Document:

Filed by Bowne Pure Compliance

 

Exhibit 4.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made as of January 15, 2008,
by and among SMART MOVE, INC., a Delaware corporation (the “Company”), and each of those
persons and entities, severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (which persons and entities are hereinafter collectively
referred to as “Purchasers” and each individually as a “Purchaser”).

RECITALS

WHEREAS, the Company has authorized the sale and issuance of secured convertible debentures,
warrants and common stock issuable upon exercise of the warrants (collectively, the
“Securities”) as provided herein;

WHEREAS, at the Closing (as defined herein), the Company desires to sell, and each Purchaser
desires to purchase, severally and not jointly, the Securities upon the terms and conditions stated
in this Agreement; and

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

ARTICLE 1

AUTHORIZATION AND SALE OF SECURITIES

1.1 Authorization. The Company has authorized the sale and issuance of up to $3,500,000 in
principal amount of its 11% Secured Convertible Debentures at an original issue discount of 15%
(the “Debentures”) and warrants (the “Warrants”) to purchase shares of its common
stock, par value $.0001 (the “Common Stock”).

1.2 Sale of Securities. At the Closing, subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser, severally and not jointly, and
each Purchaser agrees to purchase from the Company, severally and not jointly, securities
consisting of the instruments identified in (a) and (b) below, and to execute and deliver the other
documents identified in (c), (d) and (e) below:

(a) Debentures in the principal amount set forth opposite such Purchaser’s name on Exhibit A
under the heading “Principal Amount of Debentures”; and

(b) Warrants to purchase the number of shares of Common Stock set forth opposite such
Purchaser’s name on Exhibit A under the heading “Common Shares Underlying Warrants.” The shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as the “Warrant
Shares.” The number of Warrant Shares shall be equal to fifty percent (50%) of the shares of
Common Stock which would be issuable upon conversion of the Debentures at the “Fixed Conversion
Price” or such lower price as defined in the Debentures, and Warrants shall be exercisable at $1.00
per share.

 

 

 

(c) A Security Agreement (the “Security Agreement”) among the Company and the
Purchasers;

(d) A Registration Rights Agreement (the “Registration Rights Agreement”) among the
Company and the Purchasers. This Agreement, the Securities, the Security Agreement, the Pledge
Agreement and the Registration Rights Agreement are sometimes collectively referred to herein as
the “Transaction Documents.”

1.3 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Purchaser under this Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser hereunder. The decision of each Purchaser to purchase the Securities
pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser.
Nothing contained herein or therein, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the transactions contemplated
hereby. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser
in connection with making its investment hereunder and that no Purchaser will be acting as agent of
such Purchaser in connection with monitoring its investment in the Securities or enforcing its
rights under this Agreement. Each Purchaser shall be entitled independently to protect and enforce
its rights, including without limitation the rights arising out of this Agreement, and it shall not
be necessary for any other Purchaser to be joined as an additional party in any proceeding for such
purpose.

ARTICLE 2

CLOSING DATE; DELIVERY

2.1 Closing Date. The closing of the purchase and sale of the Securities hereunder (the
“Closing”) shall be held at the offices of                                         , at
 _____ 
:
 _____ 
..m. New York
time on or before January 15, 2008 or at such other time and place upon which the Company and the
Purchasers purchasing, in the aggregate, the majority in principal amount of the Debentures (the
“Majority in Interest”) shall agree.

2.2 Delivery. At the Closing, the Company will deliver to each Purchaser a duly executed
Debenture in the principal amount set forth opposite such Purchaser’s name on Exhibit A, a Warrant
representing the right to purchase the number of Warrant Shares which such Purchaser is entitled to
purchase and a signed counterpart of each of the other Transaction Documents. Such delivery shall
be against payment of the purchase price therefor by wire transfer of immediately available funds
to the Company in accordance with the Company’s written wiring instructions, which instructions
shall have been delivered to Purchasers’ counsel. The Company shall also deliver to the Purchasers
(a) an opinion of Messner & Reeves, LLC., counsel to the Company, in form and substance
satisfactory to the Majority in Interest and (b) a certificate from a duly authorized officer of
the Company certifying that the representations made by the Company in Article 3 are true and
correct as of the Closing.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchasers, as of the date hereof, as follows:

3.1 Organization and Standing. The Company is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Delaware and is in good standing under
the laws of said state, with requisite corporate power and authority to own its properties and
assets and to carry on its business as currently conducted. The Company is not in violation of any
of the provisions of its Certificate of Incorporation (the “Certificate”) or Bylaws.

3.2 Corporate Power; Authorization. The Company has all requisite legal and corporate power
and has taken all requisite corporate action to execute and deliver this Agreement and the other
Transaction Documents, to sell and issue the Securities, to issue the Warrant Shares upon exercise
of the Warrants in accordance with the terms of such Warrants, and to carry out and perform all of
its obligations under this Agreement and the Warrants. This Agreement, the Security Agreement, the
Pledge Agreement and the Registration Rights Agreement constitute, and upon execution and delivery
by the Company of the Debentures and the Warrants, the Debentures and the Warrants will constitute,
legal, valid and binding obligations of the Company, enforceable in accordance with their
respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting the enforcement of creditors’ rights generally and (b) as
limited by equitable principles generally. The execution and delivery of the Transaction Documents
do not, and the performance of the Transaction Documents and the compliance with the provisions
hereof and thereof, including the issuance, sale and delivery of the Securities by the Company will
not, conflict with, or result in a breach or violation of the terms, conditions or provisions of,
or constitute a default under, or result in the creation or imposition of any lien pursuant to the
terms of, the Certificate or Bylaws of the Company, each as amended to date, or any statute, law,
rule or regulation or any state or federal order, judgment or decree or any indenture, mortgage,
lease or other agreement or instrument to which the Company or any of its properties is subject,
except for any conflict, breach, violation, default or imposition of a lien (other than pursuant to
the terms of the Certificate or Bylaws) that would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the assets, liabilities, financial
condition, business or operations of the Company.

3.3 Issuance and Delivery of the Securities. The Securities are duly authorized and, when
issued at the Closing, will be validly issued, and the Common Stock underlying the Debentures, when
issued, will be fully paid and nonassessable. The Warrant Shares are duly authorized and, upon
exercise of the Warrants in accordance with the terms thereof, will be validly issued, fully paid
and nonassessable. The issuance and delivery of the Securities is not subject to any right of
first refusal, preemptive right, right of participation, or any similar right existing in favor of
any person or any liens or encumbrances. When issued in compliance with the provisions of this
Agreement and the Certificate, the issuance of the Securities hereunder does not require the
approval of the Company’s stockholders under the provisions of the Certificate or Delaware law, or,
any stock exchange or self-regulatory organization.

3.4 SEC Documents; Financial Statements. The Company has timely filed when due (or obtained
extensions in respect thereof and filed within the applicable grace period) all reports, schedules,
forms, statements and other documents required to be filed by it with the Securities and Exchange
Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) during the twelve calendar months preceding the date hereof, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing
including filings incorporated by reference therein being referred to herein as the

 

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“SEC Documents”. The Company has delivered or made available to the Purchasers via
EDGAR or another Internet web-site true and complete copies of the SEC Documents. As of their
respective filing dates, all SEC Documents complied in all material respects with the requirements
of the Exchange Act. None of the SEC Documents as of their respective dates contained any untrue
statement of material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Documents (the
“Financial Statements”) comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with respect thereto. The
Financial Statements have been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the consolidated financial position of the Company and its
subsidiaries, if any, at the dates thereof and the consolidated results of their operations and
consolidated cash flows for the periods then ended (subject, in the case of unaudited statements,
to normal, recurring adjustments or to the extent that such unaudited statements do not include
footnotes).

3.5 Governmental Consents. No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state, or local governmental
authority on the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement except for filing of a Form D with respect to the
Securities as required under Regulation D and notice filings required pursuant to applicable “blue
sky” laws in the states in which the Securities are offered and/or sold. The Company shall take all
other necessary action and proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities in compliance with such laws.

3.6 Capitalization.

(a) The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock
of which, as of the date immediately prior to Closing, 10,979,699 shares were issued and
outstanding, and

(b) Except (i) as disclosed to the Purchasers in Schedule 3.6 of the “Exceptions
Schedule,” attached hereto as Exhibit “B” and made a part hereof, or (ii) as contemplated
herein, there are no outstanding warrants, options, convertible or exchangeable securities or other
rights, agreements or arrangements of any character under which the Company is or may be obligated
to issue any equity securities of any kind.

3.7 Litigation. Except as disclosed to the Purchasers in writing and except as disclosed in
the SEC Documents, there are no actions, suits, proceedings or investigations pending or, to the
best of the Company’s knowledge, threatened against the Company or any of its properties before or
by any court or arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood (in the reasonable judgment of the Company) of an adverse decision that (a)
could have a material adverse effect on the assets, liabilities, financial condition, business or
operations of the Company, or (b) could impair the ability of the Company to perform in any
material respect its obligations under this Agreement, the Debentures or the Warrants or any other
Transaction Document.

 

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3.8 Company not an “Investment Company". The Company has been advised by competent counsel of
the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not, and immediately after
receipt of payment for the Securities will not be, an “investment company” or an entity
“controlled” by an “investment company” within the meaning of the Investment Company Act and shall
conduct its business in a manner so that it will not become subject to the Investment Company Act.

3.9 Compliance. The Company’s Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is listed on the American Stock Exchange (the “AMEX”), and the Company has
taken no action designed for the purpose of, or likely to have the effect of, terminating the
registration of its Common Stock under the Exchange Act or de-listing the Common Stock from the
AMEX, nor has the Company received any notification that the SEC or the AMEX is contemplating
terminating such registration or listing. The Company is in material compliance with the listing
and maintenance requirements for continued listing of the Common Stock on the AMEX.

3.10 Use of Proceeds. The proceeds of the sale of the Securities shall be used to pay off (or
acquire, to the extent structured as a debt acquisition for Investors’ collateral purposed) all
current bank debt, including that of Silicon Valley Bank. Any remaining proceeds shall be used for
general corporate purposes.

3.11 Brokers and Finders. Except as otherwise disclosed to the Purchasers in writing prior to
the date hereof, no person or entity will have, as a result of or in connection with the
transactions contemplated by this Agreement, any valid right, interest or claim against or upon the
Company or any Purchaser for any commission, fee or other compensation pursuant to any agreement,
arrangement or understanding, written or oral, entered into by or on behalf of the Company.

3.12 Intellectual Property.

(a) “Intellectual Property” shall mean patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes.

(b) Except as disclosed in the SEC Documents and to the best knowledge of the Company, the
Company owns or has the valid right to use all of the Intellectual Property that is necessary for
the conduct of the Company’s business as currently conducted or as currently proposed to be
conducted free and clear of all material liens and encumbrances.

(c) Except as disclosed to the Purchasers in writing or as disclosed in the SEC Documents and
to the knowledge of the Company, (i) the conduct of the Company’s business as currently conducted
does not infringe or otherwise conflict with (collectively, “Infringe”) any Intellectual
Property rights of any third party or any confidentiality obligation owed by the Company to a third
party and the Company has not received any written notice of any such Infringement, and (ii) the
Intellectual Property and confidential information of the Company are not being Infringed by any
third party.

(d) Each employee, consultant and contractor of the Company who has had access to confidential
information of the Company which is necessary for the conduct of Company’s business as currently
conducted or as currently proposed to be conducted has executed an agreement to maintain the
confidentiality of such confidential information and has executed agreements that are substantially
consistent with the Company’s standard forms thereof.

 

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3.13 Questionable Payments. Neither the Company nor, to the best knowledge of the Company,
any of its current or former stockholders, directors, officers, employees, agents or other persons
acting on behalf of the Company, has on behalf of the Company or in connection with its business:
(a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious
entries on the books and records of the Company; or (e) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment of any nature.

3.14 Transactions with Affiliates. Except as disclosed in the SEC Documents, none of the
officers, directors or shareholders of the Company and, to the best knowledge of the Company, none
of the employees of the Company is presently a party to any transaction with the Company or to a
presently contemplated transaction (other than for services as employees, officers and directors)
that would be required to be disclosed pursuant to Item 404 of Regulation S-B promulgated under the
Securities Act of 1933.

3.15 Insurance. The Company maintains and will continue to maintain insurance with
financially sound and reputable insurers in such amounts and covering such risks and in such
amounts as are reasonably adequate, prudent and consistent with industry practice for the conduct
of its business and the value of its property, all of which insurance is in full force and effect.
The Company has not received notice from, and has no knowledge of any threat by, any insurer that
has issued any insurance policy to the Company that such insurer intends to deny coverage under or
cancel, discontinue or not renew any insurance policy in force as of the date hereof.

3.16 No Additional Agreements. The Company does not have any agreement or understanding with
any Purchaser with respect to the transactions contemplated by this Agreement other than as
specified in this Agreement.

3.17 Absence of Undisclosed Liabilities. The Company has no material liabilities of any
nature (whether absolute, accrued, contingent or otherwise), except (i) as and to the extent
reflected in the Financial Statements as of and for the fiscal year ended December 31, 2007, and
(ii) for liabilities that have been incurred in the ordinary course of business consistent with
past practice since December 31, 2007 and that would not, individually and in the aggregate,
reasonably be expected to have a material adverse effect on the assets, financial condition,
business or operations of the Company.

3.18 Governmental Authorizations. The Company has all permits, licenses and other
authorizations of governmental authorities that are required for the conduct of its business and
operations as currently conducted or as currently proposed to be conducted, the lack of which could
materially and adversely affect the assets, financial condition, business or operations of the
Company, except as described in the SEC Documents. The Company is, and at all times has been, in
compliance with the provisions of its material permits, licenses and other governmental
authorizations.

3.19 No Material Adverse Change. Except as otherwise disclosed herein or in the SEC
Documents, since December 31, 2007, there have not been any changes in the assets, liabilities,
financial condition or operations of the Company from that reflected in the Financial Statements
except changes in the ordinary course of business which have not been, either individually or in the aggregate, materially adverse. The Company does not have pending before the SEC any
request for confidential treatment of information.

 

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3.20 Reservation. The Company has duly reserved for issuance such number of shares of Common
Stock as may be issuable from time to time upon exercise or conversion, as the case may be, of the
Securities.

3.21 Internal Accounting Controls. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as defined in
Exchange Rules 13a-15 and 15d-15) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company is made known to the
certifying officers by others within those entities, particularly during the period in which the
Company’s Form 10-K or 10-Q, as the case may be, is being prepared.

3.22 Title to Assets. Except as disclosed to Purchasers in Schedule 3.22 of the Exceptions
Schedule attached as Exhibit “B,” the Company has good and marketable title in fee simple to all
real property owned by it that is material to the business of the Company and good and marketable
title in all tangible personal property owned by them that is material to the business of the
Company in each case free and clear of all liens, except for liens identified in Schedule 3.22 or
as do not materially affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company, and liens for the payment of federal,
state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company is held by it under valid, subsisting
and enforceable leases with which the Company is in material compliance.

3.23 Registration Rights. Except as disclosed to the Purchasers in Schedules 3.23, the
Company has not granted or agreed to grant to any person any rights (including “piggy back”
registration rights) to have any securities of the Company registered with the SEC or any other
governmental authority.

3.24 Material Non-Public Information. The Company confirms that it has not provided any of
the Purchasers or their agents or counsel with any information that constitutes or might constitute
material non-public information as of the Closing Date (other than with respect to the transactions
contemplated by this Agreement). The Company understands and confirms that the Purchasers shall be
relying on the foregoing representations in effecting transactions in securities of the Company.

 

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ARTICLE 4

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS

Each Purchaser hereby severally represents and warrants to the Company:

4.1 Authorization. (a) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and deliver this
Agreement, the Security Agreement, the Pledge Agreement, the Registration Rights Agreement to
purchase the Debentures and the Warrants to be purchased by it and to carry out and perform all of
its obligations under this Agreement and the other Transaction Documents, and (b) this Agreement
and the other Transaction Documents to which a Purchaser is a party constitutes the legal, valid
and binding obligation of such Purchaser, enforceable in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or
affecting the enforcement of creditors’ rights generally and (ii) as limited by equitable
principles generally.

4.2 No Legal, Tax or Investment Advice. Purchaser understands that nothing in this Agreement
or any other materials presented to Purchaser in connection with the purchase and sale of the
Debentures and the Warrants constitutes legal, tax or investment advice. Purchaser has consulted
such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Debentures.

4.3 Purchaser’s Status. Each Purchaser is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer.
Purchaser understands that the Securities must be held indefinitely unless such Securities are
registered under the Securities Act or an exemption from registration is available and confirms
that Purchaser is familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act (“Rule 144”), and that Purchaser has
been advised that Rule 144 permits resales only under certain circumstances. Such Purchaser
understands that to the extent that Rule 144 is not available, such Purchaser will be unable to
sell any Securities without either registration under the Securities Act or the existence of
another exemption from such registration requirement. Purchaser understands that the Securities
are being offered and sold in reliance on an exemption from the registration requirement of Federal
and state securities laws and the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of Purchaser set forth
herein in order to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities.

4.4 Short Sales. Each Purchaser has not, during the last thirty (30) days prior to the
date hereof, directly or indirectly, nor has any party acting on behalf of or pursuant to any
understanding with such Purchaser, effected or agreed to effect any short sale, whether or not
against the box, established any “put equivalent position” (as defined in Rule 16(a)-1(h) under the
Exchange Act) with respect to any security of the Company, granted any other right (including,
without limitation, any put or call option) with respect to any security of the Company or with
respect to any security that includes, relates to, or derives any significant part of its value
from any security of the Company or otherwise sought to hedge its positioning of the Company’s
securities. Each Purchaser shall not, and shall cause any affiliates not to, engage, directly or
indirectly, in any hedging or short sale transactions in the securities of the Company (including,
without limitation, any short sales) involving the Company’s securities during the period from the
date hereof until one (1) year after the effectiveness of any registration statement filed by the
Company covering the Common Stock underlying the Securities.

 

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ARTICLE 5

ADDITIONAL AGREEMENTS OF THE COMPANY

5.1 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. Eastern time on
the third business day following the date of this Agreement, issue a press release or file a
Current Report on Form 8-K, in each case reasonably acceptable to the Majority in Interest on
behalf of the Purchasers, disclosing the transactions contemplated hereby. The Company and the
Majority in Interest shall consult with each other in issuing any press releases with respect to
the transactions contemplated hereby, and none of the Company, the Majority in Interest, or any
Purchaser shall issue any such press release or otherwise make any such public statement without
the prior consent of the Company (in the case of any press release or public statement proposed to
be issued by the Majority in Interest or any Purchaser) or without the prior consent of the
Majority in Interest on behalf of the Purchasers (in the case of any press release or public
statement proposed to be issued by the Company), which consent shall not unreasonably be withheld,
except if such disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with notice of such public statement or communication and consult with each
other with respect thereto prior to such public disclosure. Notwithstanding the foregoing, other
than as set forth above, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any regulatory agency or
stock exchange, except to the extent such disclosure is required by law or stock exchange
regulation, in which case the Company shall provide the Purchasers with prior notice of such
disclosure.

5.2 Listing of Common Stock. The Company hereby agrees to use commercially reasonable efforts
to secure and maintain the listing on the AMEX of the Common Stock underlying the Securities sold
hereunder. The Company further agrees, if the Company applies to have its Common Stock traded on
any other stock exchange or quotation system, it will include in such application the Common Stock
issuable upon conversion of the Debentures or exercise of the Warrants, and will take such other
action as is necessary or desirable in the opinion of the Purchasers to cause the Common Stock
underlying the Securities to be listed on such other stock exchange or quotation system as promptly
as possible.

5.3 All Assets Free and Clear. As a condition to Closing, the Company shall deliver to
Purchaser (as “Lender” pursuant to the Debentures) UCC lien searches, judgment searches, federal
and local tax lien searches and all other documents reasonably requested by Lender to demonstrate
that any and all assets with respect to which Lender is acquiring or being granted a security
interest are free and clear of all liens, claims and encumbrances, except as specifically noted on
Schedule 3.22 of the Exceptions Schedule or to the extent any liens, claims and encumbrances shall
be acquired as security for the benefit of Lender or satisfied from the proceeds of this
transaction.

ARTICLE 6

MISCELLANEOUS

6.1 Waivers and Amendments. The terms of this Agreement may be waived or amended only upon
the written consent of the Company and the Majority in Interest.

 

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6.2 Governing Law. This Agreement shall be governed in all respects by and construed in
accordance with the laws of the State of New York without any regard to conflicts of laws
principles.

6.3 Survival. The representations, warranties, covenants and agreements made in this
Agreement shall survive any investigation made by the Company or the Purchasers and the Closing.

6.4 Successors and Assigns. No Purchaser shall assign this Agreement without the prior
written consent of the Company.

6.5 Entire Agreement. This Agreement and the other Transaction Documents constitute the full
and entire understanding and agreement between the parties with regard to the subjects thereof.

6.6 Notices, etc. All notices and other communications required or permitted under this
Agreement shall be in writing and may be delivered in person, by telecopy, overnight delivery
service or registered or certified United States mail, addressed to the Company or each of the
Purchasers, as the case may be, at their respective addresses set forth at the beginning of this
Agreement or on Exhibit A, or at such other address as the Company, on the one hand, or a
Purchaser, on the other hand, shall have furnished to the other party in writing. All notices and
other communications shall be effective upon the earlier of actual receipt thereof by the person to
whom notice is directed or (a) in the case of notices and communications sent by personal delivery
or telecopy, one business day after such notice or communication arrives at the applicable address
or was successfully sent to the applicable telecopy number, (b) in the case of notices and
communications sent by overnight delivery service, at noon (local time) on the second business day
following the day such notice or communication was sent, and (c) in the case of notices and
communications sent by United States mail, seven days after such notice or communication shall have
been deposited in the United States mail.

6.7 Severability of this Agreement. If any provision of this Agreement shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

6.8 Counterparts; Signatures by Facsimile. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together shall constitute one
instrument. This Agreement, once executed by a party, may be delivered to the other parties hereto
by facsimile transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

6.9 Further Assurances. Each party to this Agreement shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all such other
agreements, certificates, instruments and documents as the other party hereto may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

6.10 Expenses. Each party shall bear its own expenses, except that the Company agrees to pay
Professional Offshore Opportunity Fund, Ltd. and Professional Traders Fund, LLC for their legal
expenses and counsel fees with respect to this Agreement and the transactions contemplated in the
aggregate amount of $30,000 and agrees to pay Professional Traders Management, LLC the sum of $25,000 as a non-accountable due diligence fee. Expenses under
this provision shall be paid at Closing.

 

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6.11 Replacement of Securities. If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution therefore, a new
certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and customary and reasonable indemnity, if requested. The
applicants for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement Securities.

 

11

 

IN WITNESS WHEREOF, this Agreement is hereby executed as of the date first above written.

	 	 	 	 	 
	 	SMART MOVE, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PROFESSIONAL OFFSHORE
OPPORTUNITY FUND, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PROFESSIONAL TRADERS FUND, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PURCHASER DESIGNATED BY SMART MOVE, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

12

 

EXHIBIT A

SCHEDULE OF PURCHASERS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Common	 
	 	 	Principal Amount	 	 	Shares Underlying	 
	PURCHASER	 	of Debenture	 	 	Warrant	 
	Professional Offshore Opportunity Fund, Ltd.

1400 Old Country Road

Suite 206

Westbury, New York 11590
	 	$	2,800,000	 	 	1,866,666 shares
	Professional Traders Fund, LLC.

1400 Old Country Road

Suite 206

Westbury, New York 11590
	 	$	200,000	 	 	133,333 shares
	Other Investor to be Designated by
Smart Move, Inc.
	 	$	500,000	 	 	333,333 shares
	 
	 	 	 	 	 	 	 	 
	Total
	 	$	3,500,000	 	 	2,333,332 shares

 

13

 

EXHIBIT “B”

EXCEPTIONS SCHEDULEFiled by Bowne Pure Compliance

 

Exhibit 4.2

THIS SECURED CONVERTIBLE DEBENTURE AND THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND
THIS SECURED CONVERTIBLE DEBENTURE, THE SECURITIES AND ANY INTEREST THEREIN MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH
LAWS, WHICH, IN THE OPINION OF COUNSEL FOR THE LENDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

SMART MOVE, INC.

SECURED CONVERTIBLE DEBENTURE

	 	 	 
	Issue Amount: $2,800,000

	 	New York, New York
	 

	 	January 15, 2008

FOR VALUE RECEIVED, the undersigned, Smart Move, Inc., a Delaware corporation (referred to
herein as the “Borrower”), with offices at 5990 Greenwood Plaza Blvd., Suite 390, Greenwood
Village, Colorado 80111, hereby unconditionally promises to pay to the order of PROFESSIONAL
OFFSHORE OPPORTUNITY FUND, LTD., its endorsees, successors and assigns (the “Lender”), in lawful
money of the United States, at 1400 Old Country Road, Suite 206, Westbury, New York 11590, or such
other address as the Lender may from time to time designate, the principal sum of two million eight
hundred thousand Dollars ($2,800,000) (the “Issue Amount”). This Debenture shall mature and become
due and payable in full on January 15, 2010 (the “Maturity Date”).

1. Original Issue Discount. The Lender shall purchase this Debenture at a price equal to 85%
of the Issue Amount which shall represent a 15% Original Issue Discount.

2. Terms of Repayment. Principal of and interest on this Debenture shall be paid by
the Borrower as follows:

(a) Interest at the rate of eleven percent (11%) per annum from the date hereof through the
Maturity Date shall be paid monthly by the Borrower in cash or, at the sole option of the Borrower,
in registered shares of common stock at a 15% discount to the closing bid price of the common stock
for the average of the lowest five (5) trading days during the previous twenty (20) days
immediately preceding the payment date.

 

 

 

(b) Principal shall be due and payable as follows:

Beginning on August 1, 2008 and on the first day of each month thereafter, unless deferred by
Lender under the Deferral Right, defined below, principal in the amount of $155,680, representing 5.56% of the original principal (the “Principal Payment”) of the Loan, shall
be due. For each such payment that is due and made in cash (“Cash Principal Payment”) there shall
be an additional premium to compensate the Lender for the risk of holding Borrower’s securities
(the “Risk Premium”) payable as follows: (i) prior to the effective date of the filing of an SB-2
representing the Lender shares as further described in the Registration Rights Agreement (the
“Effective Date”), equal to 20% of each such Cash Principal Payment; and (ii) after the Effective
Date, a Risk Premium equal to 15% of each such Cash Principal Payment.

Should the Borrower elect to pay in Common Stock, the Risk Premium is not applicable and the
Principal Payment subject to the Percentage Cap (as defined in Section 3, below) will be valued at
the lesser of the Fixed Conversion Price (as defined in Section 3, below) per share or 80% of the
Fair Market Value of the Common Stock on the date of payment. “Fair Market Value” on a
date shall be the average of the daily closing prices for the five (5) consecutive trading days
before such date excluding any trades which are not bona fide arm’s length transactions. The
closing price for each day shall be: (a) if such security is listed or admitted for trading on any
national securities exchange, the last sale price of such security, regular way, or the mean of the
closing bid and asked prices thereof if no such sale occurred, in each case as officially reported
on the principal securities exchange on which such security are listed; or (b) if quoted on NASDAQ
or any similar system of automated dissemination of quotations of securities prices then in common
use the mean between the closing high bid and low asked quotations of such security in the
over-the-counter market as shown by NASDAQ or such similar system of automated dissemination of
quotations of securities prices, as reported by any member firm of the New York Stock Exchange
selected by the Lender; or (c) if not quoted as described in clause (b), the mean between the high
bid and low ask quotations for the shares as reported by NASDAQ or any similar successor
organization, as reported by any member firm of the New York Stock Exchange selected by the Lender.
If such security is quoted on a national securities or central market system in lieu of a market
or quotation system described above, the closing price shall be determined in the manner set forth
in clause (a) of the preceding sentence if bid and ask quotations are reported but actual
transactions are not, and in the manner set forth in clause (b) of the preceding sentence if actual
transactions are reported. Lender’s “Deferral Right” means that the Lender, in its sole
and absolute discretion may defer any scheduled payment of principal, in whole or in part, by
giving three (3) days prior written notice to the Borrower, with any such deferred principal
payment, in whole or in part, becoming payable three (3) days after Lender’s written demand
therefor, provided, however, that to the extent the “Percentage Cap” as defined in Section 3 (e)
below would be exceeded in whole or in part as a result of Borrower’s payment of the deferred
principal so demanded in Common Stock, in which event the deferred principal or portion thereof
which the Company is required to pay in cash as a result of the Percentage Cap limitation on share
issuance to Lender shall be payable on the earlier of sixty (60) days after Lender’s written demand
or on the first date after Borrower’s receipt on such demand on which the Percentage Cap or portion
thereof precluding the remittance of such payment or a portion thereof in Common Stock would be
inapplicable.

In the event the Lender elects to exercise its Deferral Right and subsequently demands
payment, if the Borrower then elects to pay in Common Stock, the conversion price will be
determined in the same manner as if the Deferral Right was not exercised (as described above) and
the Borrower elected to pay in Common Stock, except that the Fair Market Value of the Common Stock
shall be as of the date of the Lender’s written demand of payment.

 

 

 

Specifically, the Risk Premium shall not be applicable and the Principal Payment subject to
the Percentage Cap (as defined in Section 3 (e) below) will be valued at the lesser of the Fixed
Conversion Price (as defined in Section 3, below) per share or 80% of the Fair Market Value of the
Common Stock on the date of payment.

(c) The Borrower further agrees that, if any payment made by the Borrower or any other person
is applied to this Debenture and is at any time annulled, set aside, rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the
proceeds of any property hereafter pledged as security for this Debenture is required to be
returned by Lender to the Borrower, its estate, trustee, receiver or any other party, including,
without limitation, under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, the Borrower’s liability hereunder (and any lien,
security interest or other collateral securing such liability) shall be and remain in full force
and effect, as fully as if such payment had never been made, or, if prior thereto any such lien,
security interest or other collateral hereunder securing the Borrower’s liability hereunder shall
have been released or terminated by virtue of such cancellation or surrender, this Debenture (and
such lien, security interest or other collateral) shall be reinstated in full force and effect, and
such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise
affect the obligations of the Borrower in respect to the amount of such payment (or any lien,
security interest or other collateral securing such obligation).

(d) All computations of interest shall be made by Lender on the basis of a year of 360 days
for the actual number of days (including the first day but excluding the last day) occurring in the
period for which such interest is payable. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a business day, such payment shall be made on the next
succeeding day and such extension of time shall in such case be included in the computation of
payment of interest.

(e) The Borrower may prepay all or any part of the outstanding principal amount of this
Debenture, together with any unpaid interest accrued through the date of prepayment, plus a premium
(equal to 25% for principal prepaid before January
 _____ 
, 2009 or 40% of the principal prepaid after
January
 _____ 
, 2009), upon not fewer than ten (10) trading days’ prior written notice to the Lender.
In the event such prepayment occurs prior to January
 _____ 
, 2009, the amount paid, including the
premium, shall be 125% of the principal deemed prepaid; and, in the event such prepayment occurs
after January
 _____ 
, 2009, the amount paid, including the premium, shall be 140% of the principal
deemed prepaid.

3. Conversion.

(a) The Lender shall have the option, at any time on or before the Maturity Date, to convert
the outstanding principal of this Debenture into fully-paid and nonassessable shares of Borrower’s
Common Stock at the rate per share equal to the lowest of (i) the Fixed Conversion Price, (ii) the
Lowest Fixed Conversion Price or (iii) the Default Conversion Price (the “Conversion Rate”). As
used herein, the following terms have the following meanings:

(i) Fixed Conversion Price means $0.75 per share.

 

 

 

(ii) Lowest Fixed Conversion Price means the lowest price, conversion price or exercise price
set by the Borrower in any equity financing transaction, convertible security, or derivative instrument issued after the date hereof in a “New Transaction.” The term “New
Transaction” as used in this Debenture and in any other Transaction Document, means any financing
transaction consummated directly or indirectly by the Company with parties other than the Lender
involving issuance of Common Stock or other securities convertible into or exercisable for Common
Stock; provided, however, that the following share issuances shall not be deemed a New Transaction:
(i) issuances pursuant to Employee Stock Ownership Plans, ii) transactions with strategic industry
or operating partners of the Company involving the issuance of Common Stock or securities
convertible into Common Stock, or upon the exercise of warrants related to the deal terms of the
foregoing or (iii) issuance of stock options or warrants to employees, officers or directors
pursuant to compensation arrangements approved by the Borrower’s Board of Directors.

(iii) The Default Conversion Price means (if and so long as there exists an Event of Default
hereunder) 70% of the average of the three lowest closing prices of the Common Stock during the
twenty (20) day trading period immediately prior to a notice of conversion.

(b) If, but only if, a registration statement under the Securities Act of 1933, as amended, is
effective covering sales of the Common Stock issuable upon exercise of this Debenture, then the
Borrower may require the Lender to convert the remaining principal amount outstanding in one of the
following manners: (i) in the event the Fair Market Value of the Common Stock for at least the
immediately preceding ten consecutive trading days prior to delivery of a Borrower Conversion
Notice (defined below) is not less than 175% of the Conversion Rate in effect on the date of such
Notice and the average volume during such ten (10) day period is at least 100,000 shares per day,
then the Company may send a notice (the “Borrower Conversion Notice”) to the Lender requiring them
to convert any portion of their notes that remain outstanding at that time; (ii) in the event the
Fair Market Value of the Common Stock for at least the immediately preceding ten consecutive
trading days prior to delivery of a Borrower Conversion Notice (defined below) is not less than
175% of the Conversion Rate in effect on the date of such Notice and the average volume during such
ten (10) day period is at least 75,000 shares per day, then the Company may send the Borrower
Conversion Notice to the Lender requiring them to convert 50% of their notes that remain
outstanding at that time; or (iii) in the event the Fair Market Value of the Common Stock for at
least the immediately preceding ten consecutive trading days prior to delivery of a Borrower
Conversion Notice (defined below) is not less than 175% of the Conversion Rate in effect on the
date of such Notice and the average volume during such ten (10) day period is at least 50,000
shares per day, then the Company may send a notice (the “Borrower Conversion Notice”) to the Lender
requiring them to convert 25% of their notes that remain outstanding at that time.

In the event such registration statement for any reason, whether by stop order, lapse of time
or other event, becomes ineffective or otherwise unavailable for the sale of the Common Stock
issuable upon conversion of this Debenture at any time within ninety (90) days after such
conversion, the Lender may deem the conversion null and void and the Borrower shall, upon request
of the Lender and receipt of any stock certificates held by the Lender evidencing shares issued
upon such conversion, reissue this Debenture for the remaining principal amount and pay any
principal that would have been payable during such period, all as if such conversion had not
occurred.

To exercise any conversion, the holder of this Debenture, either upon its own election or
following receipt of the Borrower Conversion Notice, shall surrender the Debenture to the Borrower during usual business hours at the offices of the Borrower, accompanied by a written
notice in the form attached hereto as Exhibit A, Notice of Conversion, and made a part hereof.

 

 

 

(c) As promptly as practicable after the surrender of this Debenture by the Lender, the
Borrower shall deliver or cause to be delivered to the Lender, certificates for the full number of
Shares issuable upon conversion of this Debenture, in accordance with the provisions hereof,
together with a duly executed new Debenture of the Borrower in the form of this Debenture for any
principal amount not so converted. Such conversion shall be deemed to have been made at the time
that this Debenture was surrendered for conversion and the notice specified herein shall have been
received or delivered (in the case of a Borrower Conversion Notice) by the Borrower. If, however,
the Borrower fails to deliver or cause the Transfer Agent for the Common Stock of the Borrower to
deliver or otherwise credit Lender with ownership of the full number of shares due upon any
conversion effective within five (5) days following the Lender’s demand of conversion, the Borrower
shall pay liquidated damages in cash equal to $1,500 per day for each day the Shares are not
delivered or credited to the account of the Lender.

(d) The number of shares issuable upon conversion of this Debenture or repayment by the
Borrower in shares shall be proportionately adjusted if the Borrower shall declare a dividend of
capital stock on its capital stock, or subdivide its outstanding capital stock into a larger number
of shares by reclassification, stock split or otherwise, which adjustment shall be made effective
immediately after the record date in the case of a dividend, and immediately after the effective
date in the case of a subdivision. The number of shares issuable upon conversion of this Debenture
or any part thereof shall be proportionately adjusted in the amount of securities for which the
shares have been changed or exchanged in another transaction for other stock or securities, cash
and/or any other property pursuant to a merger, consolidation or other combination. The Borrower
shall promptly provide the holder of this Debenture with notice of any events mandating an
adjustment to the conversion ratio, or for any planned merger, consolidation, share exchange or
sale of the Borrower, signed by the President and Chief Executive Officer of Borrower.

(e) Percentage Cap. Notwithstanding the provisions of this Debenture, in no event
(except (i) as specifically provided in the Debenture as an exception to this provision, (ii)
during the forty-five (45) day period prior to the Maturity Date, or (iii) while there is
outstanding a tender offer for any or all of the shares of the Borrower’s Common Stock) shall the
Lender be entitled to convert this Debenture, or the Borrower have the obligation or option to
issue shares upon such conversion or in lieu of cash payments hereunder, to the extent that, after
such conversion or issuance the sum of (1) the number of shares of Common Stock beneficially owned
by the Lender and its affiliates, and (2) the number of shares of Common Stock issuable upon the
conversion of the Debenture with respect to which the determination of the proviso is being made,
would result in beneficial ownership by the Lender and its affiliates of more than 4.99% (the
“Percentage Cap”) of the outstanding shares of Common Stock (after taking into account the shares
to be issued to the Lender upon such conversion). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with Section 12(d) of
the Securities Exchange Act of 1934, as amended.

 

 

 

4. Liability of the Borrower. The Borrower is unconditionally, and without regard to
the liability of any other person, liable for the payment and performance of this Debenture and
such liability shall not be affected by an extension of time, renewal, waiver, or modification of
this Debenture or the release, substitution, or addition of collateral for this Debenture. Each person signing this Debenture consents to any and all extensions of time, renewals, waivers,
or modifications, as well as to release, substitution, or addition of guarantors or collateral
security, without affecting the Borrower’s liabilities hereunder. Lender is entitled to the
benefits of any collateral agreement, guarantee, security agreement, assignment, or any other
documents which may be related to or are applicable to the debt evidenced by this Debenture, all of
which are collectively referred to as “Loan Documents” as they now exist, may exist in the future,
have existed, and as they may be amended, modified, renewed, or substituted.

5. Representations and Warranties. The Borrower represents and warrants as follows:

	 	(i)	 	the Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;

	 
	 	(ii)	 	the execution, delivery and performance by the Borrower of this
Debenture are within the Borrower’s powers, have been duly authorized by all
necessary action, and do not contravene: (A) the Borrower’s certificate of
incorporation or by-laws; or (B) any law or agreement or document binding on or
affecting the Borrower;

	 
	 	(iii)	 	no authorization or approval or other action by, and no notice
to or filing with, any governmental authority, regulatory body or third person
is required for the due execution, delivery and performance by the Borrower of
this Debenture;

	 
	 	(iv)	 	this Debenture constitutes the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms except as enforcement hereof may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors’ rights generally
and subject to the applicability of general principles of equity;

	 
	 	(v)	 	the Borrower has all requisite power and authority to own and
operate its property and assets and to conduct its business as now conducted
and proposed to be conducted and to consummate the transactions contemplated
hereby;

	 
	 	(vi)	 	the Borrower is duly qualified to conduct its business and is
in good standing in each jurisdiction in which the character of the properties
owned or leased by it, or in which the transaction of its business makes such
qualification necessary;

	 
	 	(vii)	 	there is no pending or, to the Borrower ‘s knowledge,
threatened action or proceeding affecting the Borrower before any governmental
agency or arbitrator which challenges or relates to this Debenture or which may
otherwise have a material adverse effect on the Borrower;

	 
	 	(viii)	 	after giving effect to the transactions contemplated by this Debenture, the
Borrower is Solvent;

 

 

 

	 	(ix)	 	the Borrower is not in violation or default of any provision of
its certificate of incorporation or by-laws, each as currently in effect, or
any instrument, judgment, order, writ, decree or contract, statute, rule or
regulation to which the Borrower is subject;

	 
	 	(x)	 	this Debenture is validly issued, free of any taxes, liens, and
encumbrances related to the issuance hereof and is not subject to preemptive
right or other similar right of members of the Borrower; and

	 
	 	(xi)	 	the Borrower has taken all required action to reserve for
issuance such number of shares of Common Stock as may be issuable from time to
time upon conversion of this Debenture.

6. Covenants. So long as any principal or interest is due hereunder and shall remain
unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed:

(a) Maintain and preserve its existence, rights and privileges;

(b) Other than: (i) a bank financing (e.g. revolving credit facility), equipment finance
leases or other commercial credit arrangements for up to $25,000 in the aggregate, except as
otherwise permitted in the Transaction Documents; (ii) borrowings that are secured by the current
assets of the Company (.e.g., receivables financing) or investment margin agreements, and (iii) any
financing arrangements identified as permitted arrangements under the terms of the Security
Agreement or other Transaction Documents (as defined in the Securities Purchase Agreement), the
Company will not incur any indebtedness, other than indebtedness incurred in the ordinary course of
business or outstanding on the date hereof, unless the collateral, if any, securing such
indebtedness is subordinated to the security interest and lien granted to the Lender to secure
payment of this Debenture on terms reasonably satisfactory to the Lender;

(c) Not: (i) directly or indirectly sell, lease or otherwise dispose of any of its property or
assets other than in its ordinary course of business, in the aggregate, to any person(s), whether
in one transaction or in a series of transactions over any period of time; (ii) merge into, with or
consolidate with any other person; or (iii) adopt any plan or arrangement for the dissolution or
liquidation of the Borrower;

(d) Give written notice to Lender upon the occurrence of an Event of Default (as defined
below) within five (5) Business Days of such event or the earliest date on which Borrower becomes
aware of such event, if later;

(e) Not use the proceeds from the issuance of this Debenture in any way for any purpose that
entails a violation of, or is inconsistent with, Regulation U of the Board of Governors of the
Federal Reserve System of the United States of America;

(f) Comply in all material respects with all applicable laws (whether federal, state or local
and whether statutory, administrative or judicial or other) and with every applicable lawful
governmental order (whether administrative or judicial).

(g) Not redeem or repurchase any of its capital stock;

 

 

 

(h) Not: (i) make any advance or loan to any person, firm or corporation, except for
reasonable travel or business expenses advanced to the Company’s employees or independent
contractors in the ordinary course of business; or (ii) acquire all or substantially all of the
assets of another entity, without the prior written consent of Lender, which consent is hereby
confirmed in respect of a planned acquisition of certain assets relating to Star Alliance as
described in the Company’s current report on Form 8-K filed in January 2008;

(i) Not prepay any indebtedness, except for trade payables incurred in the ordinary course of
the Borrower’s business, without the prior written consent of Lender; and

(j) Not take any action which would impair the rights and privileges of this Debenture set
forth herein or the rights and privileges of the holder of this Debenture; and

(k) Unless Borrower files reports in compliance with the Securities Exchange Act of 1934, as
amended, which contain such information, deliver to the Lender quarterly financial statements
within forty five (45) days after the end of each quarter in form, scope and substance satisfactory
to the Lender and annual audited financial statements within ninety (90) days after the end of each
fiscal year.

7. Events of Default. Each and any of the following shall constitute a default and,
after expiration of any grace period or cure or corrective period as stated herein, shall
constitute an “Event of Default” hereunder:

(a) the nonpayment of principal, late charges or any other costs or expenses promptly when due
(and in no event later than a grace period of three business days after the due date) of any amount
payable under this Debenture or the nonpayment by the Borrower of any other obligation to the
Lender;

(b) any default under any material or nonmaterial provision of this Debenture (other than a
payment default described above);

(c) any failure of the Borrower to observe or perform any present or future agreement of any
nature whatsoever with Lender, including, without limitation, any covenant set forth in this
Debenture;

(d) if Borrower shall commence any case, proceeding or other action: (i) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution, composition or other relief with respect to it or its debts;
or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or
for all or any substantial part of its property, or the Borrower shall make a general assignment
for the benefit of its creditors; or (iii) there shall be commenced against the Borrower any case,
proceeding or other action of a nature referred to above or seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any substantial part of its
property, which case, proceeding or other action results in the entry of any order for relief or
remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) the
Borrower shall take any action indicating its consent to, approval of, or acquiescence in, or in furtherance of, any of the acts set forth; or (iv) the Borrower shall generally not, or shall
be unable to, pay its debts as they become due or shall admit in writing its inability to pay its
debts;

 

 

 

(e) any representation or warranty made by the Borrower or any other person or entity under
this Debenture or under any other Loan Documents shall prove to have been incorrect in any material
respect when made;

(f) an event of default or default shall occur and be continuing under any other material
agreement, document or instrument binding upon the Borrower including, without limitation, any
instrument for borrowed money in excess of fifty thousand dollars ($50,000) (whether or not any
such event of default or default is waived by the holder thereof) and including, without
limitation, under any other Transaction Document (as defined in the Securities Purchase Agreement);

(g) the entry of any judgment against Borrower or any of its property for an amount in excess
of fifty thousand dollars ($50,000) that remains unsatisfied for thirty (30) days;

(h) any material adverse change in the condition or affairs (financial or otherwise) of the
Borrower shall occur which, in the sole opinion of the Lender, increases its risk with respect to
loans evidenced by this Debenture; or

(i) the sale of all or substantially all of the assets, or change in ownership or the
dissolution, liquidation, merger, consolidation, or reorganization of Borrower without the Lender’s
written consent.

If no grace period or other time period for cure or correction is specified above with respect
to an event or circumstance identified in the foregoing items (a) through (i) of this Section 7,
such event or circumstance shall be subject to a right of cure or correction of fifteen (15) days
after the occurrence thereof or after Borrower’s first awareness of the event or circumstance, if
later.

8. Lender’s Rights Upon Default. Upon the occurrence of any Event of Default, the Lender may,
at its sole and exclusive option, do any or all of the following, either concurrently or
separately: (a) accelerate the maturity of this Debenture and demand immediate payment in full,
whereupon the outstanding principal amount of the Debenture and all obligations of Borrower to
Lender, together with accrued interest thereon and accrued charges and costs, shall become
immediately due and payable without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived; and (b) exercise all legally available rights and privileges.

9. Default Interest Rate. Upon an Event of Default, without any further action on
the part of Lender, interest will thereafter accrue at the rate of eighteen percent (18%) per annum
(the “Default Rate”), until all outstanding principal, interest and fees are repaid in full by
Borrower.

 

 

 

10. Usury. In no event shall the amount of interest paid or agreed to be paid
hereunder exceed the highest lawful rate permissible under applicable law. Any excess amount of
deemed interest shall be null and void and shall not interfere with or affect the Borrower’s
obligation to repay the principal of and interest on the Debenture. This confirms that the Borrower and, by its acceptance of this Debenture, the Lender intend to contract in strict
compliance with applicable usury laws from time to time in effect. Accordingly, the Borrower and
the Lender stipulate and agree that none of the terms and provisions contained herein shall ever be
construed to create a contract to pay, for the use or forbearance of money, interest in excess of
the maximum amount of interest permitted to be charged by applicable law from time to time in
effect.

11. No Prepayment. This Debenture may not be prepaid in whole or in part, at any
time, without the prior written consent of the Lender except pursuant to the provisions hereof.

12. Costs of Enforcement. Borrower hereby covenants and agrees to indemnify, defend
and hold Lender harmless from and against all costs and expenses, including reasonable attorneys’
fees and their costs, together with interest thereon at the Prime Rate, incurred by Lender in
enforcing its rights under this Debenture; or if Lender is made a party as a defendant in any
action or proceeding arising out of or in connection with its status as a lender, or if Lender is
requested to respond to any subpoena or other legal process issued in connection with this
Debenture; or reasonable disbursements arising out of any costs and expenses, including reasonable
attorneys’ fees and their costs incurred in any bankruptcy case; or for any legal or appraisal
reviews, advice or counsel performed for Lender following a request by Borrower for waiver,
modification or amendment of this Debenture or any of the other Loan Documents.

13. Governing Law. This Debenture shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns; provided that the Borrower
may not assign this Debenture, in whole or in part, by operation of law or otherwise, without the
prior written consent of the Lender. The Lender may assign or otherwise participate out all or
part of, or any interest in, its rights and benefits hereunder and to the extent of such assignment
or participation such assignee shall have the same rights and benefits against the Borrower as it
would have had if it were the Lender. This Debenture, and any claims arising out of or relating to
this Debenture, whether in contract or tort, statutory or common law, shall be governed exclusively
by, and construed in accordance with the laws of the State of New York without regard to principles
of conflicts of laws.

14. Jurisdiction. THE BORROWER CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING AGAINST
IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS DEBENTURE, OR ANY OTHER INSTRUMENT OR
DOCUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH SHALL BE BROUGHT EXCLUSIVELY IN ANY COURT OF
THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK,
IN EACH CASE, IN THE COUNTY OF NASSAU. THE BORROWER, BY THE EXECUTION AND DELIVERY OF THIS
DEBENTURE, EXPRESSLY AND IRREVOCABLY CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF
SUCH COURTS IN ANY SUCH ACTION OR PROCEEDINGS. THE BORROWER AGREES THAT PERSONAL JURISDICTION OVER
IT MAY BE OBTAINED BY THE DELIVERY OF A SUMMONS BY PERSONAL DELIVERY OR OVERNIGHT COURIER AT THE
ADDRESS PROVIDED IN SECTION 16 OF THIS DEBENTURE. ASSUMING DELIVERY OF THE SUMMONS IN ACCORDANCE
WITH THIS PROVISION, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY ALLEGED LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OF FORUM NON CONVENIENS OR ANY SIMILAR BASIS.

 

 

 

15. Miscellaneous.

(a) Borrower hereby waives protest, notice of protest, presentment, dishonor, and demand.

(b) Time is of the essence for each of Borrower’s covenants under this Debenture.

(c) The rights and privileges of Lender under this Debenture shall inure to the benefit of its
successors and assigns. All obligations of Borrower in connection with this Debenture shall bind
Borrower’s successors and assigns, and Lender’s conversion rights shall succeed to any successor
securities to Borrower’s common stock.

(d) If any provision of this Debenture shall for any reason be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but
this Debenture shall be construed as if such invalid or unenforceable provision had never been
contained herein.

(e) The waiver of any Event of Default or the failure of Lender to exercise any right or
remedy to which it may be entitled shall not be deemed a waiver of any subsequent Event of Default
or Lender’s right to exercise that or any other right or remedy to which Lender is entitled. No
delay or omission by Lender in exercising, or failure by Lender to exercise on any one or more
occasions, shall be construed as a waiver or novation of this Debenture or prevent the subsequent
exercise of any or all such rights.

(f) This Debenture may not be waived, changed, modified, or discharged orally, but only in
writing.

16. Notice, Etc. Any notice required by the provisions of this Debenture will be in
writing and will be deemed effectively given: (a) upon personal delivery to the party to be
notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day; (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day delivery, with written
verification of receipt, and delivered as follows:

If to the Borrower:

Smart Move, Inc.

5990 Greenwood Plaza Boulevard, Suite 390

Greenwood Village, CO 80111

Attention: Chris Sapyta, Chief Executive Officer

Tel. No.: 303-339-9554

Fax No.: 720-488-0199

If to Lender:

Professional Offshore Opportunity Fund, Ltd.

1400 Old Country Road

Suite 206

Westbury, New York 11590

Attention: Howard Berger

Facsimile Number: (516) 228-8270

 

 

 

or, as to each party, at such other address as shall be designated by such party in a written
notice to the other parties.

17. Definitions. As used herein, the following terms shall have the meaning ascribed
to them below:

(a) “Solvent” shall mean, with respect to any person or entity on a particular date,
that on such date: (i) the fair value of the property of such person or entity is
not less than the total amount of the liabilities of such person or entity; (ii) the
present fair salable value of the assets of such person or entity is not less than
the amount required to pay the probable liability on such person’s existing debts as
they become absolute and matured; (iii) such person or entity is able to realize
upon its assets and pay its debts and other liabilities; (iv) such person or entity
does not intend to, and does not believe that it will, incur debts or liabilities
beyond such person or entity’s ability to pay as such debts and liabilities mature;
and (v) such person or entity is not engaged in business or a transaction, and is
not about to engage in a business or a transaction, for which such person’s or
entity’s property would constitute unreasonably small capital.

(b) “Securities Purchase Agreement” shall mean the Securities Purchase Agreement
dated the date hereof among the Borrower, the Lender and the other purchasers
identified therein.

[remainder of page left blank]

 

 

 

IN
WITNESS WHEREOF, the undersigned has executed this Secured
Convertible Debenture

 as of the date first set forth above.

	 	 	 	 	 
	 	 	SMART MOVE, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Its:	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 	 	 	)	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss:
	 	 
	COUNTY OF

	 	 	 	 	)	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

On this
 _____ 
day of January, 2008, before me, personally came                     , to me known, who
being by me duly sworn, did depose and say that he resides in                                         , that he
is the President and Chief Executive Officer of Smart Move, Inc., the corporation described in and
which executed the above instrument; and that he signed his name by authority of the board of
directors of said corporation.

	 	 	 
	 

	 	 
	 

	 	Notary Public

 

 

 

EXHIBIT A

NOTICE OF CONVERSION

(to be signed upon conversion of the Debenture)

TO SMART MOVE, INC.:

The undersigned, the holder of the foregoing Debenture, hereby surrenders such Debenture for
conversion into
 _____ 
shares of Common Stock of Smart Move, Inc., and requests that the
certificates for such shares be issued in the name of, and delivered to,                     , whose
address is                                                             .

Dated:                                         

 

	 	 	 
	 

	 	 
	 

	 	(signature)
	 
	 	 
	 

	 	 
	 

	 	(address)

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