CAMPUSTECH, INC. Senior Convertible Debenture
NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES
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.
CAMPUSTECH,
INC.
| $_________________ |
Leesburg,
Virginia
|
|
May
___,
2007
|
THIS
DEBTENTURE is one of a duly authorized issue (the “Series”)
of
senior convertible debentures of CampusTech, Inc., a Delaware corporation
(the “Company”)
and
has been issued to the Holder (as defined below) in connection with the private
placement of debentures and warrants offered by the Company.
FOR
VALUE
RECEIVED, the Company hereby
promises to pay to ______________________ (“Holder”),
or
the Holder’s transferees, successors and assigns, the principal sum of
$__________, together with any unpaid accrued interest (computed on the basis
of
a 365-day year for the actual number of days elapsed) accruing from the date
hereof on the unpaid balance of such principal amount from time to time
outstanding at the rate of eight percent (8%) per annum until paid in full
or
converted as provided herein.
Principal
of, and any unpaid accrued interest on, this Debenture shall be due and payable
on one year from the date of issuance, on _____________, 2008 (such date and
time hereinafter referred to as the “Maturity
Date”),
unless it has been prepaid or converted in accordance with the terms herein.
If
the Maturity Date would fall on a day that is not a Business Day (as defined
below), the payment due on the Maturity Date will be made on the next succeeding
Business Day with the same force and effect as if made on the Maturity Date.
As
used herein, “Business
Day”
shall
mean any day which is not a Saturday or Sunday and is not a day on which banking
institutions are generally authorized or obligated to close in the city of
New
York, New York.
1. Interest.
Commencing on the initial Quarterly Payment Date (as defined below) and on
each
Quarterly Payment Date thereafter, any unpaid accrued interest on the then
outstanding principal amount of this Debenture shall be due and payable to
the
Holder, unless this Debenture has been prepaid or converted in accordance with
the terms herein. As used herein, “Quarterly
Payment Date”
shall
mean: (i) the date which is 3 months after the date of issuance of this
Debenture, (ii) the date which is 6 months after the date of issuance of this
Debenture, and (iii) the date which is 9 months after the date of issuance
of
this Debenture.
2. Conversion.
(a) General.
Upon a
Conversion Event (as defined below), the entire outstanding principal amount
of
this Debenture, any unpaid accrued interest thereon, and any costs incurred
hereunder shall, at the option of the Holder and at any time prior to or
following the Maturity Date, be converted into fully paid and non-assessable
shares of the Company’s common stock, $0.0001 par value per share (“Common
Stock”).
In
order to effect conversion, the Holder shall transmit by facsimile (or otherwise
deliver) a copy of an executed notice of conversion in the form attached hereto
as Exhibit
A.
Upon
conversion of this Debenture, subject to the provisions of Section 2(b) hereof,
the Holder of this Debenture shall be entitled to a number of shares of Common
Stock determined by dividing: (i) the outstanding principal amount of, any
unpaid accrued interest on, and any costs incurred hereunder, this Debenture
(collectively, the “Debenture
Balance”),
as of
the Conversion Date (as defined below) by (ii) the Conversion Price (as defined
below).
As
used
herein, “Conversion
Event”
shall
mean the earlier of: (i) the closing of an initial, underwritten, public
offering by the Company of Common Stock with gross proceeds to the Company
exceeding $10,000,000 (a “Qualified
IPO”),
(ii)
the consummation of a merger or consolidation of the Company with or into
another corporation or other entity of any kind (a “Merger”),
or
(iii) the Maturity Date.
As
used
herein, “Conversion
Price”
shall
mean: (i) upon the consummation of a Qualified IPO prior to the Maturity Date,
a
price per share equal to EIGHTY PERCENT (80%) of the public offering price
of
such Qualified IPO, (ii) upon the consummation of a Merger prior to the Maturity
Date, a price per share equal to EIGHTY PERCENT (80%) of the per share valuation
of the Company at the time of and in connection with the Merger, or (iii) if
a
Qualified IPO or a Merger shall not have been consummated on or prior to the
Maturity Date, ONE DOLLAR AND NO CENTS ($1.00) per share.
(b) Fractional
Shares.
No
fractional shares of capital stock of the Company shall be issued upon
conversion of this Debenture. In lieu of any fractional shares to which the
Holder would otherwise be entitled, the Company shall pay cash equal to such
fraction multiplied by the Conversion Price.
(c) Mechanics
of Conversion.
(i) The
Company shall cause notice of the Conversion Event to be mailed to the
registered Holder of this Debenture, at such ▇▇▇▇▇▇’s address appearing in the
records of the Company, at least five (5) business days prior to the date of
the
Conversion Event (the “Conversion
Date”),
or as
promptly thereafter, as circumstances require. On, before or following the
Conversion Date, if the Holder elects to convert this Debenture, the Holder
shall surrender this Debenture for conversion at the principal place of business
of the Company or a place designated in such notice. Such notice by the Holder
of this Debenture shall state such ▇▇▇▇▇▇’s name or the names of his or its
nominees in which such Holder wishes the certificate or certificates for shares
of Common Stock to be issued. If required by the Company, the Debenture
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of surrender, in form satisfactory to the Company,
duly executed by the registered Holder or his or its attorney duly authorized
in
writing. The Company shall, as soon as practicable after the Conversion Date
(but in any event within three (3) Business Days), issue and deliver to such
Holder of this Debenture, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such Holder
shall
be entitled, together with cash in lieu of any fraction of a share.
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(ii) The
Company shall, for the purpose of effecting the conversion of this Debenture
as
provided herein, authorize and at all time maintain a sufficient number of
shares of Common Stock to effect the conversion of the Debenture Balance in
the
event that this Debenture is converted pursuant to this Section
2(c).
(iii) Upon
any
conversion of this Debenture pursuant to this Section 2(c), no adjustment to
the
Conversion Price shall be made for any declared or accrued but unpaid dividends
on the Common Stock delivered upon conversion.
(iv) Immediately
upon the surrender of this Debenture for conversion as provided in this Section
2(c), this Debenture shall no longer be deemed to be outstanding and all rights
of the Holder with respect to this Debenture shall immediately cease and
terminate, except only the right of the Holder to receive the shares of Common
Stock to which it is entitled as a result of the conversion on the Conversion
Date.
(v) The
Company shall pay any and all issue and other taxes that may be payable in
respect of any issuance or delivery of shares of Common Stock upon conversion
of
this Debenture pursuant to this Section 2(c). The Company shall not, however,
be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a name other than
that
of the registered Holder of this Debenture, and no such issuance or delivery
shall be made unless and until the person or entity requesting such issuance
has
paid to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
(d) Adjustments.
(i)Splits,
Subdivisions, etc.
In the
event that the Company should at any time or from time to time, after the date
of this Debenture, fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock, or the determination
of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly additional shares of Common Stock (hereinafter referred to as
“Common
Stock Equivalents”)
without payment of any consideration by such holder for the additional shares
of
Common Stock or the Common Stock Equivalents (including the additional shares
of
Common Stock issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend, distribution, split or subdivision
if
no record date is fixed), the Conversion Price shall be appropriately decreased
so that the number of shares of Common Stock issuable on conversion of this
Debenture shall be increased in proportion to such increase in the aggregate
number of shares of the Common Stock outstanding.
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(ii)Combinations.
If the
number of shares of Common Stock outstanding at any time after the date of
this
Debenture is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date of such combination, the Conversion
Price
shall be appropriately increased so that the number of shares of Common Stock
issuable upon conversion of this Debenture shall be decreased in proportion
to
such decrease in outstanding shares.
(iii)Mergers,
Consolidations, etc.
A
merger, consolidation or other corporate reorganization in which the Company’s
stockholders shall receive cash or securities of another entity, or any
transaction in which all or substantially all of the assets of the Company
are
sold shall be treated as a liquidation of the Company for purposes of the
payment of the Liquidation Preference.
3. Rank
and Liquidation Preference.
(a) The
payment of the principal of and interest on this Debenture is senior in right
of
payment to the payment of all existing and future Junior Debt (as hereinafter
defined). As used herein, “Junior
Debt”
shall
mean all existing and future Indebtedness (as hereinafter defined) other than
the following (the “Pari
Passu Debt”):
(i) a
15% Secured Demand Note and a 10% Demand Note, each issued by the Company on
June 30, 2006 to ▇▇▇▇▇▇▇ ▇▇▇▇▇, the Company’s Executive Chairman and Chairman of
the Board, in the aggregate principal amount of up to $1,500,000 (the
“Demand
Notes”),
(ii)
capital or equipment lease obligations up to $500,000 in the ordinary course
of
business or existing on the date hereof, and (iii) secured trade credit entered
into by the Company in the ordinary course of business consistent with past
practice.
(b) Until
the
payment in full of all amounts of principal of and interest on the Debentures,
and all other amounts owing under this Debenture, no payment may be made with
respect to the principal of or other amounts owing with respect to any Junior
Debt, or in respect of any redemption, retirement, purchase or other acquisition
thereof, provided that the Company may pay scheduled interest thereon so long
as
no Event of Default shall have occurred and be continuing.
(c) Upon:
(i)
any liquidation, dissolution or winding up of the Company, (ii) any transaction
in which all or substantially all of the Company’s assets are sold or
transferred, (iii) a merger or other reorganization of, or similar proceeding
relating to the Company, or (iv) except as a result of an IPO, an
acquisition of any voting securities of the Company (the “Voting
Securities”)
by any
“person” (as the term “person” is used for purposes of Section 13(d) or Section
14(d) of the Securities Exchange Act of 1934, as amended (the “1934
Act”))
immediately after which such person has “beneficial ownership” (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 30% or more of the
combined voting power of the Company’s then outstanding Voting Securities,
the
Holders of the Debentures shall be entitled to receive, pro rata with the
holders of the Pari Passu Debt, in full an amount equal to each such Holder’s
respective Debenture Balance (the “Liquidation
Payment”).
The
Liquidation Payment shall be paid pro rata among all of the Holders of the
Debentures, and shall be in preference to any Holder of Junior Debt or equity
securities of the Company.
4
4. Requirements
for Transfer.
This
Debenture and the shares of Common Stock into which the Debenture may be
converted, shall not be assigned, sold, pledged, transferred or otherwise
disposed of except in compliance with the Securities Act of 1933, as amended
(the “Securities
Act”),
applicable state securities laws.
5. Creation
of Senior Debt.
Without
the prior unanimous written consent of the holders of the then outstanding
aggregate principal indebtedness of the Company evidenced by the Series, the
Company shall not create or incur any indebtedness (other than trade debt or
capital or equipment lease obligations up to $500,000 or existing on the date
hereof) which by its terms is senior in payment or liquidation preference to
this Debenture (“Senior
Debt”).
6. Default.
This
Debenture and all amounts due hereunder shall become immediately due and payable
in cash without notice or demand upon the occurrence at any time of any of
the
following events of default (individually, “an
Event of Default”
and
collectively, “Events
of Default”):
(a) default
in the payment when due of any principal or interest under: (i) this Debenture
or any Debenture in the Series or (ii) any Pari Passu Debt or (iii) any Senior
Debt;
(b) if
the
Company makes an assignment for the benefit of creditors or if the Company
admits in writing its inability to pay its debts as they become
due;
(c) the
liquidation, termination of existence, dissolution or the appointment of a
receiver or custodian for the Company or any part of its property if such
appointment is not terminated or dismissed within thirty (30) days;
(d) the
institution against the Company or any endorser or guarantor of this Debenture
of any proceedings under the United States Bankruptcy Code or any other federal
or state bankruptcy, reorganization, receivership, insolvency or other similar
law affecting the rights of creditors generally, which proceeding is not
dismissed within thirty (30) days of filing;
(e) the
institution by the Company or any endorser or guarantor of this Debenture of
any
proceedings under the United States Bankruptcy Code or any other federal or
state bankruptcy, reorganization, receivership, insolvency or other similar
law
affecting the rights of creditors generally or the making by the Company or
any
endorser or guarantor of this Debenture of a composition or an assignment or
trust mortgage for the benefit of creditors;
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(f) any
representation or warranty made or deemed to be made by or on behalf of the
Company in connection with the Subscription Agreement dated as of the date
hereof between the Company and the Holder (the “Subscription Agreement”) or
in any certificate, financial statement or other document furnished pursuant
thereto or pursuant to the Memorandum (as defined in the Subscription Agreement)
shall prove to have been incorrect in any material way as of the date when
made
or deemed made; or
(g) the
failure of the Company to observe or perform any covenant, condition or
agreement contained herein or in the Subscription Agreement (other than those
specified in Section 6(a)), which, after notice from the Holder is not cured
within fifteen (15) business days.
Within
five (5) days of any officer of the Company obtaining knowledge of any Event
of
Default, if such Event of Default is then continuing, the Company shall furnish
to the Holder a certificate of the chief executive officer of the Company
setting forth the details thereof and the action which the Company is taking
or
proposes to take with respect thereto.
Upon
the
occurrence of an Event of Default, the Holder shall have then, or at any time
thereafter, all of the rights and remedies afforded by the Uniform Commercial
Code as from time to time in effect in the State of Delaware or afforded by
other applicable law.
7. Prepayment.
This
Debenture may be prepaid at any time prior to the Maturity Date with the prior
written consent of the Holder.
Subject
to the waiver or non-consent of any holder
of
the then outstanding aggregate principal indebtedness of the Company evidenced
by the Series, any prepayment pursuant to this Section 7 shall be pro rata
among
all of the Holders of the Debentures.
8. Performance.
The
Company will not, by any voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by
the
Company, but will at all times in good faith assist in the carrying out of
the
provisions of this Debenture and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Debenture against impairment.
9. No
Rights as Stockholder.
Nothing
contained in this Debenture shall be construed as conferring upon the Holder
or
its transferees the right to vote or to receive dividends or to consent or
to
receive notice as a stockholder in respect of any meeting of shareholders for
the election of directors of the Company or of any other matter, or any rights
whatsoever as a shareholder of the Company, unless and to the extent
converted.
10. Waiver
of Demand, Presentment, etc.
The
Company hereby expressly waives demand and presentment for payment, notice
of
nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, bringing of suit and diligence in taking
any action to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereunder,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
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11. Payment.
Except
as otherwise provided for herein, all payments with respect to this Debenture
shall be made in lawful currency of the United States of America by check or
wire transfer of immediately available funds, at the option of the Holder,
at
the principal office of the Holder or such other place or places or designated
accounts as may be reasonably specified by the Holder in a written notice to
the
Company at least one (1) business day prior to payment. Payment shall be
credited first to the accrued interest then due and payable and the remainder
applied to principal.
12. General.
(a) Successors
and Assigns.
This
Debenture, and the obligations and rights of the Company hereunder, shall be
binding upon and inure to the benefit of the Company, the Holder of this
Debenture, and their respective heirs, successors and assigns. The Company
may
not assign this Debenture or any obligations and rights of the Company hereunder
without the prior written consent of the Holder.
(b) Recourse.
Recourse under this Debenture shall be to the general unsecured assets of the
Company only, and in no event to the officers, directors or stockholders of
the
Company.
(c) Changes.
Changes
in or additions to this Debenture may be made or compliance with any term,
covenant, agreement, condition or provision set forth herein may be omitted
or
waived (either generally or in a particular instance and either retroactively
or
prospectively), only upon written consent of the Company and the Holder of
this
Debenture.
(d) Governing
Law.
This
Debenture shall be governed by and construed in accordance with the law of
the
State of New York, excluding the body of law relating to conflict of laws.
Notwithstanding anything to the contrary contained herein, in no event may
the
effective rate of interest collected or received by the Holder exceed that
which
may be charged, collected or received by the Holder under applicable
law.
(e) Venue;
Waiver of Jury Trial.
The
Company hereby submits to the exclusive jurisdiction of the New York State
or
United States federal courts located in New York County, New York with respect
to any dispute arising under this note. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company further agrees that service of process upon it mailed by first
class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the Holder’s
right to serve process in any other manner permitted by law. The Company agrees
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner. The
Company hereby irrevocably waives any right it may have, and agrees not to
request, a jury trial for the adjudication of any dispute hereunder or in
connection with or arising out of this Debenture.
7
(e) Notices.
All
notices, requests, consents and demands shall be made in writing and shall
be
mailed postage prepaid, or delivered by hand, to the Company or to the Holder
thereof at their respective addresses set forth below or to such other address
as may be furnished in writing to the other party hereto:
If
to the
Holder: ___________________.
If
to the
Company to: CampusTech,
Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: President,
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇ or such other address as the Company shall so notify
the Holder.
All
notices, requests, consents and other communications hereunder shall be deemed
to have been given either (i) if by hand, at the time of the delivery thereof
to
the receiving party at the address of such party set forth above, (ii) if made
by telex, telecopy or facsimile transmission, at the time that receipt thereof
has been acknowledged by electronic confirmation or otherwise, (iii) if sent
by
overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iv) if sent by registered or certified
mail, on the 3rd business
day following the day such mailing is made.
(f) Severability.
If one
or more provisions of this Debenture are held to be unenforceable under
applicable law, such provisions shall be excluded from this Debenture, and
the
balance of this Debenture shall be interpreted as if such provisions were so
excluded and shall be enforceable in accordance with its terms.
(g) Mutilated,
Destroyed, Lost or Stolen Debentures.
In case
this Debenture shall become mutilated or defaced, or be destroyed, lost or
stolen, the Company shall execute and deliver a new note of like principal
amount in exchange and substitution for the mutilated or defaced Debenture,
or
in lieu of and in substitution for the destroyed, lost or stolen Debenture.
In
the case of a mutilated or defaced Debenture, the Holder shall surrender such
Debenture to the Company. In the case of any destroyed, lost or stolen
Debenture, the Holder shall furnish to the Company: (i) evidence to its
satisfaction of the destruction, loss or theft of such Debenture and (ii) such
indemnity as may be reasonably required by the Company to hold the Company
harmless.
8
IN
WITNESS WHEREOF, this ▇▇▇▇▇▇▇▇▇ has been executed and delivered as a sealed
instrument on the date first above written by the duly authorized representative
of the Company.
| CAMPUSTECH, INC. | ||
| |
|
|
| By: | ||
|
Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Executive
Chairman & Chairman of the Board
|
||
9
ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby directs
Continental
Stock Transfer and Trust Company to
issue
the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated _______________ from the Company and
acknowledged and agreed to by Continental
Stock Transfer and Trust Company.
| CAMPUSTECH, INC. | ||
| |
|
|
| Date: | By: | /s/ |
|
Name:
|
||
| Title | ||
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