of such property or assets or materially impair the use thereof in
the
operation of the business of the Company and its consolidated Subsidiaries
or
(y) are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable future the
forfeiture or sale of the property or asset subject to such Lien.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of July 16,
2007, among the Company and the original Holders, 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, among the Company and the original Holders,
as
amended, modified or supplemented from time to time in accordance with
its
terms.
“Registration
Statement” means a registration statement that registers the resale of all
Underlying Shares of the Holder, names such Holder as a “selling stockholder”
therein, and meets the requirements of the Registration Rights
Agreement.
3
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Subsidiary”
shall have the meaning set forth in the Purchase Agreement.
“Trading
Day” means a day on which the principal Trading Market is open for
business.
“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 American Stock
Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global
Select Market, the New York Stock Exchange or the OTC Bulletin
Board.
|
Section
2.
|
Interest and Repayment
Obligations.
|
a) Payment
of Interest. The Company shall pay interest to the Holder on the aggregate
then outstanding principal amount of this Debenture at the rate of 12%
per
annum, payable quarterly within 3 Business Days of January 1, April 1,
July 1
and October 1, beginning on the first such date after the Original Issue
Date
and on each Maturity Date (each such date, an “Interest Payment Date”),
in cash.
b) Payment
of Principal. The Company shall repay principal to the Holder in
eight (8) equal installments at the same time interest payments are due
hereunder commencing on September 30, 2009, with all remaining amounts
due
hereunder to be paid in full on July 16, 2011 (each such date as to the
applicable principal amount under this Debenture, a “Maturity Date” or
such earlier date as this Debenture is required or permitted to be repaid
as
provided for under this Debenture.
c) Interest
Calculations. Interest shall be calculated on the basis of a 360-day year,
consisting of twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding principal,
together with all accrued and unpaid interest, liquidated damages and other
amounts which may become due hereunder, has been made. 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 this
Debenture (the “Debenture Register”).
d) Late
Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18%
per annum
or the maximum rate permitted by applicable law (“Late Fees”) which shall
accrue daily from the date such interest is due hereunder through and including
the date of payment in full.
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.
4
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|
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 payable for such registration of 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 for transfer to the Company
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.
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|
Section
4.
|
[INTENTIONALLY
DELETED].
|
Section
5. Negative
Covenants. As long as any portion of this Debenture remains outstanding,
unless the holders of at least 75% in principal amount of the then outstanding
Debentures shall have otherwise given prior written consent, the Company
shall
not, and shall not permit any of its subsidiaries (whether or not a Subsidiary
on the Original Issue Date) to, directly or indirectly:
a) other
than Permitted Indebtedness, 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;
b) other
than Permitted Liens, 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;
c) amend
its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects
any rights of the Holder;
d) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than
a
deminimis number of shares of its Common Stock or Common Stock
Equivalents other than as to (a) the Warrant Shares as permitted or required
under the Transaction Documents and (b) repurchases of Common Stock or
Common
Stock Equivalents of departing officers and directors of the Company, provided
that such repurchases shall not exceed an aggregate of $100,000 for all
officers
and directors during the term of this Debenture;
5
e) pay
cash dividends or distributions on any equity securities of the
Company;
f) enter
into any transaction with any Affiliate of the Company which would be required
to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than
a
quorum otherwise required for board approval); or
g) enter
into any agreement with respect to any of the foregoing.
|
Section
6.
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Events
of Default.
|
a) “Event
of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event 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, liquidated damages and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on
a
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 the Debentures which failure is not cured, if possible to
cure,
within the earlier to occur of (A) 5 Trading Days after notice of such
failure
sent by the Holder or by any other Holder and (B) 10 Trading Days after
the
Company has become or should have become aware of such failure;
iii. a
default or event of default (subject to any grace or cure period provided
in the
applicable agreement, document or instrument) shall occur under (A) any
of the
Transaction Documents or (B) any other material agreement, lease, document
or
instrument to which the Company or any Subsidiary is obligated (and not
covered
by clause (vi) below);
iv. any
representation or warranty made in this Debenture, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other
report,
financial statement or certificate made or delivered to the Holder or any
other
Holder shall be untrue or incorrect in any material respect as of the date
when
made or deemed made;
6
v. the
Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;
vi. the
Company or any Subsidiary shall default on 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 that (a) involves
an
obligation greater than $150,000, whether such indebtedness now exists
or shall
hereafter be created, and (b) results 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 listing or quotation for trading
on a
Trading Market and shall not be eligible to resume listing or quotation
for
trading thereon within five Trading Days;
viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 33%
of its
assets in one transaction or a series of related transactions (whether
or not
such sale would constitute a Change of Control Transaction);
ix. the
initial 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), either (a) the effectiveness of the Registration Statement
lapses
for any reason or (b) the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Registration Statement for a period of more than 20 consecutive Trading
Days or
30 non-consecutive Trading Days during any 12 month period; provided,
however, that if 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 pending transaction(s) or the parties thereto which information
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 pursuant to this Section 8(a)(x); or
7
xi. any
monetary judgment, writ or similar final process shall be entered or filed
against the Company, any subsidiary or any of their respective property
or other
assets for more than $50,000, and such judgment, writ or similar final
process
shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days.
b) Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding
principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election, immediately due and
payable in cash at the Mandatory Default 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 an interest rate equal to the lesser of 18% per annum or the maximum
rate
permitted under applicable law. Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this Debenture
to
or as directed by the Company. In connection with such acceleration
described herein, 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 acceleration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have
all
rights as a holder of the Debenture until such time, if any, as the Holder
receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of Default or
impair
any right consequent thereon.
|
Section
7.
|
Miscellaneous.
|
a) Notices. Any
and all notices or other communications or deliveries to be provided by
the
Holder hereunder, shall be in writing and delivered personally, by facsimile,
or
sent by a nationally recognized overnight courier service, addressed to
the
Company, at the address set forth above, or such other facsimile number
or
address as the Company may specify for such purpose by notice to the Holder
delivered in accordance with this Section 7. 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, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Xxxxxx appearing on the books of the Company,
or if no
such facsimile 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 number specified in this Section 7 prior to 5:30 p.m. (New York
City
time), (ii) the date immediately following the date of transmission, if
such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section 9 between 5:30 p.m. (New York City time) and
11:59
p.m. (New York City time) on any 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.
8
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, liquidated damages and accrued
interest, as applicable, 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
paripassu 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, 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 conflict of laws
thereof. Each party agrees that all legal proceedings concerning the
interpretation, 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 such
New York
Courts, 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 other manner permitted by applicable
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 in the investigation, preparation and
prosecution of such action or proceeding.
9
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 by the Company or the Holder 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
the applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law. The Company covenants (to the extent that
it may
lawfully do so) that it shall not at any time insist upon, plead, or in
any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture
as
contemplated herein, wherever enacted, now or at any time hereafter in
force, or
which may affect the covenants or the performance of this indenture, and
the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not,
by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every
such as
though no such law has been enacted.
g) Next
Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be
made on
the next succeeding Business Day.
h) Headings. The
headings contained herein are for convenience only, do not constitute a
part of
this Debenture and shall not be deemed to limit or affect any of the provisions
hereof.
i) Assumption.
Any successor to the Company or any surviving entity in a Fundamental
Transaction shall (i) assume, prior to such Fundamental Transaction, all
of the
obligations of the Company under this Debenture and the other Transaction
Documents pursuant to written agreements in form and substance satisfactory
to
the Holder (such approval not to be unreasonably withheld or delayed) and
(ii)
issue to the Holder a new debenture of such successor entity evidenced
by a
written instrument substantially similar in form and substance to this
Debenture, including, without limitation, having a principal amount and
interest
rate equal to the principal amount and the interest rate of this Debenture
and
having similar ranking to this Debenture, which shall be satisfactory to
the
Holder (any such approval not to be unreasonably withheld or delayed).
The
provisions of this Section 7(i) shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.
10
j) Secured
Obligation. The obligations of the Company under this Debenture
are secured by all assets of the Company and each Subsidiary pursuant to
the
Security Agreement, dated as of July ____, 2007 between the Company, the
Subsidiaries of the Company and the Secured Parties (as defined
therein).
*********************
11
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.
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|
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By:__________________________________________
Name:
Title:
Facsimile
No. for delivery of Notices:
_______________
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12
