Document:

Form GCA 7% Convertible Debenture

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED AS OF THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE ACCELERATED. 

No. __                                                                                                                                                                                                            $_______ 

7% CONVERTIBLE DEBENTURE 

of 

SPEEDEMISSIONS, INC., a Georgia corporation (together with its successors, the "Company"), for value received hereby promises to pay to: 

GCA Strategic Investment Fund Limited 

(The "Holder") and registered assigns, the principal sum of ______________________ ($_______) or, if less, the principal amount of this Debenture then outstanding, on the Maturity Date by wire transfer of immediately available funds to the Holder in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, which shall begin to accrue on the date of this Debenture, quarterly in arrears, on (i) the last day of March, June, September and December of each year until the Maturity Date, commencing _______, ____ (unless such day is not a Business Day, in which event on the next succeeding Business Day) (each an "Interest Payment Date"), (ii) the Maturity Date, (iii) each Conversion Date, as hereafter defined, and (iv) the date the principal amount of the Convertible Debentures shall be declared to be or shall automatically become due and payable, on the principal sum hereof outstanding in like coin or currency, at the rates per annum set forth below, from the most recent Interest Payment Date to which interest has been paid on this Convertible Debenture, or if no interest has been paid on this Convertible Debenture, from the date of this Convertible Debenture until payment in full of the principal sum hereof has been made. The Maturity Date is _____, ____. 

	 
	 	 	 
	

	 

 

The interest rate shall be seven percent (7%) per annum (the "Interest Rate") or, if less, the maximum rate permitted by applicable law. Past due amounts (including interest, to the extent permitted by law) will also accrue interest at the Interest Rate plus 2% per annum or, if less, the maximum rate permitted by applicable law, and will be payable on demand ("Default Interest"). Interest on this Convertible Debenture will be calculated on the basis of a 360-day year of twelve 30 day months. All payments of principal and interest hereunder shall be made for the benefit of the Holder pursuant to the terms of the Agreement (hereafter defined). At the option of the Fund, interest may be paid in cash or in shares of Common Stock. On each Conversion Date, interest shall be paid in shares of Common Stock on the portion of the principal balance of the Convertible Debenture then being converted. The number of shares of Common Stock issued as interest shall be determined by dividing the dollar amount of interest due on the applicable Interest Payment Date by the Conversion Price then in effect. 

This Convertible Debenture (this "Convertible Debenture") is one of a duly authorized issuance of up to $_________ aggregate principal amount of Convertible Debentures of the Company referred to in that certain Securities Purchase Agreement dated as of the date hereof between the Company and the Purchaser named therein (the "Agreement"). The Agreement contains certain additional agreements among the parties with respect to the terms of this Convertible Debenture, including, without limitation, provisions which (A) limit the conversion rights of the Holder, (B) specify voluntary and mandatory repayment, prepayment and redemption rights and obligations and (C) specify Events of Default following which the remaining balance due and owing hereunder may be accelerated. All such provisions are an integral part of this Convertible Debenture and are incorporated herein by reference. This Convertible Debenture is transferable and assignable to one or more Persons, in accordance with the limitations set forth in the Agreement. 

The Company shall keep a register (the "Register") in which shall be entered the names and addresses of the registered holder of this Convertible Debenture and particulars of this Convertible Debenture held by such holder and of all transfers of this Convertible Debenture. References to the Holder or "Holders" shall mean the Person listed in the Register as registered holder of such Convertible Debentures. The ownership of this Convertible Debenture shall be proven by the Register. 

1.  Certain Terms Defined. All terms defined in the Agreement and not otherwise defined herein shall have for purposes hereof the meanings provided for in the Agreement. 

2.  Covenants. The Company covenants and agrees to observe and perform each of its covenants, obligations and undertakings contained in the Agreement, which obligations and undertakings are expressly assumed herein by the Company and made for the benefit of the holder hereof. 

3.   Payment of Principal. The Company shall repay the remaining unpaid balance of this Convertible Debenture on the Maturity Date. The Company may, and shall be obligated to, prepay all or a portion of this Convertible Debenture on the terms specified in the Agreement. 

 

	 
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4.  Conversion. 

4.1  Conversion of Convertible Debenture. Subject to Section 5 hereof, the Holder shall have the right, at its option, at any time from and after the date of issuance of this Convertible Debenture, convert the principal amount of this Convertible Debenture, or any portion of such principal amount, into that number of fully paid and nonassessable shares of Common Stock (as such shares shall then be constituted) determined pursuant to this Section 4.1. The number of shares of Common Stock to be issued upon each conversion of this Convertible Debenture shall be determined by dividing the Conversion Amount (as defined below) by the Conversion Price in effect on the date (the "Conversion Date") a Notice of Conversion is delivered to the Company, as applicable, by the Holder by facsimile or other reasonable means of communication dispatched prior to 5:00 p.m., E.S.T. The term "Conversion Amount" means, with respect to any conversion of this Convertible Debenture, the sum of (1) the principal amount of this Convertible Debenture to be converted in such conversion plus (2) accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Convertible Debenture to the Conversion Date plus (3) Default Interest, if any, on the interest referred to in the immediately preceding clause (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Section 4.3 hereof, Section 10.1 of the Agreement or Section 10.4 of the Agreement. 

4.2  Conversion Price and Limitation. At the option of the Holder, any portion or all of the outstanding principal amount of this Convertible Debenture shall be converted into a number of shares of Common Stock at the conversion price (the "Conversion Price") equal to the lesser of (i)$0.28 (the "Fixed Conversion Price") and (ii) 80% of the three lowest weighted average sales prices as reported by Bloomberg LP for the ten (10) Trading Days immediately preceding but not including the date of the related Notice of Conversion (the "Formula Conversion Price"). 

4.3  Authorized Shares. 

(a)  Consistent with Section 7.11 of the Agreement, the Company (i) shall promptly irrevocably instruct the Company's transfer agent to issue certificates for the Common Stock issuable upon conversion of this Convertible Debenture and (ii) agrees that its issuance of this Convertible Debenture shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Convertible Debenture. 

	 
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(b)  If at any time a Holder of this Convertible Debenture submits a Notice of Conversion (x) the Company does not have sufficient authorized but unissued shares of Common Stock available to effect such conversion in full in accordance with the provisions of this Article 4 or (y) the Company is prohibited by the applicable rules of the OTC Bulletin Board or the National Market on which the Common Shares are listed and traded at that time to effect such conversion in full as provided in subsection (d) below, without stockholder approval (each, a "Conversion Default"), the Company shall issue to the Holder all of the shares of Common Stock which are then available to effect such conversion. The portion of this Convertible Debenture which the Holder included in its Conversion Notice and which exceeds the amount which is then convertible into available shares of Common Stock (the "Excess Amount") shall, notwithstanding anything to the contrary contained herein, not be convertible into Common Stock in accordance with the terms hereof until (and at the Holder’s option at any time after) the date additional shares of Common Stock are authorized by the Company, or its stockholders, as applicable, at which time the Conversion Price in respect thereof shall be the lower of (i) the Conversion Price on the Conversion Default Date (as defined below) and (ii) the Conversion Price on the Conversion Date thereafter elected by the Holder in respect thereof. The Company shall pay to the Holder payments ("Conversion Default Payments") for a Conversion Default in the amount of (N/365) x .24 x the Excess Amount on the Conversion Date in respect of the Conversion Default (the "Conversion Default Date"), where N = the number of days from the Conversion Default Date to the date (the "Authorization Date") that the Company, or its stockholders, as applicable, authorizes a sufficient number of shares of Common Stock to effect conversion of the full outstanding principal balance of this Convertible Debenture. The Company shall use its best efforts to authorize, or cause its stockholders to authorize within 40 days of the occurrence of a Conversion Default, as applicable, a sufficient number of shares of Common Stock as soon as practicable following the earlier of (i) such time that the Holder notifies the Company or that the Company otherwise becomes aware that there are or likely will be insufficient shares to allow full conversion thereof and (ii) a Conversion Default. The Company shall send notice to the Holder of the authorization of additional shares of Common Stock, the Authorization Date and the amount of Holder’s accrued Conversion Default Payments. The accrued Conversion Default Payments for each calendar month shall be paid in cash or shall be convertible into Common Stock (at such time as there are sufficient authorized shares of Common Stock) at the Market Price, at the Holder’s option, as follows: 

(i)  In the event the Holder elects to take such payment in cash, cash payment shall be made to Holder by the fifth Business Day of the month following the month in which it has accrued; and 

(ii)  In the event the Holder elects to take such payment in Common Stock, the Holder may convert such payment amount into Common Stock at the Conversion Price (as in effect at the time of conversion) at any time after the fifth Business Day of the month following the month in which it has accrued (at such time as there are sufficient authorized shares of Common Stock) in accordance with the terms of this Article 4. 

	 
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(c)  The Holder’s election pursuant to this Section 4.3 shall be made in writing to the Company at any time prior to 5:00 p.m., E.S.T., on the third Business Day of the month following the month in which Conversion Default payments have accrued. If no election is made, the Holder shall be deemed to have elected to receive cash. Nothing herein shall limit the Holders right to pursue actual damages (to the extent in excess of the Conversion Default Payments) due to the Company’s failure to maintain a sufficient number of authorized shares of Common Stock. 

(d)  In no event shall the Company issue more than the Maximum Number of Shares upon conversion of this Convertible Debenture, unless the Company shall have obtained approval by the stockholders of the Company ("Stockholder Approval") or a waiver of such requirement by the OTC Bulletin Board or the National Market on which the Common Shares are listed and traded at that time. Once the Maximum Number of Shares has been issued (the date of which is hereinafter referred to as the "Maximum Conversion Date"), unless the Company shall have obtained Stockholder Approval or a waiver of such requirement by the OTC Bulletin Board or the National Market on which the Common Shares are listed and traded at that time within 40 days of the Maximum Conversion Date, the Company shall pay to the Holder within five (5) Business Days of the Maximum Conversion Date (or, if the Company is, in good faith, using its best efforts to obtain Stockholder Approval, then the earlier of (x) 40 days following the Maximum Conversion Date, and (y) such date that it becomes reasonably apparent that Stockholder Approval will not be obtained within such 40 days period), the Formula Price plus accrued and unpaid Default Interest, if any. The Maximum Number of Shares shall be subject to adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof as contemplated by Article XI of the Agreement. With respect to each Holder of Convertible Debentures, the Maximum Number of Shares shall refer to such Holder’s pro rata share thereof based upon the aggregate principal balance of the Convertible Debentures then outstanding. In the event that the Company obtains Stockholder Approval, approval of the OTC Bulletin Board or the National Market on which the Common Shares are listed and traded at that time , or otherwise is able to increase the number of shares to be issued above the Maximum Number of Shares (such increased number being the "New Maximum Number of Shares"), the references to Maximum Number of Shares above shall be deemed to be, instead, references to the New Maximum Number of Shares. 

	 
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4.4  Method of Conversion. 

(a)  Notwithstanding anything to the contrary set forth herein, upon conversion of this Convertible Debenture in accordance with the terms hereof, the Holder shall not be required to physically surrender this Convertible Debenture to the Company unless the entire unpaid principal amount of this Convertible Debenture is so converted. Rather, records showing the principal amount converted (or otherwise repaid) and the date of such conversion or repayment shall be maintained on a ledger substantially in the form of Annex A attached hereto (a copy of which shall be delivered to the Company or transfer agent with each Notice of Conversion). It is specifically contemplated that the Holder hereof shall act as the calculation agent for conversions and repayments. In the event of any dispute or discrepancies, such records maintained by the Holder shall be controlling and determinative in the absence of manifest error or failure of Holder to record the principal amount converted (or otherwise repaid) from time to time, in which events the record of the Company shall be controlling and determinative. The Holder and any assignee, by acceptance of this Convertible Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following a conversion of a portion of this Convertible Debenture, the principal amount represented by this Convertible Debenture will be the amount indicated on Annex A attached hereto (which may be less than the amount stated on the face hereof). 

(b)  The Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock or other securities or property on conversion of this Convertible Debenture in a name other than that of the Holder (or in street name), and the Company shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Company the amount of any such tax or shall have established to the satisfaction of the Company that such tax has been paid. 

 

(c)  Subject to Section 5 hereof, upon receipt by the Company of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Convertible Debenture shall be deemed reduced to reflect such conversion, and, unless the Company defaults on its obligations under this Article 4, all rights with respect to the portion of this Convertible Debenture being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. Subject to Section 5 hereof, if the Holder shall have given a Notice of Conversion as provided herein, the Company’s obligation to issue and deliver the certificates for shares of Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provisions thereof, the recovery of any judgment against any person or any action by the Holder to enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the Holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Company, and subject to Section 4.4(a) irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with such conversion. The date of receipt (including receipt via telecopy) of such Notice of Conversion shall be the Conversion Date so long as it is received before 5:00 p.m., E.S.T., on such date. 

	 
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(d)  Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the expiration of the Deadline with respect to a conversion of any portion of this Convertible Debenture for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Company), the Holder shall regain the rights of a Holder of this Convertible Debenture with respect to such unconverted portions of this Convertible Debenture and the Company shall, as soon as practicable, return such unconverted Convertible Debenture to the holder or, if the Convertible Debenture has not been surrendered, adjust its records to reflect that such portion of this Convertible Debenture not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 4.3 for the Company’s failure to convert this Convertible Debenture. 

(e)  In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Company’s transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, upon request of the Holder and its compliance with the provisions contained in Section 4.1 and in this Section 4.4, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission System. 

5.  Redemption by Company. 

5.1  Company’s Right to Redeem . In accordance with the provisions of the Purchase Agreement, the Company may elect, or be required, upon receipt of a Notice of Conversion, to redeem in whole or in part, the remaining unpaid principal amount of this Convertible Debenture, for cash at a redemption price (the "Redemption Price") equal to the greater of (i) 105% of the principal amount of all outstanding Convertible Debentures, plus all accrued and unpaid interest and (ii)(x) the number of shares of Common Stock into which this Convertible Debenture is then convertible, times (y) the average Closing Bid Price of Common Stock for the five (5) Trading Days as reported by Bloomberg L.P. immediately prior to the date that this Convertible Debenture is called for redemption, plus accrued and unpaid interest. 

	 
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5.2  Mechanics of Redemption . The Company shall effect each such redemption within 10 business days of giving notice of its election to redeem by facsimile with a copy by either overnight or 2-day courier to the Holder of this Convertible Debenture to be redeemed at the address and facsimile number of such Holder appearing in the Company’s register for the Convertible Debentures. Such redemption notice shall indicate whether the Company will redeem all or part of such portion of the Convertible Debenture to be redeemed and the applicable Redemption Price. The Company shall not be entitled to send any notice of redemption and begin the redemption procedure unless it has (i) the full amount of the Redemption Price, in cash, available in a demand or other immediately available account in a bank or similar financial institution or (ii) immediately available credit facilities, in the full amount of the Redemption Price, with a bank or similar financial institution on the date the redemption notice is sent to the Holders of this Convertible Debenture. Provided, however, the Company will process any Notice of Conversion received prior to the issuance of a notice of redemption; and further provided that, after a notice of redemption has been issued, the Holder may issue a Notice of Conversion which will not be honored unless the Company fails to make the redemption payment when due. In the event of such failure, the Notice of Conversion will be honored as of the date of the Notice of Conversion. Additionally, if the Company fails to make full payments of the Redemption Price of this Convertible Debenture being redeemed by the tenth day following the notice or redemption, then the Company waives its right to redeem any of the remaining then outstanding Debentures, unless approved by the Holder. 

5.3  Payment of Redemption Price. The Redemption Price shall be paid to the Holder of this Convertible Debenture within 10 business days of the delivery of the notice of such redemption to such Holder. 

6.0  Holder’s Right to Advance Notice of Election Redeem. 

6.1  Holder’s Right to Elect to Receive Notice of Cash Redemption by Company. The Holder of this Convertible Debenture shall have the right to require Company to provide advance notice stating whether the Company will elect to redeem all or part of the redeemable portion in cash, pursuant to the Company’s redemption rights discussed in Section 5.1 above. 

6.2  Mechanics of Holder’s Election Notice. Holder shall give notice to the Company by facsimile (the "Election Notice"), requiring that the Company disclose whether the Company would elect to redeem the redeemable portion of this Convertible Debenture (in whole or in part) if the Holder were to provide a Notice of Conversion and sought to convert the Convertible Debenture in such principal amount as is specified in the Notice of Election. 

	 
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6.3  Company’s Response. Company must respond, disclosing its election, within two (2) business days of receipt of Holder’s Election Notice via facsimile. If Company does not respond to Holder within two (2) business days (by 12:00 noon, if required above) via facsimile, Company shall be deemed to have forfeited its right to exercise redemption pursuant to Section 5(a) upon its receipt of (but only with respect to) that Notice of Conversion. 

7.0  Miscellaneous. This Convertible Debenture shall be deemed to be a contract made under the laws of the State of Georgia, and for all purposes shall be governed by and construed in accordance with the laws of said State. The parties hereto, including all guarantors or endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Convertible Debenture, except as specifically provided herein, and asset to extensions of the time of payment, or forbearance or other indulgence without notice. The Company hereby submits to the exclusive jurisdiction of the United States District Court for the Middle District of Georgia and of any Georgia state court sitting in Atlanta, Georgia for purposes of all legal proceedings arising out of or relating to this Convertible Debenture. The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. The Company hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Convertible Debenture. 

The Holder of this Convertible Debenture by acceptance of this Convertible Debenture agrees to be bound by the provisions of this Convertible Debenture which are expressly binding on such Holder. 

Signature Page Follows 

	

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. 

Dated: _____, ____ 

SPEEDEMISSIONS, INC. 

 

 

	
By: 
	
 

		

	
 
	
Rich Parlontieri 

	
 
	
President 

Convertible Debenture 

	

	 	 	 
	

	

ANNEX A 

CONVERSION AND REPAYMENT LEDGER 

 

	
 

Date 
	
 

Principal Balance 
	
Interest Converted or Paid 
	
Principal Converted or Paid 
	
 

New Principal Balance 
	
 

Issuer Initials 
	
 

Holder Initials 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

	

	

	

	

	

	

	

	 	 	 
	

	

FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES: 

NAME: 

ADDRESS: 

TEL NO: 

FAX NO: 

CONTACT 

NAME: 

DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME): 

NAME: 

ADDRESS: 

TEL NO: 

FAX NO: 

CONTACT 

NAME: 

SPECIAL INSTRUCTIONS: ________________________________________________ 

____________________________________________________________ 

____________________________________________________________ 

____________________________________________________________ 

	 
	 	 	 
	

	 

NOTICE OF CONVERSION 

(To be Executed by the Registered Holder 

in order to Convert the Convertible Debenture) 

The undersigned hereby irrevocably elects to convert $________ of the principal balance of the Convertible Debenture into shares of Common Stock, no par value per share (the "Common Stock"), of Speedemissions, Inc. (the "Company") according to the conditions hereof, as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. The undersigned, as contemplated by Section 5.1 of the Securities Purchase Agreement pursuant to which the Convertible Debenture was issued, hereby states that the representations and warranties of the undersigned set forth therein are true and correct in all material respects as of the date hereof (provided, the undersigned makes no representations concerning its investment intent with respect to the Common Stock received upon this conversion). 

Conversion calculations: 

	
 
	
 

		

	
 
	
Date of Conversion 

	
 
	
 

	
 
	
 

		

	
 
	
Applicable Conversion Price 

	
 
	
 

	
 
	
 

		

	
 
	
Number of Shares 

	
 
	
 

	
 
	
 

		

	
 
	
Name/Signature 

	
 
	
 

	
 
	
Address:Warrant Agreement 6.16.03

WARRANT 

TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF 

SPEEDEMISSIONS, INC. 

 

THIS CERTIFIES THAT, for value received, V2R, LLC (the "Holder"), or his registered assigns, is entitled to subscribe for and purchase from Speedemissions, Inc. (the "Company"), a corporation organized and existing under the laws of the State of Georgia, at the price specified below (subject to adjustment as noted below) at any time from and after the date hereof (the "Effective Date"), to and including the fifth anniversary of the Effective Date, Twenty Five Thousand (25,000) fully paid and non assessable shares of the Company’s Common Stock (the "Warrant Stock"). 

 

The warrant exercise price (subject to adjustment as noted below) shall be One Cent ($0.01) per share. 

 

This Warrant is subject to the following provisions, terms and conditions: 

1.   Exercise . The rights represented by this Warrant may be exercised by the Holder hereof, in whole or in part, by written notice of exercise delivered to the Company and by the surrender of this Warrant (properly endorsed, if required) at the principal office of the Company and upon payment to it by check of the purchase price for such shares. The Company agrees that the shares so purchased shall be and are deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment for such shares is received. Subject to the provisions of the next succeeding paragraph, certificates for the shares of stock so purchased shall be delivered to the holder hereof within a reasonable time, not exceeding seven days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of shares, if any, with respect to which this Warrant shall not then have been exercised shall also be delivered to the holder hereof within such time. 

2.   Restriction on Transferability . Notwithstanding the foregoing, however, the Company shall not be required to deliver any certificate for shares of stock upon exercise of this Warrant except in accordance with the provisions, and subject to the limitations, of Paragraph 7 and the restrictive legend under the heading "Restriction on Transfer" below. This Warrant shall not be sold, transferred, assigned or hypothecated for a period of one year from the Effective Date except to persons who are partners, executive officers, directors or owners of V2R,LLC, or immediate family of same, or by operation of law. 

3.  Restriction On Transfer . This Warrant or the shares of Common Stock issuable upon exercise hereof may not be resold or transferred unless such resale or transfer is exempted from the registration requirements of the Securities Act of 1933, as amended (the "Act"), and any applicable state securities laws ("Laws"), and the Company receives, prior to resale or transfer, written representations of the holder and proposed transferee satisfactory to the Company regarding such transfer or, at the election of the Company, an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer of this Warrant or of such shares may be effected without registration under the Act or qualification under the Laws, or the resale or transfer of this Warrant or of such shares is registered under the Act and any applicable Laws. 

	 
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4.  Covenants of the Company . The Company covenants and agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized and issued, fully paid and nonassessable. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 

5.  Anti-Dilution Adjustments . The warrant purchase price shall, from and after the date of issuance of this Warrant, be subject to adjustment from time to time as hereinafter provided in this Section 4. 

(a)        In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares, including any dividend declared to effect a subdivision of the outstanding shares of Common Stock, the warrant purchase price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the warrant purchase price in effect immediately prior to such combination shall be proportionately increased. 

(b)       If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, the Company or such successor or purchasing corporation, as the case may be, shall execute and deliver to the holder a new Warrant providing that the holder shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified therein and in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of the holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the warrant purchase price and of the number of shares purchasable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument executed and mailed to the registered holder hereof at the last address of such holder appearing on the books of the Company, the obligation to deliver to such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 

	 
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(c)        Upon any adjustment of the warrant purchase price, the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to the registered holder of this Warrant at the address of such holder as shown on the books of the Company, which notice shall state the warrant purchase price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 

(d)       If at any time: 

(1)       the Company shall declare any cash dividend on its Common Stock at a rate in excess of the rate of the last cash dividend theretofore paid; 

(2)       the Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than regular cash dividends) to the holders of its Common Stock; 

(3)       the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; 

(4)       there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; or 

(5)       there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, 

then, in any one or more of said cases, the Company shall give written notice, by first-class mail, postage prepaid, addressed to the registered holder of this Warrant at the address of such holder as shown on the books of the Company, of the date on which (A) the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights, or (B) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. Such written notice shall be given at least twenty (20) days prior to the action in question and not less than twenty (20) days prior to the record date or the date on which the Company’s transfer books are closed in respect thereto. 

	 
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(e)        No fractional shares of Common Stock shall be issued upon the exercise of this Warrant, but, instead of any fraction of a share which would otherwise be issuable, the Company shall pay a cash adjustment (which may be effected as a reduction of the amount to be paid by the holder hereof upon such exercise) in respect of such fraction in an amount equal to the same fraction of the market price per share of Common Stock as of the close of business on the date of the written notice of exercise required by Paragraph 1 above. "Market price" for purposes of this Paragraph 4(e) and for purposes of Paragraph 10(c ) hereof shall mean, (i) if the Common Stock is traded on a securities exchange or on the Nasdaq National Market, the closing price of the Common Stock on such exchange or the Nasdaq National Market, or, (ii) if the Common Stock is otherwise traded in the over-the-counter market, the closing bid price, in each case averaged over a period of five (5) consecutive business days prior to the date as of which "market price" is being determined. If at any time the Common Stock is not traded on an exchange or the Nasdaq National Market, or otherwise traded in the over-the-counter market, the "market price" shall be deemed to be the higher of (i) the fair value thereof as determined by any firm of independent public accountants of recognized national standing selected by the Board of Directors of the Company as of the last day of any month ending within sixty (60) days preceding the date as of which the determination is to be made, or (ii) the fair value thereof determined in good faith by the Board of Directors of the Company as of a date which is within fifteen (15) days of the date as of which the determination is to be made. "Market price" and "fair value" shall be determined without regard to any liquidity or minority shareholder limitations in valuing such shares of Common Stock. 

6.         Common Stock . As used herein, the term "Common Stock" shall mean and include the Company’s presently authorized Common Stock and shall also include any capital stock of any class of the Company hereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided that the shares purchasable pursuant to this Warrant shall include shares designated as Common Stock of the Company on the date of original issue of this Warrant or, in the case of any reclassification of the outstanding shares thereof, the stock, securities or assets provided for in Paragraph 4(c ) above. 

7.         No Voting Rights. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company. 

	 
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8.        Notice of Transfer of Warrant or Resale of Shares . The holder of this Warrant, by acceptance hereof, agrees to give written notice to the Company before transferring this Warrant or transferring any Common Stock issuable or issued upon the exercise hereof, describing briefly the manner of any proposed transfer of this Warrant or such holder’s intention as to the disposition to be made of shares of Common Stock issuable or issued upon the exercise hereof. Such holder shall also provide the Company with written representations from the holder and the proposed transferee satisfactory to the Company regarding the transfer of this Warrant or disposition of shares of Common Stock without registration or qualification (under any federal or state law) of this Warrant or the shares of Common Stock issuable or issued upon the exercise hereof. Upon receipt of such written notice and such representations, such holder shall be entitled to transfer this Warrant, or to exercise this Warrant in accordance with its terms and dispose of the shares received upon such exercise or to dispose of shares of Common Stock received upon the previous exercise of this Warrant, all in accordance with the terms of the notice delivered by such holder to the Company, provided that an appropriate legend, if any, respecting the aforesaid restrictions on transfer and disposition may be endorsed on this Warrant or the certificates for such shares. 

 

9.        Transferability. Subject to the provisions of Paragraph 2 and Paragraph 7 hereof, this Warrant and all rights hereunder may be transferred, in whole or in part, at the principal office of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that the bearer of this Warrant, when endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding; but until such transfer on such books, the Company may treat the registered holder hereof as the owner for all purposes. 

This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the principal office of the Company, for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by said holder hereof at the time of such surrender. 

10.       Optional Conversion (Net Exercise) . 

(a)       In addition to and without limiting the rights of the holder of this Warrant under the terms of this Warrant, the holder of this Warrant shall have the right (the "Conversion Right") to convert this Warrant or any portion thereof into shares of Common Stock as provided in this paragraph 10 at any time or from time to time after the Effective Date prior to its expiration. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the holder of this Warrant, without payment by the holder of any exercise price or any cash or other consideration, that number of shares of Common Stock equal to the quotient obtained by dividing the Net Value (as hereinafter defined) of the Converted Warrant Shares by the fair market value (as defined in paragraph (d) below) of a single share of Common Stock, determined in each case as of the close of business on the Conversion Date (as hereinafter defined). The "Net Value" of the Converted Warrant Shares shall be determined by subtracting the aggregate warrant purchase price of the Converted Warrant Shares from the aggregate fair market value of the Converted Warrant Shares. No fractional shares shall be issuable upon exercise of the Conversion Right, and if the number of shares to be issued in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder of this Warrant an amount in cash equal to the fair market value of the resulting fractional share. 

 

	 
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(b)       The Conversion Right may be exercised by the holder of this Warrant by the surrender of this Warrant at the principal office of the Company together with a written statement specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in paragraph (a) above as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the "Conversion Date"), but not later than the expiration date of this Warrant. Certificates for the shares of Common Stock issuable upon exercise of the Conversion Right, together with a check in payment of any fractional share and, in the case of a partial exercise, a new warrant evidencing the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder of this Warrant within five (5) days following the Conversion Date. 

 

(c)       In the event the Conversion Right would, at any time this Warrant remains outstanding, be deemed by the Company’s independent certified public accountants to give rise to a charge to the Company’s earnings for financial reporting purposes, then the Conversion Right shall automatically terminate upon the Company’s written notice to the holder of this Warrant of such adverse accounting treatment. 

 

(d)        For purposes of this paragraph 10, the "fair market value" of a share of Common Stock as of a particular date shall be its "market price", calculated as described in paragraph 4(e) hereof. 

11.       Registration Rights . The holder of this Warrant and of the Common Stock issuable or issued upon exercise hereof shall be entitled to the same registration rights of any kind granted to the founders and other prior investors (the "Prior Investors") as amended (the" Registration Rights Agreement"), a copy of which is attached hereto, subject to the requirement that the Company take all reasonable actions to further amend such Registration Rights Agreement to add this Warrant to the definition of Registrable Common. 

	 
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12.       Company Redemption of Warrant Upon the Warrantholder Put . If the Company has not yet closed on an initial public offering of its shares by February 11, 2006, then the Company shall be obligated to purchase and redeem this Warrant (" Put Right ") for a price equal to $1.50 per share times the number of vested Warrant Shares (the "Put Price" ). The Warrantholder shall exercise its right under this Section by giving written notice to the Company of its intent to exercise its Put Right, and upon the giving of such notice, the Company is obligated to pay the Warrantholder the Put Price within 30 days. Upon payment to the Warrantholder of the Put Price, the Warrantholder is obligated to surrender this Warrant to the Company. 

13.       Securities Law and Other Representations . The holder of this Warrant, by acceptance hereof, represents and warrants that (a) it is acquiring this Warrant for its own account for investment purposes only and not with a view to its resale or distribution and (b) it has no present intention to resell or otherwise dispose of all or any part of this Warrant. Other than pursuant to registration under federal and state securities laws or an exemption from such registration, (y) the Company will not accept the exercise of this Warrant or issue certificates for shares of Warrant Stock and (z) neither this Warrant nor any shares of Warrant Stock may be sold, pledged, assigned or otherwise disposed of (whether voluntarily or involuntarily) except pursuant to Section 2 hereof. The Company may condition such issuance or sale, pledge, assignment or other disposition on the receipt from the party to whom this Warrant is to be so transferred or to whom Warrant Stock is to be issued or so transferred of any representations and agreements requested by the Company in order to permit such issuance or transfer to be made pursuant to exemptions from registration under federal and applicable state securities laws. Each certificate representing the Warrant (or any part thereof) and any shares of Warrant Stock shall be stamped with appropriate legends setting forth these restrictions on transferability. The holder of this Warrant, by acceptance hereof, agrees to give written notice to the Company before exercising or transferring this Warrant or transferring any shares of Warrant Stock of the holder’s intention to do so, describing briefly the manner of any proposed exercise or transfer. Within thirty (30) days after receiving such written notice, the Company shall notify the holder as to whether such exercise or transfer may be effected. 

14.       Choice of Law . All questions concerning this Warrant will be governed and interpreted and enforced in accordance with the internal law of the State of Florida without regard for principles of conflict of law. 

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer and this Warrant to be dated as of June 16, 2003. 

	
 
	
/s/ Rich Parlontieri

		

	
 
	
By: Rich Parlontieri 

	
 
	
Its: President/CEO 

	 
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FORM OF ASSIGNMENT 

(TO BE SIGNED ONLY UPON ASSIGNMENT) 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________________ this Warrant, and appoints _______________________to transfer this Warrant on the books of the Company, with the full power of substitution in the premises. 

Dated: _______________ 

In the presence of: 

	
 
	
Signature: 
	
 

			

                                                                                                                                   Note: The signature must conform in all respect to the name of the holder 

                                                                                                                                   as written on the face of this Warrant without alteration, enlargement or 

                                                                                                                                   any change whatsoever, and the signature must be guaranteed in the usual

                                                                                                                                   manner. 

	 
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SUBSCRIPTION FORM 

TO BE EXECUTED BY THE HOLDER OF THIS WARRANT IF SUCH HOLDER 

DESIRES TO EXERCISE THIS WARRANT IN WHOLE OR IN PART 

To:       _________________ (the "Company") 

The undersigned, __________________________, 

(taxpayer identification number: _______________), 

hereby irrevocably elects to exercise the right of purchase represented by this Warrant for, and to purchase thereunder, __________________ shares of the Common Stock provided for therein and tenders payment herewith to the order of the Company in the amount of $_____________________, such payment being made as provided on the face of this Warrant. 

The undersigned requests that certificates for such shares of Common Stock be issued as follows: 

	
Name: 
	
 
	
 

			

	
 
	
 
	
 

	
Address: 
	
 
	
 

			

	
 
	
 
	
 

	
 
	
 
	
 

			

	
 
	
 
	
 

	
Deliver to: 
	
 
	
 

			

	
 
	
 
	
 

	
Address: 
	
 
	
 

			

and, if such number of shares of Common Stock shall not be all the shares of Common Stock purchasable hereunder, that a new Warrant for the balance remaining of the shares of Common Stock purchasable under this Warrant be registered in the name of, and delivered to, the undersigned at the address stated above. 

Dated: ______________________________ 

	
 
	
Signature: 
	
 

			

                                                                                                                                  Note: The signature must conform in all respects

                                                                                                                                  to the name of the holder as written on the face of this

                                                                                                                                 Warrant without alteration, enlargement or any

                                                                                                                                  change whatsoever. 

	

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