8% SECURED STRAIGHT CONVERTIBLE DEBENTURE DUE NOVEMBER ___, 2010
EXHIBIT
10.3
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 ___, 2009
|
Original
Conversion Price (subject to adjustment herein):
|
Greater
of $0.50 or 20% discount to the 10-day VWAP, the 10th
day of which shall be the Trading Day immediately preceding the Conversion
Date
|
$1,300,000.00
8%
SECURED STRAIGHT CONVERTIBLE DEBENTURE
DUE
NOVEMBER ___, 2010
THIS
DEBENTURE is one of a series of duly authorized and validly issued 8% Secured
Straight Convertible Debentures of CrowdGather, Inc., a Nevada corporation (the
“Company”),
having its principal place of business at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, designated as its 8% Secured Straight
Convertible Debenture due November __, 2010 (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”) the
principal sum of $ 1,300,000.00 on November ___, 2010 (the “Maturity Date”) or
such earlier date as this Debenture is required to be repaid as provided
hereunder, and to pay interest to the Holder on the then-outstanding principal
amount of this Debenture in accordance with the provisions
hereof. This Debenture is subject to the following additional
provisions:
Section
1. Definitions. For
the purposes hereof, in addition to the terms defined elsewhere in this
Debenture, (a) capitalized terms not otherwise defined herein shall have the
meanings set forth in the Subscription Agreement and (b) the following terms
shall have the following meanings:
“Alternate
Consideration” shall have the meaning set forth in Section
5(e).
1
“Bankruptcy Event”
means any of the following events: (a) the Company 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; (b) there is
commenced against the Company any such case or proceeding that is not dismissed
within 60 days after commencement; (c) the Company is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company 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 makes a general assignment for the benefit of creditors; (f) the Company
calls a meeting of its creditors with a view to arranging a composition,
adjustment, or restructuring of its debts; or (g) the Company 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.
“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 Nevada are authorized or required by law or other governmental action
to close.
“Change of Control
Transaction” means the occurrence after the date hereof of any of (i) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company (other than by means of conversion or exercise
of the Debentures and the Warrants issued together with the Debentures), or (ii)
the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 50% of the aggregate voting power of the Company or
the successor entity of such transaction, or (iii) the Company sells or
transfers all or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction own less than
50% of the aggregate voting power of the acquiring entity immediately after the
transaction, or (iv) a replacement at one time or within a three-year period of
more than one-half of the members of the Company’s board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), or (v) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing
for any of the events set forth in clauses (i) through (iv) above.
“Conversion Date”
shall have the meaning set forth in Section 4(a).
“Conversion Price”
shall have the meaning set forth in Section 4(b).
“Conversion Shares”
means, 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).
2
“Equity Conditions”
means, during the period in question, (i) the
Company shall have duly honored all conversions occurring by virtue of one or
more Notices of Conversion of the Holder, if any, (ii) the Common Stock
is trading on a Trading Market and all of the shares issuable pursuant to the
documents referenced in the Subscription Agreement are listed or
quoted for trading on such Trading Market (and the Company believes, in good
faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (iii) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the documents referenced in
the Subscription Agreement , (iv) there is no existing Event of Default or no
existing event that, with the passage of time or the giving of notice, would
constitute an Event of Default, (v) the issuance of the shares in question to
the Holder would not violate the limitations set forth in Section 4(c) herein,
(vi) there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control Transaction
that has not been consummated, and (viii) the Holder is not in possession of any
information provided by the Company that constitutes, or may constitute,
material non-public information.
“Event of Default” shall have the meaning set forth in Section
8.
“Fundamental
Transaction” shall have the meaning set forth in Section
5(b).
“Interest Payment
Date” shall have the meaning set forth in Section 2(a).
“Late Fees” shall have
the meaning set forth in Section 2(d).
“Nevada 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 the indebtedness evidenced by the
Debentures.
“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 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; and (c) Liens
incurred in connection with Permitted Indebtedness.
“Subscription
Agreement” means the Subscription Agreement, dated as of May __, 2009,
among the Company and the original Holders, as amended, modified, or
supplemented from time to time in accordance with its terms.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
3
“Share Delivery Date”
shall have the meaning set forth in Section 4(d).
“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 New York Stock Exchange,
NYSE Alternext US, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the OTC Bulletin Board, or the Pink OTC Markets,
Inc.
“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. (Nevada time) to 4:02 p.m. (Nevada 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 OTC Markets, Inc. (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.
Section
2. Interest.
a) Payment of Interest in Good
Funds. The Company shall pay interest in good funds to the
Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of 8% per annum, payable on the Maturity Date (the
“Interest Payment
Date”).
b) Interest
Calculations. Interest shall be calculated on the basis of a
360-day year, consisting of twelve 30 calendar day periods, and shall accrue
daily commencing on the Original Issue Date until payment in full of the
outstanding principal, together with all accrued and unpaid interest and other
amounts which may become due hereunder, has been made. Interest
hereunder will be paid to the Person in whose name this Debenture is registered
on the records of the Company regarding registration and transfers of this
Debenture (the “Debenture
Register”).
c) Late
Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 12%
per annum or the maximum rate permitted by applicable law (“Late Fees”) which
shall accrue daily from the date such interest is due hereunder through and
including the date of actual payment in full.
d) Prepayment. 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.
4
a) Different
Denominations. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same. No service charge
will be payable for such registration of exchange.
b) Investment
Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the
Subscription Agreement and may be transferred or exchanged only in compliance
with the Subscription 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 (a “Notice of
Conversion”), specifying therein the principal amount of this Debenture
to be converted and the date on which such conversion shall be effected (such
date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Debenture to the
Company unless the entire principal amount of this Debenture, plus all accrued
and unpaid interest thereon, has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Debenture in an amount equal to the applicable conversion. The
Holder and the Company shall maintain records showing the principal amount(s)
converted and the date of such conversion(s). The Company may deliver
an objection to any Notice of Conversion within one 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 the greater of $0.50 or 20% discount to the 10-day VWAP, the 10th day of
which shall be the Trading Day immediately preceding the Conversion Date,
subject to adjustment herein (the “Conversion
Price”).
5
c) Conversion
Limitations. 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 that 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),
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) 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 Holder’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), 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). Any such increase or decrease will not be
effective until the 61st day
after such notice is delivered to the Company. The 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) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained 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.
6
|
|
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.
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
representing the number of Conversion Shares being acquired upon the conversion
of this Debenture.
iii. Obligation
Absolute. The Company’s obligations to issue and deliver the
Conversion Shares upon conversion of this Debenture in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may
have against the Holder.
iv. Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will
at all times reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon conversion of this
Debenture, 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
Subscription Agreement) be issuable (taking into account the adjustments of
Section 5) upon the conversion of the outstanding principal amount of this
Debenture and payment of interest hereunder. The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be
duly authorized, validly issued, fully paid and nonassessable.
v. 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 that the Holder would otherwise be entitled to purchase
upon such conversion, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole
share.
vi. 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 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.
7
Section
5.
Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Company, at any time while this Debenture is
outstanding: (A) pays a stock dividend or otherwise 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, or payment of
interest on, the Debentures); (B) subdivides outstanding shares of Common Stock
into a larger number of shares; (C) combines (including by way of a reverse
stock split) outstanding shares of Common Stock into a smaller number of shares;
or (D) 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) Fundamental
Transaction. If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person; (B) the Company effects any sale of all or
substantially all of its assets in one transaction or a series of related
transactions; (C) any tender offer or exchange offer (whether by the Company or
another Person) is completed, pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property; or (D) the Company effects any reclassification of the Common Stock or
any compulsory share exchange, pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash, or property (in any such
case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction, the same kind and amount of securities, cash, or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders
of Common Stock are given any choice as to the 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(b)
and insuring that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
8
c) 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.
d) 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 ▇▇▇▇▇▇. 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.
Section
6. Reserved.
9
Section
7. Negative
Covenants. As long as any portion of this Debenture remains
outstanding, unless the holders of at least 50% in principal amount of the then
outstanding Debentures shall have otherwise given prior written consent, the
Company shall not, 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 articles 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 the 5,000,000 shares of
Common Stock owned by the Company’s President, or an Affiliate thereof, that are
being repurchased for nominal value concurrently with the Original Issue
Date;
e) repay, repurchase, or offer to repay, repurchase or
otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata
basis, other than regularly scheduled principal and interest payments as such
terms are in effect as of the Original Issue Date;
f)
pay cash dividends or distributions on any equity
securities of the Company;
g)
enter into any transaction with any Affiliate of the Company that would be
required to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a
majority of the disinterested directors of the Company (even if less than a
quorum otherwise required for board approval); or
h) 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) interest and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and
payable;
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 (ix) 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 and (B) 10 Trading
Days after the Company has become or should have become aware of such
failure;
10
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 documents referenced in the Subscription Agreement or (B) any
other material agreement, lease, document or instrument to which the Company is
obligated (and not covered by clause (vi) below);
iv. any
representation or warranty made in this Debenture, any other documents
referenced in the Subscription Agreement , 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 shall be subject to a Bankruptcy Event;
vi. the
Company shall default on any of its obligations under any mortgage, credit
agreement or other facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be secured or
evidenced, any indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement that (a) involves an obligation greater than
$150,000, whether such indebtedness now exists or shall hereafter be created,
and (b) results in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and
payable;
vii. the
Common Stock shall not be eligible for listing or quotation for trading on a
Trading Market and shall not be eligible to resume listing or quotation for
trading thereon within five Trading Days;
viii. the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction or shall agree to sell or dispose of all or in excess of 50% of its
assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);
ix. the
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;
or
x. any
monetary judgment, writ, or similar final process shall be entered or filed
against the Company or any of its property or other assets for more than
$150,000, and such judgment, writ, or similar final process shall remain
unvacated, unbonded, or unstayed for a period of 90 calendar days.
11
b) Remedies Upon Event of
Default. If any Event of Default occurs, the outstanding
principal amount of this Debenture, plus accrued but unpaid interest and other
amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in
cash. Commencing five 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
smaller of 12% 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 ▇▇▇▇▇▇ 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 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. 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 in this Section 9 prior to 5:30 p.m. (Nevada time),
(ii) the date immediately following the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section 9 between 5:30 p.m. (Nevada time) and 11:59 p.m. (Nevada 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 and accrued interest, as
applicable, on this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks 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.
12
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
Nevada, 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 documents referenced in the Subscription Agreement (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 Las Vegas, County of ▇▇▇▇▇ (the “Nevada
Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Nevada Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
documents referenced in the Subscription Agreement ), 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 Nevada Courts, or
such Nevada 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 or interest on this Debenture
as contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
13
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 documents referenced in the
Subscription Agreement pursuant to written agreements in form and
substance satisfactory to the Holder (such approval not to be unreasonably
withheld or delayed) and (ii) issue to the Holder a new debenture of such
successor entity evidenced by a written instrument substantially similar in form
and substance to this Debenture, including, without limitation, having a
principal amount and interest rate equal to the principal amount and the
interest rate of this Debenture and having similar ranking to this Debenture,
which shall be satisfactory to the Holder (any such approval not to be
unreasonably withheld or delayed). The provisions of this Section
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 pursuant to the Security
Agreement, dated as of May __, 2009, between the Company and the Secured Parties
(as defined therein).
IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a
duly authorized officer as of the date first above indicated.
|
|
By:
|
||
| Name: ▇▇▇▇▇▇
▇▇▇▇▇▇▇
Title: CEO
|
|||
|
Facsimile
No. for delivery of Notices: ▇▇▇-▇▇▇-▇▇▇▇
|
|||
14
ANNEX
A
NOTICE
OF CONVERSION
The undersigned hereby elects to
convert principal under the 8% Secured Straight Convertible Debenture due
November ___, 2010 of CrowdGather, 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.
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:________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
15
SCHEDULE
1
CONVERSION
SCHEDULE
The 8%
Secured Straight Convertible Debentures due on November ___, 2010 in the
aggregate principal amount of $____________ are issued by CrowdGather,
Inc. This Conversion Schedule reflects conversions made under Section
4 of the above referenced Debenture.
Dated:
_______________________________
|
Date
of Conversion
(or
for first entry,
Original
Issue Date)
|
Amount
of
Conversion
|
Aggregate
Principal
Amount
Remaining
Subsequent
to
Conversion
(or
original
Principal
Amount)
|
Company
Attest
|
16