NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: May 21, 2008
Original Conversion Price (subject to adjustment herein): $0.33
$_______________
SENIOR SECURED CONVERTIBLE DEBENTURE
DUE SEPTEMBER 29, 2008
THIS SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly
authorized and validly issued Senior Secured Convertible Debentures of ABC
Funding, Inc., a Nevada corporation, (the "Company"), having its principal place
of business at 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, designated as
its Senior Secured Convertible Debenture due September 29, 2008 (this debenture,
the "Debenture" and, collectively with the other debentures of such series, the
"Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), or shall have
paid pursuant to the terms hereunder, the principal sum of $_______________(1)
on the earlier of (i) September 29, 2008 or (ii) concurrently with the closing
of the Company's purchase of all of the capital stock of Voyager Gas Corporation
(the "Voyager Acquisition"), as contemplated by that certain Stock Purchase and
Sale Agreement of even date herewith between the Company and Voyager Gas
Holdings, LP (the "Maturity Date") or such earlier date as this Debenture is
required or permitted to be repaid as provided hereunder; provided, however, the
Company shall give the Holder 5 Trading Days' prior written notice of the
closing of the Voyager Acquisition. At any time prior to the Trading Day
----------
1 1.125 times the Subscription Amount.
1
immediately prior to the Voyager Acquisition, the Holder shall have the right to
convert this Debenture pursuant to Section 4. Any portion of this Debenture not
so converted (or exercise its rights under Section 4.18 of the Purchase
Agreement) by Holder shall, concurrently with the closing of the Voyager
Acquisition, be repaid to the Holder, and upon such repayment, all further
obligations of the Company under this Debenture shall terminate. 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:
"Alternate Consideration" shall have the meaning set forth in
Section 5(e).
"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.
"Base Conversion Price" shall have the meaning set forth in Section
5(b).
"Beneficial Ownership Limitation" shall have the meaning set forth
in Section 4(c)(i).
"Business Day" means any day except any Saturday, any 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.
"Buy-In" shall have the meaning set forth in Section 4(d)(v).
2
"Change of Control Transaction" means the occurrence after the date
hereof of any of (a) an acquisition after the date hereof by an individual
or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal or
beneficial ownership of capital stock of the Company, by contract or
otherwise) of in excess of 33% of the voting securities of the Company
(other than by means of conversion or exercise of the Debentures and the
Securities issued together with the Debentures), (b) 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 (c) 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, (d) a replacement at one time or within a three
year period of more than one-half of the members of the 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
(e) 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 (a) through (d) above.
"Conversion" shall have the meaning ascribed to such term in Section
4.
"Conversion Date" shall have the meaning set forth in Section 4(a).
"Conversion Price" shall have the meaning set forth in Section 4(b).
"Conversion Schedule" means the Conversion Schedule in the form of
Schedule 1 attached hereto.
"Conversion Shares" means, collectively, the shares of Common Stock
issuable upon conversion of this Debenture in accordance with the terms
hereof.
"Debenture Register" shall have the meaning set forth in Section
2(b).
"Dilutive Issuance" shall have the meaning set forth in Section
5(b).
"Dilutive Issuance Notice" shall have the meaning set forth in
Section 5(b).
"Event of Default" shall have the meaning set forth in Section 8(a).
"Fundamental Transaction" shall have the meaning set forth in
Section 5(e).
3
"Mandatory Default Amount" means the sum of (a) the greater of (i)
the outstanding principal amount of this Debenture divided by the
Conversion Price on the date the Mandatory Default Amount is either (A)
demanded (if demand or notice is required to create an Event of Default)
or otherwise due or (B) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default Amount is
either (x) demanded or otherwise due or (y) paid in full, whichever has a
higher VWAP, or (ii) 130% of the outstanding principal amount of this
Debenture, and (b) 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 9(d).
"Notice of Conversion" shall have the meaning set forth in Section
4(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" means (a) the Indebtedness evidenced by the
Debentures, (b) the Indebtedness existing on the Original Issue Date and
set forth on Schedule 3.1(aa) attached to the Purchase Agreement and (c)
Indebtedness that shall be incurred in connection with the Voyager
Acquisition at the closing of such transaction; provided, however, that
(x) the Company has filed the Charter Amendment in the State of Nevada and
such Charter Amendment is effective at least 5 Trading Days prior to the
closing of the Voyager Acquisition (y) the Company has provided the Holder
with at least 5 Trading Days' written notice of the Voyager Transaction
and (z) the transactions contemplated under the Voyager Acquisition
provide for the allocation of proceeds in escrow to the repayment of this
Debenture in full in the event the Holder does not elect to convert this
Debenture.
"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; (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; (c) Liens incurred in connection with Permitted
Indebtedness under clause (a) thereunder and (d) Liens incurred in
connection with Permitted Indebtedness under clause (c) thereunder
provided that the conditions to such indebtedness are met prior to the
filing of any such Liens.
4
"Purchase Agreement" means the Securities Purchase Agreement, dated
as of May 20, 2008 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 Conversion Shares of the Holder, names the
Holder as a "selling stockholder" therein, and meets the requirements of
the Registration Rights Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Share Delivery Date" shall have the meaning set forth in Section
4(d)(ii).
"Subsidiary" shall have the meaning set forth in the Purchase
Agreement.
"Trading Day" means a day on which the New York Stock Exchange 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.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted for trading as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time)); (b) if the OTC
Bulletin Board is not a Trading Market, the volume weighted average price
of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading
on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the "Pink Sheets" published by Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or
(d) in all other cases, the fair market value of a share of Common Stock
as determined by an independent appraiser selected in good faith by the
Holder and reasonably acceptable to the Company.
5
Section 2. Interest.
a) No Payment of Interest. This Debenture is an original issue
discount instrument and as such bears no regularly scheduled interest
payment other than after the occurrence of an Event of Default pursuant to
Section 8(b).
b) Prepayment. Except as otherwise set forth in this Debenture, the
Company may not prepay any portion of the principal amount of this
Debenture without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No
service charge will be payable for such registration of transfer or
exchange.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder set
forth in the Purchase Agreement and may be transferred or exchanged only
in compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment 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. Conversion.
a) Voluntary Conversion. At any time after the Original Issue Date
until this Debenture is no longer outstanding, this Debenture shall be
convertible, in whole or in part, into shares of Common Stock at the
option of the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(c) hereof). 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 has been so converted. Conversions hereunder shall have the
6
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 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) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $0.33, subject to adjustment herein (the
"Conversion Price"); provided, however, if the Voyager Acquisition and
Voyager Equity Raise has not occurred on or before September 29, 2008, or
the Holder is notified before such time that such transaction shall not
occur, then the Conversion Price shall be permanently reduced to equal
$0.001, subject to adjustment herein.
c) Conversion Limitations.
(i) Beneficial Ownership Cap. The Company shall not effect any
conversion of this Debenture, and a Holder shall not have the right
to convert any portion of this Debenture, to the extent that after
giving effect to the conversion set forth on the applicable Notice
of Conversion, the Holder (together with the Holder's Affiliates,
and any other person or entity acting as a group together with the
Holder or any of the Holder's Affiliates) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon
conversion of this Debenture with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (A) conversion of the
remaining, unconverted principal amount of this Debenture
beneficially owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein
(including, without limitation, any other Debentures or the
Warrants) beneficially owned by the Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this
Section 4(c)(i), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. To the extent that the
limitation contained in this Section 4(c)(i) applies, the
determination of whether this Debenture is convertible (in relation
to other securities owned by the Holder together with any
Affiliates) and of which principal amount of this Debenture is
convertible shall be in the sole discretion of the Holder, and the
submission of a Notice of Conversion shall be deemed to be the
7
Xxxxxx's determination of whether this Debenture may be converted
(in relation to other securities owned by the Holder together with
any Affiliates) and which principal amount of this Debenture is
convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers a
Notice of Conversion that such Notice of Conversion has not violated
the restrictions set forth in this paragraph and the Company shall
have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 4(c)(i), in determining the
number of outstanding shares of Common Stock, the Holder may rely on
the number of outstanding shares of Common Stock as stated in the
most recent of the following: (A) the Company's most recent periodic
or annual report, as the case may be; (B) a more recent public
announcement by the Company; or (C) a more recent notice by the
Company or the Company's transfer agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral request
of a Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including
this Debenture, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. The "Beneficial Ownership Limitation" shall be 4.99% of
the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock
issuable upon conversion of this Debenture held by the Holder. The
Holder, upon not less than 61 days' prior notice to the Company, may
increase or decrease the Beneficial Ownership Limitation provisions
of this Section 4(c)(i), provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon conversion of this Debenture
held by the Holder and the Beneficial Ownership Limitation
provisions of this Section 4(c)(i) shall continue to apply. Any such
increase or decrease will not be effective until the 61st day after
such notice is delivered to the Company. The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the
terms of this Section 4(c)(i) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to make
changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Debenture.
(ii) Authorized Share Limitation. Notwithstanding anything
herein to the contrary, until the Company has filed the Charter
Amendment with the State of Nevada and such Charter Amendment is
effective, this Debenture shall not be convertible into Conversion
Shares to the extent that the
8
number of Conversion Shares issued hereunder would exceed, in the
aggregate, 250,000 shares of Common Stock (subject to adjustment for
forward and reverse stock splits, recapitalizations and the like).
This limitation shall terminate and be of no further force or effect
at any time, or to the extent that, shares are available for
conversion of this Debenture.
d) 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. i. 19
ii. Delivery of Certificate Upon Conversion. Not later than
three Trading Days after each Conversion Date (the "Share Delivery
Date"), the Company shall deliver, or cause to be delivered, to the
Holder 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,
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, the Company shall use its best efforts
to deliver any certificate or certificates required to be delivered
by the Company under this Section 4(d) 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 third
Trading Day after the Conversion 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 representing the principal amount of this Debenture
unsuccessfully tendered for conversion to the Company.
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
9
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 4(d)(ii) by the third Trading Day after the Conversion
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 third (3rd) Trading
Day until such certificates are delivered. Nothing herein shall
limit a Xxxxxx's right to pursue actual damages or declare an Event
of Default pursuant to Section 8 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.
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 4(d)(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 by which
(x) the Holder's total purchase price (including any brokerage
commissions) for the Common Stock so purchased exceeds (y) the
10
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 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 4(d)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of 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 Xxxxxx'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. Following
the date that the Company files the Charter Amendment in the State
of Nevada and the Charter Amendment is effective, 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, 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 5) upon the
conversion of the outstanding principal amount of this Debenture.
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 sale in accordance with such Registration Statement.
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 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.
11
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.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any time
while this Debenture is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares of
Common Stock on shares of Common Stock or any Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon conversion of the Debentures), (ii)
subdivides outstanding shares of Common Stock into a larger number of
shares, (iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares or (iv)
issues, in the event of a reclassification of shares of the Common Stock,
any shares of capital stock of the Company, then the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding any treasury shares of the
Company) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If, 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 Common Stock
Equivalents entitling any Person 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,
12
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. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. Notwithstanding
the foregoing, no adjustment will be made under this Section 5(b) in
respect of an Exempt Issuance. If the Company enters into a Variable Rate
Transaction, despite the prohibition set forth in the Purchase Agreement,
the Company shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion price at which such
securities may be converted or exercised. The Company shall notify the
Holder in writing, no later than 1 Business Day following the issuance of
any Common Stock or Common Stock Equivalents subject to this Section 5(b),
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 5(b), upon the occurrence of any Dilutive Issuance, the
Holder is entitled to receive a number of Conversion Shares based upon the
Base Conversion Price on or after the date of such Dilutive Issuance,
regardless of whether the Holder accurately refers to the Base Conversion
Price in the Notice of Conversion.
c) Subsequent Rights Offerings. If the Company, at any time while
the Debenture is outstanding, shall issue rights, options or warrants to
all holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per share that
is lower than the VWAP on the record date referenced below, then the
Conversion Price shall be multiplied by a fraction of which the
denominator shall be the number of shares of the Common Stock outstanding
on the date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus
the number of shares which the aggregate offering price of the total
number of shares so offered (assuming delivery to the Company in full of
all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.
d) Pro Rata Distributions. If the Company, at any time while this
Debenture is outstanding, distributes to all holders of Common Stock (and
not to the Holders) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or
purchase any security (other than the Common Stock, which shall be subject
to Section 5(b)), then in each such case the Conversion Price shall be
adjusted by multiplying such Conversion Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be
the VWAP determined as of the record date mentioned above, and of which
the numerator shall be such VWAP on such record date less the then fair
13
market value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to 1 outstanding share of the
Common Stock as determined by the Board of Directors of the Company in
good faith. In either case the adjustments shall be described in a
statement delivered to the Holder describing the portion of assets or
evidences of indebtedness so distributed or such subscription rights
applicable to 1 share of Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
e) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person, (ii) the Company effects any sale of
all or substantially all of its assets in one transaction or a series of
related transactions, (iii) any tender offer or exchange offer (whether by
the Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then, upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Conversion
Share that would have been issuable upon such conversion immediately prior
to the occurrence of such Fundamental Transaction, the same kind and
amount of securities, cash or property as it would have been entitled to
receive upon the occurrence of such Fundamental Transaction if it had
been, immediately prior to such Fundamental Transaction, the holder of 1
share of Common Stock (the "Alternate Consideration"). For purposes of any
such conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on
the amount of Alternate Consideration issuable in respect of 1 share of
Common Stock in such Fundamental Transaction, and the Company shall
apportion the Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any conversion of this
Debenture following such Fundamental Transaction. To the extent necessary
to effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder
a new debenture consistent with the foregoing provisions and evidencing
the Holder's right to convert such debenture into Alternate Consideration.
The terms of any agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or surviving
entity to comply with the provisions of this Section 5(e) and insuring
that this Debenture (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
14
f) Calculations. All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding any treasury shares of the
Company) issued and outstanding.
g) Notice to the Holder.
i. Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any provision of this Section 5, the
Company shall promptly deliver to each Holder a notice setting forth
the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
ii. Notice to Allow Conversion by Xxxxxx. If (A) the Company
shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock,
(C) the Company shall authorize the granting to all holders of the
Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company,
of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E) the Company
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in
each case, the Company shall cause to be filed at each office or
agency maintained for the purpose of conversion of this Debenture,
and shall cause to be delivered to the Holder at its last address as
it shall appear upon the Debenture Register, at least twenty (20)
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder is entitled to convert this Debenture during the
20-day period commencing on the date of such notice through the
effective date of the event triggering such notice.
15
Section 6. [RESERVED]
Section 7. Negative Covenants. As long as any portion of this Debenture
remains outstanding, unless the holders of at least 67% 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 de minimis number of shares of its Common Stock or
Common Stock Equivalents (other than Exempt Issuances under clause (b)
thereof) other than as to (i) the Conversion Shares or Warrant Shares as
permitted or required under the Transaction Documents and (ii) 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;
e) repay, repurchase or offer to repay, repurchase or otherwise
acquire any Indebtedness, other than the Debentures if on a pro-rata
basis;
f) pay cash dividends or distributions on any equity securities of
the Company;
g) 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);
h) the Company shall not consummate the Voyager Acquisition or any
other Fundamental Transaction or Change of Control until such time that
the Company has filed the Charter Amendment in the State of Nevada and
such Charter Amendment is effective and provides at least 5 Trading Days'
16
written notice to the Holder prior to the closing of the Voyager
Acquisition and the transactions contemplated under the Voyager
Acquisition provide for the allocation of proceeds in escrow to the
repayment of this Debenture in full in the event the Holder does not elect
to convert this Debenture; or
i) enter into any agreement with respect to any of the foregoing.
Section 8. 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) 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 Conversion Date or the Maturity Date or by
acceleration or otherwise);
ii. the Company shall fail to observe or perform any other
covenant or agreement contained in the Debentures (other than a
breach by the Company of its obligations to deliver shares of Common
Stock to the Holder upon conversion, which breach is addressed in
clause (xi) below) which failure is not cured, if possible to cure,
within the earlier to occur of (A) 5 Trading Days after notice of
such failure sent by the Holder or by any other Holder to the
Company 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;
v. the Company or any Significant Subsidiary (as such term is
defined in Rule 1-02(w) of Regulation S-X) shall be subject to a
Bankruptcy Event;
17
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 (excluding
outstanding promissory notes in the face amount of $990,000, which
matured on February 28, 2008);
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); provided, however, that
the closing of the Voyager Acquisition shall not be an Event of
Default hereunder provided that (x) the Charter Amendment has been
filed with the State of Nevada and such Charter Amendment is
effective prior to the closing of the Voyager Acquisition (y) the
Company has provided the Holder with at least 5 Trading Days'
written notice prior to the Voyager Acquisition and (z) the
transactions contemplated under the Voyager Acquisition provide for
the allocation of proceeds in escrow to the repayment of this
Debenture in full in the event the Holder does not elect to convert
this Debenture;
ix. the Initial Registration Statement (as defined in the
Registration Rights Agreement) shall not have been declared
effective by the Commission on or prior to the 210th calendar day
after the Closing Date or the Company does not meet the current
public information requirements under Rule 144 in respect of the
Underlying Shares;
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
18
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);
xi. the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a
Conversion Date pursuant to Section 4(d) or the Company shall
provide at any time notice to the Holder, including by way of public
announcement, of the Company's intention to not honor requests for
conversions of any Debentures in accordance with the terms hereof;
xii. the Company has not filed the Charter Amendment with the
State of Nevada and such Charter Amendment is not effective on or
before the earlier of (a) prior to the closing of the Voyager
Acquisition and (b) September 4, 2008; or
xiii. 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 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 8(b). No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
Section 9. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
19
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 9(a). 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 the Holder 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 on the signature page 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 on the signature page 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.
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, 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 pari
passu with all other Debentures now or hereafter issued under the terms
set forth herein.
c) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the principal amount of this
Debenture so mutilated, lost, stolen or destroyed, but only upon receipt
of evidence of such loss, theft or destruction of such Debenture, and of
the ownership hereof, 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
20
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.
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 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 impede 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.
21
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 equal to the principal
amount 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 9(i)
shall apply similarly and equally to successive Fundamental Transactions
and shall be applied without regard to any limitations of this Debenture.
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 May 20, 2008 between the
Company, the Subsidiaries of the Company and the Secured Parties (as
defined therein).
*********************
(Signature Pages Follow)
22
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
ABC FUNDING, INC.
By:
-------------------------------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: Chief Executive Officer
Facsimile No. for delivery of Notices: ______________
23
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Senior
Secured Convertible Debenture due, subject to the terms herein, September 29,
2008 of ABC Funding, Inc., a Nevada 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:
Date to Effect Conversion:
Principal Amount of Debenture to be Converted:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address for Delivery of Common Stock Certificates:
Or
DWAC Instructions:
Broker No:______________________
Account No:____________________
24
Schedule 1
CONVERSION SCHEDULE
This Senior Secured Convertible Debenture due on September 29, 2008 in the
aggregate principal amount of $800,000 is issued by ABC Funding, Inc., a Nevada
corporation. This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.
Dated:
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Aggregate
Principal
Amount
Remaining
Date of Conversion Subsequent to
(or for first entry, Amount of Conversion
Original Issue Date) Conversion (or original Company Attest
Principal
Amount)
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