Contract
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
8%
SECURED CONVERTIBLE DEBENTURE
|
$300,000
|
December
___, 2009
|
FOR VALUE
RECEIVED, INFERX CORPORATION (the “Company” or the
“Maker”)
promises to pay to the order of ____________, having an address located at
_______________ (the “Holder” or the “Payee”) or its
registered assigns (the “Payee”), upon the
terms set forth below, the principal sum of Three Hundred Thousand Dollars
($300,000) (this “Debenture”).
1. Definitions. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Debenture and Warrant Purchase Agreement (the “Purchase Agreement”),
dated December __, 2009, among the Company and the purchasers signatory
thereto.
“Base Conversion
Price” shall have the meaning set forth in Section 17(c).
“Buy-In” shall have
the meaning set forth in Section 17(b)(v).
“Change of Control
Transaction” shall have the meaning set forth in Section
5(a)(vi).
“Conversion Date”
shall have the meaning set forth in Section 17(a).
“Conversion Price”
shall have the meaning set forth in Section 17(a).
“Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of this
Debenture in accordance with the terms hereof.
“Dilutive Issuance”
shall have the meaning set forth in Section 17(c).
“Dilutive Issuance
Notice” shall have the meaning set forth in Section 17(c).
“Event of Default”
shall have the meaning set forth in Section 5(a).
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“New York Courts”
shall have the meaning set forth in Section 13.
“Notice of Conversion”
shall have the meaning set forth in Section 17(a).
“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” shall mean up to $900,000 of indebtedness as described on
Schedule 4(k)
to the Purchase Agreement.
“Permitted Lien” shall
mean the individual and collective reference to the following: (a) liens in
connection with this Debenture; (b) 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 Maker) have been established in accordance with
generally accepted accounting procedures and (c) liens imposed by law which were
incurred in the ordinary course of business, such as carriers’, warehousemen’s
and mechanics’ liens, statutory landlords’ liens, and other similar liens
arising in the ordinary course of business, and (x) which 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 Maker
and its consolidated subsidiaries or (y) which are being contested in good faith
by appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property or asset subject to such lien.
“Prepayment” shall
have the meaning set forth in Section 2(d).
“Prepayment Notice”
shall have the meaning set forth in Section 2(d).
“Share Delivery Date”
shall have the meaning set forth in Section 17(a).
2. Payment
Terms.
(a) The
entire principal amount of this Debenture, together with all accrued interest
and unpaid interest, shall be due and payable on June __, 2010 (the “Maturity
Date”).
(b) The
Company shall pay interest to the Holder on the aggregate then outstanding
principal amount of this Debenture at the rate of 8% per annum, which shall be
payable in cash quarterly in arrears commencing March __, 2010, provided, however, upon the
occurrence of an Event of Default as set forth in Section 4(a) the Company shall
pay interest to the Holder on the aggregate principal amount of this Debenture
as of the original date of issuance of this Debenture at a rate of 22% per annum
and such interest shall be payable in cash monthly, on the first business day of
each month with any accrued and unpaid interest due and payable on the Maturity
Date.
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(c) All
overdue accrued and unpaid principal and interest to be paid hereunder shall
entail a late fee at the rate of 22% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) which will accrue daily,
from the date such principal and/or interest is due hereunder through and
including the date of payment.
(d) This
Debenture may be prepaid, in full, and in cash, subject to the terms and
conditions set forth herein (the “Prepayment”). At
least ten (10) business days prior to the Prepayment, the Company shall deliver
to the Holder a written notice of its intention to prepay (“Prepayment
Notice”). All payments shall be made by the Company, in lawful
money of the United States, at the offices of the Company, or such other place
as the Holder shall designate by notice to the Company. The Company
covenants and agrees that it will honor all conversion
requests tendered from the time of delivery
of the first Notice of
Conversion through the date all amounts
owing thereon are due and paid in
full (including, without limitation, at all
times following any Prepayment Notice prior to the Prepayment date)). The Company’s determination to exercise a
Prepayment shall be applied ratably to all of the holders of the then
outstanding Debentures based on their (or their predecessor’s) initial purchases
of Debentures pursuant to the Purchase Agreement.
3. Secured Obligation.
As security for the payment in full of principal, interest and performance under
this Debenture and of all other liabilities and obligations of the Maker to the
Payee, Maker hereby grants to the Payee a general security interest in all of
the assets of the Maker and its subsidiaries and all proceeds arising therefrom
and any and all products of such assets. Maker represents that it is the sole
lawful owner of such assets attributable to it, free and clear of any liens and
encumbrances, and has the right and power to pledge, sell, assign and transfer
absolute title thereto to the Payee and that no financing statement covering
such assets has been filed in any jurisdiction. Maker agrees that this security
interest shall be a first priority security interest, senior and prior in
payment to all other indebtedness and obligations of Maker and its subsidiaries
to third parties. Maker hereby authorizes the Payee to file one or more
financing statements under the UCC and any amendments thereto or extensions
thereof without the signature of the Maker or any of its
subsidiaries.
4. Representations and
Warranties. The Maker hereby represents and warrants to the
Payee as follows:
(a) Each of the Maker and each of
its subsidiaries has been duly organized and is validly existing under the laws
of its jurisdiction of organization and has all requisite power and authority to
execute, deliver and perform its obligations under this Debenture. This
Debenture has been duly authorized, executed and delivered by the Maker and each
of its subsidiaries that is a party thereto and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with the terms hereof
and thereof. The execution, delivery and performance by the Maker and each of
its subsidiaries of this Debenture, and the incurrence by them of their
respective obligations hereunder, do not contravene or conflict with any law
applicable to the Maker or any of its subsidiaries or other instrument binding
on or otherwise affecting the Maker or any of its subsidiaries or give rise to
any lien, security interest or other charge or encumbrance (other than in favor
of the Payee) upon any of the Maker’s or its subsidiary’s properties. No consent
or approval of or notice to or filing with any governmental authority or other
third party is or will be required as a condition to the validity or
enforceability of this Debenture, other than such consents which have been
obtained and are in full force and effect.
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(b) Except with respect to the
material terms and conditions of the transactions contemplated by the
Transaction Documents (as defined herein), the Maker confirms that neither it
nor any other person acting on its behalf has provided Payee or their agents or
counsel with any information that it believes constitutes or might constitute
material, non-public information. All of the disclosure furnished by
or on behalf of the Maker to the Payee regarding the Maker, its business and the
transactions contemplated hereby, is true and correct and does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5. Events of
Default.
(a) “Event of Default”,
wherever used herein, means any one of the following events (whatever the reason
and whether it shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. any
default on the payment of (A) the principal amount of this Debenture or (B)
interest or other amounts owing to the Payee on this Debenture, as and when the
same shall become due and payable (whether on the Maturity Date or by
acceleration or otherwise);
ii. Maker
shall fail to observe or perform any material obligation or shall breach any
material term or provision of this Debenture and such failure or breach shall
not have been remedied within 10 days after the date on which notice of such
failure or breach shall have been delivered;
iii. Maker
or any of its subsidiaries shall fail to observe or perform any of their
respective obligations owed to Payee or any other covenant, agreement,
representation or warranty contained in, or otherwise commit any breach
hereunder or any other agreement executed in connection herewith and such
failure or breach shall not have been remedied within three days after the date
on which notice of such failure or breach shall have been
delivered;
iv. Maker
or any of its subsidiaries shall commence, or there shall be commenced against
Maker or any subsidiary a case under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto, or Maker or any
subsidiary commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect relating to
Maker or any subsidiary, or there is commenced against Maker or any subsidiary
any such bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or Maker or any subsidiary is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Maker or any subsidiary suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or Maker or any
subsidiary makes a general assignment for the benefit of creditors; or Maker or
any subsidiary shall fail to pay, or shall state that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or Maker or any
subsidiary shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or Maker or any
subsidiary shall by any act or failure to act expressly indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or other
action is taken by Maker or any subsidiary for the purpose of effecting any of
the foregoing;
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v. Maker
or any subsidiary shall default in any of its respective obligations under any
other note or any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
of Maker or any subsidiary, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable; or
vi. Maker
(a) shall be a party to any Change of Control Transaction (as defined below),
(b) shall agree to sell or dispose all or in excess of 50% of its assets in one
or more transactions (whether or not such sale would constitute a Change of
Control Transaction), (c) shall redeem or repurchase more than a de minimis number of
shares of the Maker's capital stock or other equity securities of Maker, or (d)
shall make any distribution or declare or pay any dividends (in cash or other
property, other than common stock) on, or purchase, acquire, redeem, or retire
any of Maker's capital stock, of any class, whether now or hereafter
outstanding. “Change
of Control Transaction” means the occurrence 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 Securities Exchange Act
of 1934, as amended) of effective control (whether through legal or beneficial
ownership of capital stock of Maker, by contract or otherwise) of in excess of
50% of the voting securities of Maker, (ii) a replacement at one time or over
time of more than one-half of the members of Maker'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), (iii) the merger of Maker with or into another
entity that is not wholly-owned by Maker or the consolidation or sale of 33% or
more of the assets of Maker in one or a series of related transactions, or (iv)
the execution by Maker of an agreement to which Maker is a party or by which it
is bound, providing for any of the events set forth above in (i), (ii) or
(iii).
(b) Remedies Upon Event of
Default. If any Event of Default occurs, the outstanding principal amount
of this Debenture plus accrued but unpaid interest and other amounts owing in
respect thereof through the date of acceleration, shall become, at the Payee’s
election, immediately due and payable in cash. Commencing 5 days after the
occurrence of any Event of Default that results in the acceleration of this
Debenture, the interest rate on this Debenture shall accrue at the rate of 22%
per annum, or such lower maximum amount of interest permitted to be charged
under applicable law. The Payee need not provide and the Maker hereby
waives any presentment, demand, protest or other notice of any kind, and the
Payee may immediately and without expiration of any grace period enforce any and
all of its rights and remedies hereunder and all other remedies available to it
under applicable law. Such declaration may be rescinded and annulled by Xxxxx at
any time prior to payment hereunder and the Payee shall have all rights as
holder of this Debenture until such time, if any, as the Payee receives full
payment pursuant to this Section 5(b). No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
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6. Negative
Covenants. So long as any portion of this
Debenture is outstanding, without the prior written consent of the Payee, the
Maker will not and will not permit any of its subsidiaries 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 certificate of incorporation, bylaws or
other charter documents so as to adversely affect any rights of the
Payee;
(d)
repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of securities;
(e)
repay, repurchase or offer to repay repurchase or
otherwise acquire any indebtedness, other than this Debenture if on a pro-rata
basis, other than regularly scheduled interest payment as such terms are in
effect as of the date hereof; provided, however, that no
regularly scheduled principal and interest payments may be made if, at the time
such payment is due or is otherwise made or after giving effect to such payment,
an event constituting, or that with the passage of time and without being cured
would constitute, an Event of Default has occurred and is
continuing;
(f)
pay cash dividends or distributions on any equity
securities of the Maker; or
(g)
enter into any agreement with respect to any of
the foregoing.
7. No Waiver of Payee’s
Rights. All payments of principal and interest shall be
made without setoff, deduction or counterclaim. No delay or failure on the part
of the Payee in exercising any of its options, powers or rights, nor any partial
or single exercise of its options, powers or rights shall constitute a waiver
thereof or of any other option, power or right, and no waiver on the part of the
Payee of any of its options, powers or rights shall constitute a waiver of any
other option, power or right. Maker hereby waives presentment of payment,
protest, and all notices or demands in connection with the delivery, acceptance,
performance, default or endorsement of this Debenture. Acceptance by the Payee
of less than the full amount due and payable hereunder shall in no way limit the
right of the Payee to require full payment of all sums due and payable hereunder
in accordance with the terms hereof.
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8. Remedies; Usury. In
case any one or more Event of Default shall have occurred and be continuing, the
Holder may exercise all remedies permitted by applicable law, without further
notice or demand. No failure or delay on the part of the Holder in exercising
any right, power or privilege under this Debenture and no course of dealing
between the Company and the Holder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise of any right, power or privilege the Holder would
otherwise have. No notice to, or demand on, the Company in any case shall
entitle the Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Company to any other or
further action in any circumstances without notice or demand. If it shall be
found that any interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall be reduced to the
maximum permitted rate of interest under such law.
9. Payment of Costs and
Expenses. The Maker agrees to pay, in addition to the principal and
interest due and payable hereon, all costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by the Holder in order to
collect the amounts due hereunder or to protect its interests hereunder. The
Company further agrees to pay, on demand, all costs and expenses of any
endorsement or any guaranty hereof, if any, and/or the enforcement of the
Holder's rights with respect to, or the administration, supervision,
preservation, protection of, or realization upon, any property securing payment
hereof, including reasonable attorney's fees.
10. Waiver of Presentment and
Notice of Dishonor. The Company and all others who may at any time be
liable hereon in any capacity, jointly and severally, waive presentment for
payment, demand, notice of nonpayment, notice of protest and protest of this
Debenture, and hereby consent to any and all extensions of time. Renewals,
waivers or modifications that may be granted by the Holder with respect to the
payment or other provisions of this Debenture, and to the release of any
collateral securing this Debenture or any part thereof, with or without
substitution, and agree that additional obligors may become parties hereto
without notice to the Company and without affecting their liability
hereunder.
11. Collection
Expenses. If Payee shall commence an action or proceeding to
enforce this Debenture, then Maker shall reimburse Payee for its costs of
collection and reasonable attorneys fees incurred with the investigation,
preparation and prosecution of such action or proceeding.
12. Notices. All notices,
requests, consents and other communications hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by overnight courier, facsimile transmission or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by the addressee to the addressor listing
all parties:
If to the
Company, to:
InferX
Corporation
00000
Xxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxx, 00000-0000
(fax) 000
000-0000
Attn:
Xxxxx Xxxx, President
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With a
copy to
Seyfarth
Xxxx LLP
000 X
Xxxxxx, X.X.
Washington,
D.C. 20004
(fax) 000
000-0000
Attn:
Xxxxxx X. Xxxxx, Esq.
If to the
Holder: at the address set forth in the Purchase Agreement
All such
notices and communications shall be deemed to have been given in the case of (a)
facsimile transmission on the date sent, (b) personal delivery on the date of
such delivery, (c) overnight courier on the day following delivery to such
courier and (d) mailing on the third day after the posting thereof.
13. 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 this Debenture (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, 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 any 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.
14. Binding; Effect: Successor
and Assigns. This Debenture shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto, provided that the Company may not sell or assign or transfer any
of its interest hereunder without the prior written consent of the Holder, its
successors or assigns.
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15. Severability. If any
term, condition, or provision of this Debenture shall be held to be invalid,
illegal or unenforceable in any respect, then in such event the remainder of
this Debenture shall not be affected thereby and it shall remain in full force
and effect except with respect to such term, condition, or
provision.
16. Amendments. No
provision of this Debenture may be amended, waived, modified or discharged
orally, by course of dealing or otherwise, without a writing signed by the party
to be charged with such amendment, waiver, modification or
discharge.
17. Conversion
Right.
(a) At
any time after the date hereof, this Debenture shall be convertible into shares
of Common Stock at a conversion price equal to $0.20 per share subject to
adjustment for reverse and forward stock splits the like after the date of
issuance of this Debenture (the “Conversion Price”);
provided, however, this
Debenture shall only be convertible to the extent that the Payee’s beneficial
ownership of common stock does not exceed 4.99% of the issued and outstanding
shares of common stock of the Company then outstanding. The Holder
shall effect conversions by delivering to the Company a Notice of Conversion,
the form of which is attached hereto as Annex A (each, a
“Notice of
Conversion”), specifying therein the principal amount of this Debenture
to be converted and the date on which such conversion shall be effected (such
date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Debenture to the
Company unless the entire principal amount of this Debenture, plus all accrued
and unpaid interest thereon, has been so converted. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of this Debenture
in an amount equal to the applicable conversion. The Holder and the
Company shall maintain records showing the principal amount(s) converted and the
date of such conversion(s). The Company may deliver an objection to
any Notice of Conversion within one (1) Business Day of delivery of such Notice
of Conversion. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error. The Holder, and
any assignee by acceptance of this Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of a portion of
this Debenture, the unpaid and unconverted principal amount of this Debenture
may be less than the amount stated on the face hereof.
(b) Mechanics of
Conversion.
i.
Conversion
Shares Issuable Upon Conversion of Principal Amount. The
number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Debenture to be converted by (y) the Conversion
Price.
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ii. Delivery of Certificate Upon
Conversion. Not later than three (3) Trading Days after each Conversion
Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to
the Holder (A) a certificate or certificates representing the Conversion Shares
which, on or after the earlier of (i) the six month anniversary of the Original
Issue Date or (ii) the effective date of a registration statement registering
the Conversion Shares, shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Purchase
Agreement) representing the number of Conversion Shares being acquired upon the
conversion of this Debenture and (B) a bank check in the amount of accrued and
unpaid interest (if the Company has elected or is required to pay accrued
interest in cash). On or after the earlier of (i) the six month anniversary of
the Original Issue Date or (ii) the effective date of a registration registering
the Conversion Shares, the Company shall use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section 17(b) electronically through the Depository Trust Company or another
established clearing corporation performing similar functions.
iii. Failure to Deliver
Certificates. If, in the case of any Notice of Conversion,
such certificate or certificates are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be entitled to
elect by written notice to the Company at any time on or before its receipt of
such certificate or certificates, to rescind such Conversion, in which event the
Company shall promptly return to the Holder any original Debenture delivered to
the Company and the Holder shall promptly return to the Company the Common Stock
certificates issued to such Holder pursuant to the rescinded Conversion
Notice.
iv. Obligation Absolute; Partial
Liquidated Damages. The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Debenture in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of such Conversion Shares; provided, however, that such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder. In the event the Holder of this
Debenture shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder
or anyone associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and or enjoining conversion of all or
part of this Debenture shall have been sought and obtained, and the Company
posts a surety bond for the benefit of the Holder in the amount of 150% of the
outstanding principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment. In the
absence of such injunction, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion. If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 17(b)(ii) by the Share Delivery Date, the Company shall pay
to the Holder, in cash, as liquidated damages and not as a penalty, for each
$1,000 of principal amount being converted, $10 per Trading Day (increasing to
$20 per Trading Day on the fifth (5th)
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such Share Delivery Date until such certificates are delivered or Holder
rescinds such conversion. Nothing herein shall limit a
Xxxxxx’s right to pursue actual damages or declare an Event of Default pursuant
to Section 6 hereof for the Company’s failure to deliver Conversion Shares
within the period specified herein and the Holder shall have the right to pursue
all remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
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v. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate or certificates by the Share Delivery
Date pursuant to Section 17(b)(ii), and if after such Share Delivery Date the
Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any other remedies
available to or elected by the Holder) the amount, if any, by which (x) the
Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Debenture in a principal amount equal to the principal amount
of the attempted conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that
would have been issued if the Company had timely complied with its delivery
requirements under Section 17(b)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of this Debenture with respect to
which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000
under clause (A) of the immediately preceding sentence, the Company shall be
required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In and, upon request of the Company, evidence of the amount of such
loss. Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Debenture as required pursuant to
the terms hereof.
vi. Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock for the sole purpose of issuance upon conversion of this Debenture and
payment of interest on this Debenture, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of Persons
other than the Holder (and the other holders of the Debentures), not less than
such aggregate number of shares of the Common Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 17(a)) upon the
conversion of the then outstanding principal amount of this Debenture and
payment of interest hereunder. The Company covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable and, if a registration statement is
then effective under the Securities Act, shall be registered for public resale
in accordance with such registration statement.
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vii. Fractional Shares. No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of this Debenture. As to any fraction of a share which
the Holder would otherwise be entitled to purchase upon such conversion, the
Company shall at its election, either pay a cash adjustment in respect of such
final fraction in an amount equal to such fraction multiplied by the Conversion
Price or round up to the next whole share.
viii. Transfer
Taxes. The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that, the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder of this Debenture so converted and the
Company shall not be required to issue or deliver such certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
(c) If,
at any time while this Debenture is outstanding, the Company or any subsidiary,
as applicable, sells or grants any option to purchase or sells or grants any
right to reprice, or otherwise disposes of or issues (or announces any sale,
grant or any option to purchase or other disposition), any common stock or other
equity securities (including securities a Common Stock Equivalent) entitling any
person or entity to acquire shares of common stock at an effective price per
share that is lower than the then Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”)
(if the holder of the common stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of common stock at an effective
price per share that is lower than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price on such date of the
Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base
Conversion Price, provided, however, that a
Dilutive Issuance shall not include the Company’s granting of stock options,
and/or issuance of common stock upon exercise thereof, to directors, officers,
employees or consultants of the Company pursuant to the Company’s 2007 Stock
Incentive Plan. Such adjustment shall be made whenever such common
stock or Common Stock Equivalents are issued. The Company shall
notify the Payee in writing, no later than one (1) business day following the
issuance of any common stock or Common Stock Equivalents subject to this Section
17(c), indicating therein the applicable issuance price, or applicable reset
price, exchange price, conversion price and other pricing terms (such notice,
the “Dilutive Issuance
Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 17(c), upon
the occurrence of any Dilutive Issuance, the Payee is entitled to receive a
number of common stock based upon the Base Conversion Price on or after the date
of such Dilutive Issuance, regardless of whether the Payee accurately refers to
the Base Conversion Price in a notice of conversion.
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[Signature Page
Follows]
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IN WITNESS WHEREOF, the
Company has caused this Debenture to be executed and delivered by its agent duly
authorized, as of the date first written above.
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INFERX
CORPORATION
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By:
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Name:
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Title:
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[Signature Page to Debenture with
StreetCapital Investors]
14
ANNEX
A
NOTICE
OF CONVERSION
The undersigned hereby elects to
convert principal under the 8% Secured Convertible Debenture due June __, 2010
of InferX Corporation, a Delaware corporation (the “Company”), into
shares of common stock (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.
By the delivery of this Notice of
Conversion the undersigned represents and warrants to the Company that its
ownership of the Common Stock does not exceed the amounts specified under
Section 4 of this Debenture, as determined in accordance with Section 13(d) of
the Exchange Act.
The undersigned agrees to comply with
the prospectus delivery requirements under the applicable securities laws in
connection with any transfer of the aforesaid shares of Common
Stock.
Conversion
calculations:
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Date
to Effect Conversion:
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Principal
Amount of Debenture to be Converted:
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Payment
of Interest in Common Stock __ yes __ no
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If
yes, $_____ of Interest Accrued on Account of Conversion at
Issue.
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Number
of shares of Common Stock to be issued:
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Signature:
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Name:
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Address
for Delivery of Common Stock Certificates:
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Or
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DWAC
Instructions:
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Broker
No:_____________________
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Account
No:_______________
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15
