NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITHTHE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATIONUNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLDEXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, ORIN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIESLAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLETO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTIONWITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

**WIZARDWORLD, Inc.**

** **

Form of Senior Convertible Debenture

 

** **

This Senior ConvertibleDebenture (the “Debenture”) is duly authorized and issued by Wizard World, Inc., a Delaware corporation (the“Company”), having its principal executive office at 1350 Avenue of the Americas, 2nd Floor, New York, NY 10019.

 

FOR VALUE RECEIVED,the Company, promises to pay to the order of _______________ _______________located at _______________________________________________,and or its registered assigns (the “Payee” or the “Holder”), the principal sum of ________________Thousand United States Dollars (US$_____________) (the “Principal Amount”) by February 28, 2012 (the “MaturityDate”) unless it is converted into Private Placement Securities (as defined herein) after the Company undertakes theQualified Offering (as defined herein), and to pay interest on the Principal Amount at a rate of six percent (6%) per annum inone lump sum payable on the Maturity Date.

 

This Debenture is subjectto the following provisions:

 

A*.* “QualifiedOffering” means one or more private placement offerings by the Company of a minimum amount in the aggregate of Five HundredThousand United States Dollars (US$500,000) of Series A Convertible Preferred Shares (the “Private Placement Securities”)convertible into Common Shares (as defined below) of the Company pursuant to the terms and conditions contained in the privateplacement offering documentation to be entered into at the time of the offering.

 

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

 

 

C. “ExistingSeries A Convertible Preferred Shares” means the Company’s Series A Convertible Preferred Shares in existence asof the date hereof.

 

1.           VoluntaryConversion. At any time between the original Issue Date and the Maturity Date unless previously repaid by the Company or convertedinto Private Placement Securities pursuant to Section 2 herein, this Debenture may be convertible into (i) shares of common stockor (ii) into Existing Series A Convertible Preferred Shares, in each case, at the option of the Holder, in whole or in part (subjectto any limitations on conversion).  The Holder shall effect conversions by delivering to the Company the form of Notice ofConversion attached hereto as Exhibit A (a “Notice of Conversion”), specifying therein the PrincipalAmount and interest of this Debenture to be converted and the date on which such conversion is to be effected (a “ConversionDate”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that suchNotice of Conversion is provided hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrenderthis Debenture to the Company unless the entire Principal Amount of this Debenture plus all accrued and unpaid interest thereonhas been so converted. Conversions hereunder shall have the effect of lowering the outstanding Principal Amount of this Debenturein an amount equal to the applicable conversion amount. The Company shall maintain records showing the Principal Amount convertedand the date of such conversions. The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, byreason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted PrincipalAmount of this Debenture may be less than the amount stated on the face hereof.

** **

A.           ConversionPrice. On any Conversion Date, the Debenture is convertible into (i) shares of the Company’s common stock (the “CommonShares”) at a conversion price of US$0.40 per share or (ii) Existing Series A Convertible Preferred Shares at a conversionprice of US$1.00 per share.

** **

B.           Mechanismof Conversion.

 

i.   ConversionShares Issuable Upon Conversion of Principal Amount. The number of Common Shares or Existing Series A Convertible PreferredShares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing the outstanding principalamount of this Debenture (or any portion thereof) to be converted by the Conversion Price.

** **

ii.  Deliveryof Certificate Upon Conversion. In the event of any conversion of this Debenture in accordance with and subject to the termsand conditions hereof, (i) certificates for the Common Shares or Existing Series A Convertible Preferred Shares shall be datedthe Conversion Date and delivered to the Holder hereof within a reasonable time, not exceeding five (5) Business Days after anyConversion Date, or, (ii) at the request of the Holder, shares shall be issued and delivered to the Depository Trust Company (“DTC”)account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonabletime, not exceeding five (5) Business Days after such conversion. The Holder hereof shall be deemed for all purpose to be the holderof the Common Shares or Existing Series A Convertible Preferred Shares so purchased as of the date of such conversion. If certificatedshares are issued, the Company will deliver or cause to be delivered to the Holder a certificate or certificates representing thenumber of Common Shares or Existing Series A Convertible Preferred Shares being acquired upon the conversion of this Debenture.Notwithstanding the foregoing to the contrary, the Company or its transfer agent shall only be obligated to issue and deliver theshares to DTC on a holder’s behalf via DWAC *provided that* (i) such exercise is in connection with a registration statementunder the Securities Act providing for the resale of Common Shares or Existing Series A Convertible Preferred Shares or the CommonShares or Existing Series A Convertible Preferred Shares are otherwise exempt from registration and may be issued without a restrictivelegend and (ii) the Holder and its transfer agent are participating in DTC through the DWAC system. The Holder shall deliver thisoriginal Debenture, or an indemnification undertaking with respect to such Debenture in the case of its loss, theft or destruction,at such time that this Debenture is fully exercised.

 

 

iii.     Failureto Deliver Certificate. If in the case of any Notice of Conversion such certificate or certificates are not delivered to oras directed by the Holder by the tenth (10th) Business Day after a Conversion Date, the Holder shall be entitled by written noticeto the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion,in which event the Company shall immediately return the certificates representing the principal amount of this Debenture tenderedfor conversion.

 

iv.     Reservationof Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorizedand unissued Common Shares and Existing Series A Convertible Preferred Shares solely for the purpose of issuance upon any conversionof this Debenture and payment of interest on this Debenture each as herein provided, free from preemptive rights or any other actualcontingent purchase rights of persons other than the Holder, not less than 100% of the Common Shares and Existing Series A ConvertiblePreferred Shares as shall be issuable upon the conversion of the Principal Amount and payment of interest hereunder. The Companycovenants that all Common Shares and Existing Series A Convertible Preferred Shares that shall be so issuable shall, upon issue,be duly and validly authorized, issued, and fully paid, nonassessible.

 

v.      FractionalShares. Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions ofCommon Shares or Existing Series A Convertible Preferred Shares, but may if otherwise permitted, make a cash payment in respectof any final fraction of a share based on the closing bid price of the Company’s Common Shares or Existing Series A ConvertiblePreferred Shares as quoted by Bloomberg on the day prior to the Company’s receipt of the Conversion Notice. If the Companyelects not, or is unable, to make such cash payment, the Holder shall be entitled to receive, in lieu of the financial fractionof a share, one whole Common Share.

 

vi.     TransferTaxes. The issuance of certificates for Common Shares or Existing Series A Convertible Preferred Shares upon conversion ofthis Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payablein respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that maybe payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name otherthan that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such certificatesunless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax orshall have established to the satisfaction of the Company that such tax has been paid.

 

 

2.          MandatoryConversion upon the Subsequent Qualified Offering.

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A.           MandatoryConversion Mechanism.

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i.       Ifthe Company undertakes a Qualified Offering prior to the Maturity Date, the Company will deliver to the Holder a notice (the “OfferingNotice”), stating the price and other terms and conditions thereof not later than five (5) Business Days prior to theclosing date of the Qualified Offering.

** **

ii.      Uponthe closing of the Qualified Offering or prior to the close upon mutual agreement by the parties, the Debenture will automaticallybe converted into an equal amount of Private Placement Securities.

** **

B.           RegistrationRights. In the event that the Debenture is converted into the Private Placement Securities, the Holder shall have the sameregistration rights with respect to the Private Placement Securities as investors in the Qualified Offering.

** **

3.           Adjustmentof Conversion Price. The Conversion Price shall be subject to adjustment from time to time as set forth in this Section 3.The Company shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 3 inaccordance with the notice provisions set forth in Section 6D. If at any time the Company shall:

 

A.           makeor issue or set a record date for the holders of the Common Shares for the purpose of entitling them to receive a dividend payablein, or other distribution of, Common Shares,

 

B.           subdivideits outstanding Common Shares into a larger number of Common Shares, or

 

C.          combine its outstanding Common Shares into a smaller number ofCommon Shares,

 

then (1) the number of Common Shares for which this Debenture is convertible immediately after the occurrenceof any such event shall be adjusted to equal the number of Common Shares which a record holder of the same number of CommonShares for which this Debenture is exercisable immediately prior to the occurrence of such event would own or be entitled toreceive after the happening of such event, and (2) the Conversion Price then in effect shall be adjusted to equal (A) theConversion Price then in effect multiplied by the number of Common Shares for which this Debenture is exercisable immediatelyprior to the adjustment divided by (B) the number of Common Shares for which this Debenture is exercisable immediately aftersuch adjustment.

 

 

 

4.          Holder’sRepresentations and Warranties. The Holder represents and warrants that:

 

A.           Restrictionson Transfer or Resale. The Holder understands that (i) the Debenture, any Common Shares upon conversion of the Debenture, andthe Private Placement Securities are not being registered under the Securities Act of 1933 or any state securities laws, and maynot be offered for sale, sold, assigned or transferred unless (A) the Debenture, any Common Shares or the Private Placement Securitiesare subsequently registered thereunder, or (B) Holder shall have delivered to the Company an opinion of counsel, in a generallyacceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuantto an exemption from such registration; and (ii) neither the Company nor any other party is under any obligation to register theDebenture or the Common Shares under the 1933 Act or any state securities laws or to comply with the terms and conditions of anyexemption thereunder, providedhowever that Holders shall have the same registration rights with respect to the PrivatePlacement Debenture as investors in the Qualified Offering in the event that the Debentures are converted into the Private PlacementSecurities in the Qualified Offering; (iii) Holder is acquiring the Debenture, the Common Share and the Private Placement Securitiesfor its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, exceptpursuant to sales registered or exempted under the 1933 Act, and (iv) Holder does not presently have any agreement or understanding,directly or indirectly, with any party to distribute any of the securities. 

 

B.           AccreditedInvestor Status. Holder is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

 

C.          Relianceon Exemptions. The Holder understands that the Debenture, any Common Shares upon voluntary conversion, and any Private PlacementSecurities acquired in the Qualified Offering are being offered and sold to it in reliance on specific exemptions from the registrationrequirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracyof, and Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Holderset forth herein in order to determine the availability of such exemptions and the eligibility of Holder to acquire the securities.

 

D.    	Information. Holder and its advisors, if any, have been furnished with all materials relating to the business, financesand operations of the Company and materials relating to the offer and sale of the securities that have been requested by Holder.Holder and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries norany other due diligence investigations conducted by Holder or its advisors, if any, or its representatives shall modify, amendor affect Holder’s right to rely on the Company’s representations and warranties contained herein. Holder understandsthat its investment in the Debenture, any Common Shares upon voluntary conversion and any Private Placement Securities acquiredin the Qualified Offering involve a high degree of risk and is able to afford a complete loss of such investment. Holder has soughtsuch accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to itsacquisition of the securities.

 

E.         NoGovernmental Review. Holder understands that no United States federal or state agency or any other government or governmentalagency has passed on or made any recommendation or endorsement of the securities or the fairness or suitability of the investmentin the securities nor have such authorities passed upon or endorsed the merits of the offering of the securities.

 

F*.     **	***Legend.This Debenture, all certificates representing Common Shares upon voluntary conversion and the Private Placement Securities acquiredin the Qualified Offering shall be stamped or imprinted with a legend in substantially the following form:

 

 

Neitherthe issuance and sale of the securities represented by this Certificate nor the securities into which these securities are exercisablehave been registered under the securities Act of 1933, as amended, or Applicable state securities laws. The securities may notbe offered for sale, sold, transferred or assigned (i) in the absence of (A) an effective registration statement for the securitiesunder the securities Act of 1933, as amended, or (B) an opinion of counsel, in a generally acceptable form, that registration isnot required under said Act or (II) unless sold pursuant to Rule 144 or Rule 144 A under said Act. Notwithstanding the foregoing,the securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by thesecurities. 

 

5.            Eventsof Default

 

A.    Theterm “Event of Default” shall mean any of the events set forth in this Section 5A (the term “Company”for this purpose shall include all subsidiaries of the Company):

 

	i.            Non-Paymentof Obligations. The Company shall default in the payment of the Principal Amount of this Debenture as and when the same shallbecome due and payable, whether by acceleration or otherwise.

 

	ii.           Non-Performanceof Covenants. The Company shall default in the due observance or performance of any covenant set forth herein, which defaultshall continue uncured for thirty (30) days after notice thereof.

 

	iii.          Bankruptcy,Insolvency, etc. The Company shall:

 

(a)          admitin writing its inability to pay its debts as they become due;

 

(b)          applyfor, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or anyof its property, or make a general assignment for the benefit of creditors;

 

(c)          inthe absence of such application, consent or acquiesce in, permit or suffer to exist the appointment of a trustee, receiver, sequestratoror other custodian for the Company or for any part of its property and that is not dismissed within sixty days;

 

(d)          permitor suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcyor insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company, and, if such case or proceedingis not commenced by the Company or converted to a voluntary case, such case or proceeding is consented to or acquiesced in by theCompany or results in the entry of an order for relief; or

 

 

(e)          takeany corporate or other action authorizing any of the foregoing.

 

B.           Actionif Bankruptcy. If any Event of Default described in clauses (iii)(a) through (d) of Section 5A shall occur, the Principal Amountof this Debenture and all other obligations hereunder shall automatically be and become immediately due and payable, without noticeor demand.

 

C.           Actionif Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (iii)(a) through (d)of Section 5A shall occur for any reason, whether voluntary or involuntary, and be continuing, for 30 days after notice, the Holdermay, upon notice to the Company, declare all or any portion of the outstanding principal amount of the Debenture, to be due andpayable and any or all other obligations hereunder to be due and payable, whereupon the full unpaid principal amount hereof, andany and all other such obligations which shall be so declared due and payable shall be and become immediately due and payable,without further notice, demand, or presentment.

 

6.             Miscellaneous.

 

A.           Partiesin Interest. All covenants, agreements and undertakings in this Debenture binding upon the Company or the Holder shall bindand inure to the benefit of the successors and permitted assigns of the Company and the Holder, respectively, whether so expressedor not.

 

B.           GoverningLaw. This Debenture shall be governed by the laws of the State of New York as applied to contracts entered into and to be performedentirely within the State of New York.

 

C.           Waiverof Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURYIN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT ORINSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBALOR WRITTEN), OR ACTIONS OF THE PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE’S PURCHASING THISNOTE.

 

D.           Notices.

 

i.            Anynotice pursuant to this Debenture to be given or made (i) by the Holder to or upon the Company or (ii) by the Company to or uponthe Holder, shall be sufficiently given or made if sent by certified or registered mail, postage prepaid, addressed (until anotheraddress is sent by the Company or the Holder to the other party) as follows:

 

 

 

 

 

E.           NoWaiver. No delay in exercising any right hereunder shall be deemed a waiver thereof, and no waiver shall be deemed to haveany application to any future default or exercise of rights hereunder.

 

F.           Modificationand Severability. If, in any action before any court or agency legally empowered to enforce any provision contained herein,any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to makeit enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceabilityof such provision shall not affect the other provisions of this Debenture, but this Debenture shall be construed as if such unenforceableprovision had never been contained herein.

 

[-signature page follows-]

 

 

IN WITNESS WHEREOF,this Debenture has been executed and delivered on the date specified above.

 

 

 

**ExhibitA**

 

**NOTICE OF CONVERSION**

 

The undersigned herebyelects to convert principal under the Senior Convertible Debenture, dated December 9, 2011 (the “Debenture”),issued by Wizard World, Inc., a Delaware corporation (the “Company”), in favor of the undersigned, due on February28, 2012 if not previously repaid by the Company or converted into Private Placement Debenture pursuant to a Qualified Offering,into shares of common stock (the “Common Shares”) of the Company according to the conditions contained in theDebenture, as of the date written below.  If the Common Shares 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 opinionsas reasonably requested by the Company in accordance therewith. No fee will be charged to the undersigned for any conversion, exceptfor such transfer taxes, if any.

 

The undersigned agreesto comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of theaforesaid Common Shares.  

 

Conversion calculations:

 

 

 

 

**BLUE SKY LEGENDS**

 

NASAA LEGEND

 

IN MAKING AN INVESTMENT DECISION, SUBSCRIBERSMUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THEMERITS AND RISKS INVOLVED. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSIONOR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THISDOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

NOTICE TO RESIDENTS OF ALL STATES

 

THE SECURITIES OFFERED HEREBY HAVE NOTBEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ONEXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT IN VARIOUS STATES TO RESTRICTIONSON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TOREGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION,ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSEDTHE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL TERM SHEET. ANY REPRESENTATION TO THE CONTRARY ISUNLAWFUL.

 

IN WITNESS WHEREOF, the Subscriber andthe Company have caused this Subscription Agreement to be duly executed as of the date first above written.

 

**SUBSCRIBER:**