Exhibit 10.2

 

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.

 

THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT, DATED AS OF DECEMBER 18, 2007, BY AND BETWEEN THE COMPANY
AND THE INVESTOR REFERRED TO THEREIN (THE “PURCHASE AGREEMENT”), AND BOTH THE
COMPANY AND THE HOLDER OF THE NOTE, BY ACCEPTANCE OF THIS NOTE, AGREE TO BE
BOUND BY ALL APPLICABLE PROVISIONS OF THE PURCHASE AGREEMENT.  THE SECURITIES
REPRESENTED HEREBY ARE ALSO SUBJECT TO THE REGISTRATION REQUIREMENTS SET FORTH
IN THE PURCHASE AGREEMENT AND BOTH THE COMPANY AND THE HOLDER OF THE NOTE, BY
ACCEPTANCE OF THIS NOTE, AGREE TO BE BOUND BY THE REGISTRATION REQUIREMENTS SET
FORTH IN THE PURCHASE AGREEMENT.

 

Original Issue Date: July 11, 2008

Original Conversion Price (subject to adjustment herein): $84.00

 

$15,000,000

 

2.5% SECURED CONVERTIBLE PROMISSORY NOTE

DUE JULY 11, 2010

 

FOR VALUE RECEIVED, Ebix, Inc., a Delaware corporation with its principal place
of business at 5 Concourse Parkway, Suite 3200, Atlanta, Georgia 30328 (the
“Company”), hereby promises to pay in lawful money of the United States to the
order of Whitebox VSC Ltd., a limited partnership organized under the laws of
the British Virgin Islands or its registered successors or assigns (the
“Holder”), at the office of the Holder at 3033 Excelsior Boulevard, Suite 300,
Minneapolis, Minnesota 55416, or at such other place as the Holder may from time
to

 

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time designate in writing, (1) the principal sum of FIFTEEN MILLION AND NO/100
DOLLARS ($15,000,000) on July 11, 2010 (the “Maturity Date”), which Maturity
Date may be extended at the option of the Holder until July 11, 2012 if and only
if the closing price of the Company’s Common Stock on its Trading Market shall
not exceed $98.70 per share (as adjusted for any cash or stock dividends or
stock splits in the manner described in Section 5 below) for any 30 consecutive
Trading Days prior to July 11, 2010; provided, that the Holder shall give ten
(10) days’ written notice prior to the initial Maturity Date of its intent to
extend the Maturity Date for an additional two (2) years; and (2) interest to
the Holder on the aggregate unconverted and then-outstanding principal amount of
this Note in accordance with the provisions hereof.  This Note is being issued
in connection with that certain Secured Convertible Note Purchase Agreement,
dated as of the date hereof, between the Company and the Holder (the “Purchase
Agreement”).  This Note is subject to the following additional provisions:

 

Section 1.               Definitions.  For the purposes hereof, in addition to
the terms defined elsewhere in this Note, (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(c).

 

“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.

 

“Business Day” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

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“Common Stock” means the common stock, par value $.10 per share, of the Company
and stock of any other class of securities into which such securities may
hereafter be reclassified or changed into.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“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 Note in accordance with the terms hereof.

 

“Delaware Courts” shall have the meaning set forth in Section 9(d).

 

“Effective Date” shall mean the effective date of any registration statement
filed with the SEC covering all or such portion of the Conversion Shares as may
be specified in such registration statement.

 

“Event of Default” shall have the meaning set forth in Section 8.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

Exempt Issuance” means (a) the vesting of shares of Common Stock or options to
employees, officers, consultants or directors of the Company pursuant to the
Company’s 1996 Stock Incentive Plan, as amended (provided that any such vesting
shall not exceed 10% of the Company’s outstanding shares and/or options, in the
aggregate, in any twelve-month period), (b) the issuance of securities upon the
exercise or exchange of or conversion of any securities issued pursuant to the
Purchase Agreement and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of such securities, and (c) the
issuance of securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company, provided
any such issuance shall only be to a person which is, itself or through its
subsidiaries, an operating company in a business synergistic with or
complementary to the business of the

 

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Company and in which the Company receives benefits in addition to the investment
of funds.

 

“Fundamental Transaction” shall have the meaning set forth in Section 5(c).

 

“GAAP” means United States generally accepted accounting principles applied on a
consistent basis during the periods involved.

 

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

 

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

 

“Mandatory Default Amount” means an amount designed to compensate the Holder for
the loss of the value of the conversion feature of this Note, which shall equal
the sum of (i) the greater of (A) 110% of the outstanding principal amount of
this Note, plus all accrued and unpaid interest hereon, or (B) the outstanding
principal amount of this Note, plus all accrued and unpaid interest hereon,
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,
and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of this Note.

 

“Note Register” shall have the meaning set forth in Section 2(c).

 

“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 Notes,
regardless of any transfers of any Note and regardless of the number of
instruments which may be issued to evidence such Notes.

 

“Permitted Indebtedness” means, except as otherwise approved by the Holder, an
amount such that the sum of the interest on all indebtedness of the Company is
less than 40% of the Company’s operating cash flows for any fiscal year, as
calculated on a quarterly basis.  For purposes of this definition, the Company’s
operating cash flows shall be calculated by taking the product of (x) the sum of
(i) the prior quarter’s reported operating cash flows (as reported on the
Company’s Form 10-K or Form 10-Q, as applicable) multiplied by four, plus
(ii) the last quarterly operating cash flow of any entity acquired by the
Company (as reported on the Company’s Form 10-K or Form 10-Q, as applicable, or
the acquired entity’s audited financial statements, as the case may be),
multiplied by (y) four (4).

 

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“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.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Purchase Agreement” means the Secured Convertible Note Purchase Agreement,
dated as of July     , 2008, between the Company and the original Holder, as the
same may be amended, modified or supplemented from time to time in accordance
with its terms.

 

“Registrable Securities” means (i) all of the shares of Common Stock issuable
upon conversion in full of the Notes, (ii) any additional shares of Common Stock
issuable in connection with any adjustment mechanisms contained herein and
(iii) any securities issued or issuable upon any stock split, stock dividend,
subsequent rights offering or other distribution, recapitalization or other
transaction set forth in Section 5.

 

“Registration Statement” means a registration statement that registers the
resale of the Conversion Shares required under the terms set forth in
Section 6.12 of the Purchase Agreement, names the Holder as a “selling
stockholder” therein and meets all other requirements set forth in the Purchase
Agreement.

 

“SEC” shall mean the United States Securities and Exchange Commission.

 

“SEC Reports” means all reports, schedules, forms, statements and other
documents required to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) and 15(d) thereof.

 

“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).

 

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“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

 

“Trading Day” means a day on which the Nasdaq Stock Market (or any Trading
Market on which the Company’s Common Stock is then traded) is open for trading.

 

“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.

 

Section 2.               Interest.

 

a)             Payment of Interest in Cash. The Company shall pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of 2.5% per annum, payable annually on each
July     , on each Conversion Date (as to that principal amount then being
converted), and on the Maturity Date (each such date, an “Interest Payment
Date”) (if any Interest Payment Date is not a Business Day, then the applicable
payment shall be due on the next succeeding Business Day), in cash.  All overdue
accrued and unpaid interest to be paid hereunder shall entail a late fee at an
interest rate equal to 14% per annum until such amount is paid in full.

 

b)            Interest Calculations. Interest shall be calculated on the basis
of a 365-day year, and shall accrue daily commencing on the Original Issue Date
until payment in full of the principal sum, together with all accrued and unpaid
interest, liquidated damages and other amounts which may become due hereunder,
has been made.  Interest shall

 

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cease to accrue with respect to any principal amount converted, provided that
the Company actually delivers the Conversion Shares within the time period
required by Section 4(d)(ii) herein.  Interest hereunder will be paid to the
Person in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the “Note Register”).

 

c)             Prepayment.  The Company may not prepay any portion of the
principal amount of this Note without the prior written consent of the Holder.

 

Section 3.               Registration of Transfers and Exchanges.

 

a)             Different Denominations. This Note is exchangeable for an equal
aggregate principal amount of Notes 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 Note 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 Note Register. Prior to due presentment for transfer
to the Company of this Note, the Company and any agent of the Company may treat
the Person in whose name this Note is duly registered on the Note Register as
the owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Note 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 Note is no longer outstanding, this Note 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 Note 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 Note to
the Company unless the entire principal amount of this Note, 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 Note 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

 

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any Notice of Conversion within 1 Business Day of delivery of such Notice of
Conversion.  The Holder, and any assignee by acceptance of this Note,
acknowledges and agrees that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note 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 $84, subject to adjustment as described herein
(the “Conversion Price”).

 

c)             Conversion Limitations.  The Company shall not effect any
conversion of this Note, and a Holder shall not have the right to convert any
portion of this Note, to the extent that after giving effect to the conversion
set forth on the applicable Notice of Conversion, such Holder (together with
such Holder’s Affiliates, and any other person or entity acting as a group
together with such Holder or any of such 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 such Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Note 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 Note beneficially owned by such 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 Notes) beneficially owned by
such 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 Note
is convertible (in relation to other securities owned by such Holder together
with any Affiliates) and of which principal amount of this Note is convertible
shall be in the sole discretion of such Holder, and the submission of a Notice
of Conversion shall be deemed to be such Holder’s determination of whether this
Note may be converted (in relation to other securities owned by such Holder
together with any Affiliates) and which principal amount of this Note is
convertible, in each case subject to such aggregate percentage limitations. To
ensure compliance with this restriction, each 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, a 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 Quarterly Report on Form10-Q or Annual Report on Form 10-K, as the case
may be; (B) a more recent public

 

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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 such 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 Note, by
such 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 9.99% 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 Note held by the Holder.  The Beneficial
Ownership Limitation provisions of this Section 4(c) may be waived by such
Holder, at the election of such Holder, upon not less than 61 days’ prior notice
to the Company, to change or eliminate the Beneficial Ownership Limitation.  The
limitations contained in this paragraph shall apply to a successor holder of
this Note.

 

d)            Mechanics of Conversion.

 

i.              Conversion Shares Issuable Upon Conversion of Principal Amount. 
The number of shares of Common Stock issuable upon a conversion hereunder shall
be determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Note to be converted by (y) the Conversion Price; provided, that
the amount of principal to be converted pursuant to clause (x) shall include any
accrued but unpaid interest through the date of such conversion (based on the
number of days in such interest period up to and including the date of such
conversion).

 

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 (A) prior to the Effective
Date with respect to such Conversion Shares, shall contain such restrictive
legends as may be required pursuant to the Securities Act and (B) on or after
the Effective Date with respect to such Conversion Shares, shall be free of
restrictive legends and trading restrictions (other than those which may then be
required pursuant to the Purchase Agreement).  Such certificate or certificates
shall represent the number of shares of Common Stock being acquired upon the
conversion of this Note. On or after the Effective Date with respect to such
Conversion Shares, the Company shall use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section 4 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

 

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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 Note delivered to the Company and the Holder shall promptly return the
Common Stock certificates representing the principal amount of this Note
tendered for conversion to the Company.

 

iv.            Obligation Absolute.  The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Note 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.  Failure to
deliver the Conversion Shares upon conversion of this Note in accordance with
the terms hereof shall constitute an Event of Default hereunder.

 

v.             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 Note and payment of interest on this Note, each as
herein provided, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the Holder (and the other holders of the
Notes), 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 Note and payment
of interest hereunder.  The Company covenants that all shares of Common Stock
that shall be so issuable shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and, if the Registration Statement is then
effective under the Securities Act, shall be registered for public sale in
accordance with such Registration Statement.

 

vi.            Fractional Shares. Upon a conversion hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the VWAP at such time.  If the Company
elects not, or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, 1 whole share of
Common Stock.

 

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vii.           Transfer Taxes.  The issuance of certificates for shares of the
Common Stock on conversion of this Note 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 Note 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 Note 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 Notes); (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 prior to 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 shareholders 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 Rights Offerings.  If the Company, at any time while
the Note is outstanding, shall issue rights, options or warrants to all holders
of Common Stock, such issuance will also be granted to Holders on an
as-converted basis without the Holder having to convert in order to be entitled
to such issuance.

 

c)             Fundamental Transaction. If, at any time while this Note 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

 

11

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converted into or exchanged for other securities, cash or property (in any such
case, a “Fundamental Transaction”), then, upon any subsequent conversion of this
Note, 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 (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 one (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 Note
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 Note consistent
with the foregoing provisions and evidencing the Holder’s right to convert such
Note 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(c) and ensuring that this Note (or any such replacement security) will
be similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

 

d)            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.

 

e)             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 mail 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 Holder.  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

 

12

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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
Note, and shall cause to be delivered to the Holder at its last address as it
shall appear upon the Note Register, at least 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 Note during the 20-day
period commencing on the date of such notice through the effective date of the
event triggering such notice.

 

Section 6.               Negative Covenants. As long as any portion of this Note
remains outstanding, unless the Holder 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; provided, however, that any consent by
Holder pursuant to this subsection 7(a) shall not be unreasonably withheld if
such indebtedness for borrowed money relates to acquisitions of a business
whether through merger, asset purchase, stock purchase or similar purchase
agreement;

 

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; provided, however, that any consent by Holder pursuant to
this subsection 7(b) shall not be

 

13

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unreasonably withheld if such Liens relate to acquisitions of a business whether
through merger, asset purchase, stock purchase or similar purchase agreement;

 

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)            pay cash dividends or distributions on any equity securities of
the Company;

 

e)             enter into any agreement with respect to any of the foregoing.

 

Section 7.               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
Note or (B) interest, liquidated damages and other amounts owing to a Holder on
any Note, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which
default, in the case of a principal payment or other default under (A) above or
an interest payment or other default under clause (B) above, is not cured within
3 Trading Days;

 

ii.             the Company shall fail to observe or perform any other covenant
or agreement contained in the Notes (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 (x) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) 10 Trading Days after
notice of such failure sent by the Holder or by any other Holder and (B) 15
Trading Days after the Company has become or should have become aware of such
failure;

 

iii.            a default or event of default by the Company 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), which default is not cured, if possible to
cure, within the lesser of (a) thirty days from such default or event of default
or (b) such lesser period as may be provided in the applicable agreement,
document or instrument);

 

iv.            any representation or warranty made in this Note, any other
Transaction Documents, any written statement pursuant hereto or thereto or any

 

14

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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 Subsidiary shall be subject to a Bankruptcy
Event;

 

vi.            the Company or any Subsidiary shall default on any of its
obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
that (a) involves an obligation greater than $100,000, 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.          a Registration Statement shall not have been declared effective
within the applicable period(s) specified in Section 6.12 of the Purchase
Agreement;

 

ix.            if, after the Registration Statement has been declared effective
and any Registrable Securities are still outstanding, either (a) the
effectiveness of the Registration Statement lapses for any reason or (b) the
Holder shall not be permitted to resell Registrable Securities under the
Registration Statement in accordance with the terms set forth in Section 6.12 of
the Purchase Agreement; provided, however, that if the Company is negotiating a
merger, consolidation, acquisition or sale of all or substantially all of its
assets or a similar transaction and, in the written opinion of counsel to the
Company, the Registration Statement would be required to be amended to include
information concerning such pending transaction(s) or the parties thereto which
information is not available or may not be publicly disclosed at the time, the
Company shall be permitted an additional 10 consecutive Trading Days during any
12-month period pursuant to this Section 8(a)(ix);

 

x.             the Company shall fail for any reason to deliver certificates to
a Holder prior to the third Trading Day after a Conversion Date 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 Notes in accordance with the terms hereof;

 

15

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xi.            any monetary judgment, writ or similar final process shall be
entered or filed against the Company, any Subsidiary or any of their respective
property or other assets for more than $100,000, and such judgment, writ or
similar final process shall remain unvacated, unbonded or unstayed for a period
of 45 calendar days;

 

xii.           the Company shall have failed to file any of its SEC Reports on a
timely basis; provided, however, that such SEC Reports shall be deemed to be
filed on a timely basis if the Company has received a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of
such extension; or

 

xiii.          the Company shall fail to enter into the Security Agreement,
Guaranty and any intercreditor arrangements described in the Purchase Agreement
within thirty (30) days of the date of this Note.

 

b)            Remedies Upon Event of Default. If any Event of Default shall have
occurred, at the Holder’s election, (i) the outstanding principal amount of this
Note, plus accrued but unpaid interest, liquidated damages and other amounts
owing in respect thereof through the date of acceleration, shall become
immediately due and payable in cash at the Mandatory Default Amount or
(ii) commencing 5 days after the occurrence of any Event of Default that results
in the eventual acceleration of this Note, the interest rate on this Note 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 Note 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 Holder at any time prior to
payment hereunder and the Holder shall have all rights as a holder of the Note
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 8.               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, facsimile
number  (678) 281-2019, Attention: Robin Raina 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

 

16

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writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
number or address of such 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(a) prior to 5:30 p.m. (New York City time), (ii) the
date immediately following the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section 9(a) 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 Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages
and accrued interest, as applicable, on this Note at the time, place, and rate,
and in the coin or currency, herein prescribed.  This Note is a direct debt
obligation of the Company.

 

c)             Lost or Mutilated Note.  If this Note shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence of such loss, theft or destruction of such Note, and of the
ownership hereof, reasonably satisfactory to the Company.

 

d)            Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware, 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 Dover, Delaware (the
“Delaware Courts”).  Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Delaware Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are
improper or inconvenient venue for such proceeding.  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 Note or the transactions contemplated hereby. If either party shall
commence an action or proceeding

 

17

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to enforce any provisions of this Note, 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 Note 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 Note.  The failure of the Company or the Holder to insist upon strict
adherence to any term of this Note 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 Note.  Any waiver by the
Company or the Holder must be in writing.

 

f)             Severability.  If any provision of this Note is invalid, illegal
or unenforceable, the balance of this Note 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 Note as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this indenture, and the Company (to
the extent it may lawfully do so) hereby expressly waives all benefits or
advantage of any such law, and covenants that it will not, by resort to any such
law, hinder, delay or impeded the execution of any power herein granted to the
Holder, but will suffer and permit the execution of every such as though no such
law has been enacted.

 

g)            Next Business Day.  Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.

 

h)            Headings.  The headings contained herein are for convenience only,
do not constitute a part of this Note 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 Note 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 Note of such successor entity
evidenced by a written instrument substantially similar in

 

18

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form and substance to this Note, including, without limitation, having a
principal amount and interest rate equal to the principal amount and the
interest rate of this Note and having similar ranking to this Note, 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 Note.

 

*********************

 

19

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a
duly authorized officer as of the date first above indicated.

 

 

 

EBIX, INC.

 

 

 

 

 

By:

[g194741ki03i001.jpg]

 

 

Name:  Robin Raina

 

 

Title:

 

20

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ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the 2.5% Secured
Convertible Note due July 11, 2010 of Ebix, Inc., a Delaware corporation (the
“Company”), into shares of common stock, par value $.10 per share (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 Note, 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 Note to be Converted:

 

 

 

Payment of Interest in Common Stock      yes      no

 

If yes, $            of Interest Accrued on Account of Conversion at Issue.

 

 

 

Number of shares of Common Stock to be issued:

 

 

 

 

 

Signature:

 

 

 

Name:

 

 

 

Address:

 

A-1

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Schedule 1

 

CONVERSION SCHEDULE

 

The 2.5% Secured Convertible Notes due on July 11, 2010 in the aggregate
principal amount of $15,000,000 are issued by Ebix, Inc.  This Conversion
Schedule reflects conversions made under Section 4 of the above referenced Note.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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