Document:

ex4-1.htm

Exhibit 4.1

 

Dated: October 5, 2015

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

 $150,000

SpendSmart Networks, Inc.

Secured Convertible Debenture

Due March 31, 2016

This Amended and Restated Secured Convertible Debenture (the “Debenture”) is issued by SpendSmart Networks, Inc., a Delaware corporation (the “Obligor”), to Siskey Capital, LLC, a North Carolina limited liability company (the “Holder”).

 

The Obligor hereby promises to pay to the Holder or its successors and assigns the principal sum of One Hundred and Fifty Thousand Dollars ($150,000) together with accrued but unpaid interest on March 31, 2016 (the “Maturity Date”) in accordance with the following terms:

 

Interest.  Interest shall accrue to Holder on the outstanding principal balance hereof at an annual rate equal to twelve percent (12%).  Interest shall be calculated on the basis of a 360 day year and the actual number of days elapsed, to the extent permitted by applicable law.

 

Prepayment.  Without the consent of the Holder, the Obligor cannot prepay the amounts owed under the Debenture.

 

This Debenture is subject to the following additional provisions:

 

Section 1.                      This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be made for such registration of transfer or exchange.

 

Section 2.                      Events of Default.

 

(a)           An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i)           Any default in the payment of the principal of, interest on or other charges in respect of this Debenture, free of any claim of subordination, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise);

 

(ii)           The Obligor shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) hereof) which is not cured with in the time prescribed;

 

  

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(iii)           The Obligor or any subsidiary of the Obligor shall commence, or there shall be commenced against the Obligor or any subsidiary of the Obligor under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Obligor or any subsidiary of the Obligor commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Obligor or any subsidiary of the Obligor or there is commenced against the Obligor or any subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Obligor or any subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Obligor or any subsidiary of the Obligor suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor makes a general assignment for the benefit of creditors; or the Obligor or any subsidiary of the Obligor shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Obligor or any subsidiary of the Obligor shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Obligor or any subsidiary of the Obligor shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Obligor or any subsidiary of the Obligor for the purpose of effecting any of the foregoing;

 

(iv)           The Obligor or any subsidiary of the Obligor shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Obligor or any subsidiary of the Obligor in an amount exceeding $50,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(v)           The Obligor or any subsidiary of the Obligor shall be a party to any Change of Control Transaction (as defined in Section 4);

 

(vi)           The Obligor shall fail for any reason to deliver Common Stock certificates to a Holder prior to the fifth (5th) Trading Day after a Conversion Date or the Obligor shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions of this Debenture in accordance with the terms hereof;

 

(vii)           The Obligor shall fail for any reason to deliver the payment in cash pursuant to a Buy In (as defined herein) within three (3) days after notice is claimed delivered hereunder;

 

(b)           During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred and has not been cured by the Obligor within ten (10) calendar days of, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common Stock of the Obligor.  If an Event of Default occurs and remains uncured, the Conversion Price shall be reduced by twenty five percent (25%).  In addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in effect.  The Holder need not provide and the Obligor hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such declaration may be rescinded and annulled by Holder at any time prior to payment hereunder.  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.  Upon an Event of Default, notwithstanding any other provision of this Debenture, the Holder shall have no obligation to comply with or adhere to any limitations, if any, on the conversion of this Debenture or the sale of the Underlying Shares.

  

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Section 3.                      Conversion.

 

(a)           i)           Conversion at Option of Holder.

 

(A)           Commencing on January 1, 2016, this Debenture shall be convertible into shares of restricted Common Stock at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 4).  The number of shares of Common Stock issuable upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Debenture to be converted by (y) the Conversion Price (as defined in Section 3(c)(i)).  The Obligor shall deliver Common Stock certificates to the Holder prior to the Fifth (5th) Trading Day after a Conversion Date.

 

(B)           Notwithstanding anything to the contrary contained herein, if on any Conversion Date:  (1) the number of shares of Common Stock at the time authorized, unissued and unreserved for all purposes, or held as treasury stock, is insufficient to pay principal and interest hereunder in shares of Common Stock; (2) the Common Stock is not listed or quoted for trading on any over the counter market; or (3) the Obligor has failed to timely satisfy its conversion, then, at the option of the Holder, the Obligor, in lieu of delivering shares of Common Stock pursuant to Section 3(a)(i)(A), shall deliver, within three (3) Trading Days of each applicable Conversion Date, an amount in cash equal to the product of the outstanding principal amount to be converted plus any interest due therein divided by the Conversion Price and multiplied by the highest closing price of the stock from date of the conversion notice till the date that such cash payment is made.

 

Further, if the Obligor shall not have delivered any cash due in respect of conversion of this Debenture or as payment of interest thereon by the fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to the Obligor, require the Obligor to issue shares of Common Stock pursuant to Section 3(c), except that for such purpose the Conversion Price applicable thereto shall be the lesser of the Conversion Price on the Conversion Date and the Conversion Price on the date of such Holder demand.  Any such shares will be subject to the provisions of this Section.

 

(C)           The Holder shall effect conversions by delivering to the Obligor a completed notice in the form attached hereto as Exhibit A (a “Conversion Notice”).  The date on which a Conversion Notice is delivered is the “Conversion Date.” Unless the Holder is converting the entire principal amount outstanding under this Debenture, the Holder is not required to physically surrender this Debenture to the Obligor in order to effect conversions.  Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion.  The Holder and the Obligor shall maintain records showing the principal amount converted and the date of such conversions.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.

 

(D)           Piggy Back Registration Rights.  At any time the Conversion Shares (the “Registrable Securities”) are owned by the Holder and there is not an effective registration statement covering all of the Registrable Securities, and if the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Act, of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Act) or their then equivalents (the “Registration Statement”) relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to the Holder a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, the Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities the Holder requests to be registered; provided, however,

  

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that Registrable Securities may be reduced on a pro rata basis with such other securities being registered on the applicable registration statement if and to the extent that the underwriter(s) associated with the offering which is the subject of the registration statement believes, in good faith, that the inclusion of such Registrable Securities will have an adverse effect on the sale of the securities for which such registration statement was filed. If any SEC guidance or FINRA regulation sets forth a limitation on the number of securities permitted to be registered on a particular registration statement (and notwithstanding that the Company used diligent efforts to advocate with the SEC for the registration of all or a greater portion of Registrable Securities), the number of Registrable Securities to be registered on such registration statement will be reduced on a pro rata basis with such other securities being registered on the applicable registration.

 

(ii)           Mandatory Conversion.  In the event of a closing by the Obligor of a Qualified Financing (as defined below) before December 31, 2015, the Holder shall have the obligation to apply all of the then-outstanding principal of this Note, or at a minimum the portion allowed for under the terms of the Qualified Financing, together with any accrued and unpaid interest thereon, on a dollar-for-dollar basis, as exercise price or other form of remuneration owed to Obligor with respect to such securities being issued, converted or sold in the Qualified Financing on the terms and conditions of the Qualified Financing.  Obligor will credit Holder or Holder’s representatives with the applied and converted amount and apply the converted amount toward Holder or Holder’s representatives’ participation in the Qualified Financing. A “Qualified Financing” shall mean the closing of one or more financing to include the issuance or conversion of securities in which Obligor receives gross proceeds totaling at least $1,500,000 in exchange for equity securities.  In the event that this Note is converted in accordance with this Section 3(a)(ii), then the Holder or Holder’s representatives shall become a party to the offering agreements, in customary form, and all related agreements, along with the investors participating in such Qualified Financing. In the event that the nature and terms of a Qualified Financing result in a conversion of less then the outstanding principal of this Note, then any remaining balance of this Note shall continue to be governed under the terms herein.

 

(b)           i)           Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Obligor‘s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(ii)           In addition to any other rights available to the Holder, if the Obligor fails to deliver to the Holder such certificate or certificates pursuant to Section 3(a)(i)(A) by the fifth (5th) Trading Day after the Conversion Date, and if after such fifth (5th) Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a “Buy In”), then the Obligor shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the market price of the Common Stock at the time of the sale giving rise to such purchase obligation and (B) at the option of the Holder, either reissue a Debenture in the principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Obligor timely complied with its delivery requirements under Section 3(a)(i)(A).  For example, if the Holder purchases Common Stock having a total purchase price of $200,000 to cover a Buy In with respect to an attempted conversion of Debentures with respect to which the market price of the Underlying Shares on the date of conversion was a total of $150,000 under clause (A) of the immediately preceding sentence, the Obligor shall be required to pay the Holder $50,000.  The Holder shall provide the Obligor written notice indicating the amounts payable to the Holder in respect of the Buy In.

 

  

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(c)           i)           The Holder is entitled, at its option, to convert, and at any time, until payment in full of this Debenture, all or any part of the principal amount of the Debenture, plus accrued interest, into shares of the Company’s common stock, par value $0.001 per share, at the price per share equal to eighty percent (80%) of the average of the three (3) lowest volume weighted average prices of the Common Stock, as quoted by Bloomberg, LP, for the thirty (30) trading days immediately preceding the Conversion Date which may be adjusted pursuant to the other terms of this Debenture (“Conversion Price”).

 

(ii)           In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at its option, (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Common Stock following such reclassification or share exchange, and the Holder of this Debenture shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Obligor into which the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Debenture could have been converted immediately prior to such reclassification or share exchange would have been entitled, or (B) require the Obligor to prepay the outstanding principal amount of this Debenture, plus all interest and other amounts due and payable thereon.  The entire prepayment price shall be paid in cash.  This provision shall similarly apply to successive reclassifications or share exchanges.

 

(iii)           All calculations under this Section 3 shall be rounded up to the nearest $0.001 of a share.

 

(iv)           If (A) the Obligor shall declare a dividend (or any other distribution) or a stock split (or reverse stock split) on the Common Stock; (B) the Obligor shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Obligor shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Obligor shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Obligor is a party, any sale or transfer of all or substantially all of the assets of the Obligor, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E) the Obligor shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Obligor; then, in each case, the Obligor shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last address as it shall appear upon the stock books of the Obligor, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to convert this Debenture during the 20 day calendar period commencing the date of such notice to the effective date of the event triggering such notice.

 

(v)           In case of any (1) merger or consolidation of the Obligor or any subsidiary of the Obligor with or into another Person, or (2) sale by the Obligor or any subsidiary of the Obligor of more than one half of the assets of the Obligor in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section 2(b), (B) convert the aggregate amount of this Debenture then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Debenture could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Debenture with a principal amount equal to the aggregate principal amount

 

  

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of this Debenture then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Debenture shall have terms identical (including with respect to conversion) to the terms of this Debenture, and shall be entitled to all of the rights and privileges of the Holder of this Debenture set forth herein and the agreements pursuant to which this Debentures were issued.  In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible Debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction.  The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event.  This provision shall similarly apply to successive such events.

 

(d)           The Obligor covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Obligor as to reservation of such shares set forth in this Debenture) be issuable (taking into account the adjustments and restrictions of Sections 2(b) and 3(c)) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder.  The Obligor covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.

 

(e)           Upon a conversion hereunder the Obligor shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Closing Bid Price at such time.  If the Obligor elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(f)           The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Obligor shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debenture so converted and the Obligor shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Obligor the amount of such tax or shall have established to the satisfaction of the Obligor that such tax has been paid.

 

(g)           Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally;(ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

 

If to the Company, to:                         SpendSmart Networks, Inc.

805 Aerovista Pl.

Suite 205

San Luis Obispo, CA 93401

Attn: Alex Minicucci

If to the Holder:                                    Siskey Capital, LLC

4521 Sharon Road, Suite 450

Charlotte, NC 28211

Attn: Marty Sumichrast

  

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or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) business days prior to the effectiveness of such change.  Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

Section 4.                      Definitions.  For the purposes hereof, the following terms shall have the following meanings:

 

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

 

“Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d 5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Obligor, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Obligor (except that the acquisition of voting securities by the Holder shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one half of the members of the board of directors of the Obligor which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Obligor or any subsidiary of the Obligor in one or a series of related transactions with or into another entity, or (d) the execution by the Obligor of an agreement to which the Obligor is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c).

 

“Closing Bid Price” means the price per share in the last reported trade of the Common Stock on the over the counter market or on the exchange which the Common Stock is then listed as quoted by Bloomberg, LP.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $0.0001, of the Obligor and stock of any other class into which such shares may hereafter be changed or reclassified.

 

“Conversion Date” shall mean the date upon which the Holder gives the Obligor notice of their intention to effectuate a conversion of this Debenture into shares of the Company’s Common Stock as outlined herein.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Original Issue Date” shall mean the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.

 

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day” means a day on which the shares of Common Stock are quoted on the over the counter market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

 

  

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“Underlying Shares” means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms hereof.

 

Section 5.                      Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Obligor, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.  This Debenture is a direct obligation of the Obligor.  This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.  As long as this Debenture is outstanding, the Obligor shall not and shall cause their subsidiaries not to, without the consent of the Holder, (i) (i) amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its Common Stock or other equity securities other than as to the Underlying Shares to the extent permitted or required hereunder; or (iii) enter into any agreement with respect to any of the foregoing.

 

Section 6.                      This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Obligor, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Obligor, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

Section 7.                      If this Debenture is mutilated, lost, stolen or destroyed, the Obligor shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Obligor.

 

Section 8.                      This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to conflicts of laws thereof.

 

Section 9.                      If the Obligor fails to strictly comply with the terms of this Debenture, then the Obligor shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred:  (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

 

Section 10.                      Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture.  The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture.  Any waiver must be in writing.

 

Section 11.                      If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest.  The Obligor covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Obligor from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Obligor (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

  

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Section 12.                      Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 13.                      THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

-9-

  

 IN WITNESS WHEREOF, the Obligor has caused this Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.

 

SpendSmart Networks, Inc.

By:           _____________________________

Name:           Alex Minicucci

Title:   CEO

  

-10-

  

EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert the Debenture)

The undersigned hereby irrevocably elects to convert $___________ of the principal amount of the above Debenture into Shares of Common Stock of _____________________________, according to the conditions stated therein, as of the Conversion Date written below.

 

 

 

	 Conversion Date: 	 	 
	  
Applicable Conversion Price:

	 	 
	
 

Signature: 

	 	 
	
 

Name: 

	 	 
	
 

Address: 

	 	 
	
 

Amount to be converted: 

	
 

$

	 
	
 

Amount of Debenture unconverted:

	
 

$

	 
	
 

Conversion Price per share: 

	
 

$

	 
	  
Number of shares of Common

Stock to be issued: 

	 	 
	  
Please issue the shares of

Common Stock in the following

name and to the following address: 

	 	 
	
 

Issue to: 

	 	 
	
 

Authorized Signature: 

	 	 
	  
Name: 

	 	 
	
 

Title: 

	 	 
	
 

Phone Number: 

	 	 
	
 

Broker DTC Participant Code: 

	 	 
	
 

Account Number:ex10-1.htm

Exhibit 10.1

 

Autobytel Inc.

 

WARRANT TO PURCHASE SERIES B JUNIOR PARTICIPATING CONVERTIBLE PREFERRED STOCK

 

VOID AFTER 5:00 P.M., PACIFIC

TIME, ON THE EXPIRATION DATE

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SECURITY IS THEN IN EFFECT, OR SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED DUE TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION.  SHOULD THERE BE ANY UNCERTAINTY OR DISAGREEMENT BETWEEN THE COMPANY AND THE HOLDER AS TO THE AVAILABILITY OF SUCH EXEMPTIONS, THEN THE HOLDER SHALL BE REQUIRED TO DELIVER TO THE COMPANY AN OPINION OF COUNSEL (SKILLED IN SECURITIES MATTERS, SELECTED BY THE HOLDER AND REASONABLY SATISFACTORY TO THE COMPANY) IN FORM AND SUBSTANCE SATISFACTORY TO COMPANY TO THE EFFECT THAT SUCH OFFER, SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS.

 

THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO AN AMENDED AND RESTATED STOCKHOLDER AGREEMENT DATED AS OF OCTOBER 1, 2015 (“STOCKHOLDER AGREEMENT”), AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SECURITIES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF THAT AMENDED AND RESTATED STOCKHOLDER AGREEMENT, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER, REPURCHASE RIGHTS, STANDSTILL PROVISIONS AND VOTING ARRANGEMENTS, INCLUDING AN IRREVOCABLE PROXY, SET FORTH THEREIN.

 

THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE TERMS OF AN AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 1, 2015 (“MERGER AGREEMENT”) AND ARE SUBJECT TO VARIOUS RIGHTS OF OFFSET BY THE COMPANY UNDER THE MERGER AGREEMENT.

 

 

Issuance Date: October 1, 2015

 

FOR VALUE RECEIVED, Autobytel Inc., a Delaware corporation (“Company”), hereby agrees to sell upon the terms and on the conditions hereinafter set forth, but no later than 5:00 p.m., Pacific Time, on the Expiration Date (as hereinafter defined) to each of the persons listed on Schedule A hereto or registered assigns (each, a “Holder”), under the terms and at the Warrant Prices as hereinafter set forth, Holder’s pro rata portion (as set forth on Schedule A hereto) of One Hundred and Forty-Eight Thousand, Two Hundred and Forty (148,240) fully paid and non-assessable shares of the Company’s Series B Junior Preferred Stock, par value $0.001 per share (“Warrant Stock”), at a purchase  price of One Hundred Eighty Four Dollars and Forty Seven Cents ($184.47) per share ("Warrant Price"), pursuant to this warrant (“Warrant”).  The number of shares of Warrant Stock to be so issued and the Warrant Price are subject to adjustment in certain events as hereinafter set forth.  The term “Series B Preferred Stock” shall mean, when used herein, unless the context otherwise requires, the Series B Junior Participating Convertible Preferred Stock, par value $0.001 per share, of the Company and other securities and property at the time receivable upon the exercise of this Warrant.

 

 

  

1

  

1.           Exercise of Warrant.

 

(a)           To the extent this Warrant becomes exercisable, the Holder may exercise this Warrant according to its terms prior to 5:00 p.m., Pacific Time, on the seventh (7th) anniversary of the Issuance Date by:

 

(i)           completing the exercise form attached hereto (the “Exercise Notice”);

 

(ii)           delivering the completed Exercise Notice and this Warrant to the Company at the address set forth in Section 9; and

 

(iii)           paying to the Company an amount equal to (A) the number of shares of Warrant Stock in respect of which this Warrant is being exercised pursuant to this Section 1 multiplied by (B) the Warrant Price  (“Aggregate Exercise Price”) in accordance with Section 1(b).

 

(b)           Payment of the Aggregate Exercise Price shall be made by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price.

 

(c)           This Warrant shall become exercisable on the first date on or following the third anniversary of the Issuance Date, subject to the satisfaction of the following additional vesting conditions (“Secondary Vesting Conditions”):  (i) with respect to the first one-third (1/3) of the Warrant Stock, if at any time after the Issuance Date and prior to the Expiration Date the weighted average closing price of the Company’s Common Stock on The Nasdaq Capital Market (or if not then traded on such market or exchange, the principal market or exchange on which the Company’s Common Stock is then traded) for the preceding thirty (30) trading days (adjusted for any stock splits, stock dividends, reverse stock splits or combinations of Company’s Common Stock occurring after the Issuance Date) (“the Weighted Average Closing Price”) is at or above Thirty Dollars ($30.00); (ii) with respect to the second one-third (1/3) of the Warrant Stock, if at any time after the Issuance Date and prior to the Expiration Date the Weighted Average Closing Price is at or above Thirty-Seven Dollars and Fifty Cents ($37.50); and (iii) with respect to the last one-third (1/3) of the Warrant Stock, if at any time after the Issuance Date and prior to the Expiration Date the Weighted Average Closing Price is at or above Forty-Five Dollars ($45.00). Once a Secondary Vesting Condition has been satisfied, that Secondary Vesting Condition shall remain satisfied for the purposes of this Section 1(c) even if the Weighted Average Closing Price falls below the applicable required Weighted Average Closing Price for that Secondary Vesting Condition after the applicable Secondary Vesting Condition has first been satisfied.  Notwithstanding the foregoing provisions of this Section 1(c), this Warrant shall become exercisable in full immediately upon the Company’s Board of Directors approving a liquidation, dissolution, winding up or Change in Control (as defined below) of the Company.  The Company shall give Holder written notice of any such approval (subject to the next sentence) by the Company’s Board of Directors as promptly as practical thereafter and in any event at least ten (10) Business Days prior to such liquidation, dissolution, winding up or Change in Control.  Notwithstanding the provisions of this Section 1(d), the Company may delay such notice (and the ten (10) Business Day time period set forth in the immediately preceding sentence shall be reduced accordingly) (i) to the extent required by applicable law or the rules of any applicable securities exchange; (ii) if such notice would constitute the disclosure of material, non-public information; or (iii) if such notice would have a material adverse effect on the Company or the event requiring such notice.  “Change in Control” means the first to occur of any of the following (in one transaction or a series of related transactions): (i) consummation of a sale of, directly or indirectly, all or substantially all of the Company’s assets, (ii) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of (A) the outstanding equity securities of the Company or (B) the combined voting power of the Company’s then outstanding securities, or (iii) the Company is party to a consummated merger or consolidation which results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or another entity) at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving or other entity outstanding immediately after such merger or consolidation.

 

  

2

  

(d)           Subject to the vesting restrictions set forth herein, this Warrant may be exercised in whole or in part so long as any exercise in part hereof (i) is for not less than fifty thousand (50,000) shares of Warrant Stock (which limitation will be appropriately and equitably adjusted consistent with any adjustments under Section 4 hereof); and (ii) would not involve the issuance of fractional shares of Warrant Stock.

 

(e)           No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  The Company shall pay cash in lieu of fractional shares based upon the fair market value of such fractional shares of Series B Preferred Stock (which shall be calculated based on (i) the closing price of the Company’s common stock (“Common Stock”) on the exchange or market on which the Common Stock is then traded and (ii) the then-current number of shares of the Common Stock into which a share of Series B Preferred Stock would be convertible (notwithstanding any limitations on conversion) pursuant to the Certificate of Designations of Series B Preferred Stock) at the date of exercise of this Warrant.

 

(f)           In the event of any exercise of the rights represented by this Warrant, the Warrant Stock so purchased shall be registered in the name of the Holder within a reasonable time after such rights shall have been so exercised.  The person or entity in whose name the Warrant Stock is registered upon exercise of the rights represented by this Warrant shall for all purposes be deemed to have become the holder of record of such Warrant Stock immediately prior to the close of business on the date on which the completed Exercise Notice and the Warrant were delivered to the Company and payment of the Aggregate Exercise Price and any applicable taxes was made, irrespective of the date of registration of the Warrant Stock, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such Warrant Stock at the opening of business on the next succeeding date on which the stock transfer books are open.

 

2.           Restrictions on Disposition of Warrant and Warrant Stock.

 

(a)           The Holder hereby acknowledges that (i) this Warrant and any Warrant Stock that may be acquired upon exercise of this Warrant pursuant hereto are, as of the date hereof, not registered: (A) under the Securities Act on the ground that the issuance of this Warrant is exempt from registration under Section 4(2) of the Securities Act as not involving any public offering or (B) under any applicable state securities law because the issuance of this Warrant does not involve any public offering and (ii) that the Company’s reliance on the Section 4(2) exemption of the Securities Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder.  The Holder represents and warrants that the Holder is acquiring this Warrant and will acquire the Warrant Stock for investment for the Holder’s own account, with no present intention of reselling or otherwise distributing the same.

 

(b)           If, at the time of issuance of Warrant Stock upon exercise of this Warrant, no registration statement is in effect with respect to such shares under applicable provisions of the Securities Act and other applicable securities laws, Holder hereby agrees that Holder will not sell, transfer, offer, pledge or hypothecate all or any part of the Warrant Stock unless and until Holder shall first have given notice to the Company describing such sale, transfer, offer, pledge or hypothecation and there shall be available exemptions from such registration requirements that exist.  Should there be any uncertainty or disagreement between the Company and the Holder as to the availability of such exemptions, then the Holder shall be required to deliver to the Company an opinion of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) in form and substance satisfactory to the Company to the effect that such offer, sale, transfer, pledge or hypothecation is in compliance with an available exemption under the Securities Act and other applicable securities laws.  The Company may at its election require that the Holder provide the Company with written reconfirmation of the Holder’s investment intent as set forth in Section 2(a) with respect to the Warrant Stock.  The Warrant Stock issued upon exercise of this Warrant shall bear a legend reading substantially as follows:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND OTHER APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SECURITY IS THEN IN EFFECT, OR SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED DUE TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION.  SHOULD THERE BE ANY UNCERTAINTY OR DISAGREEMENT BETWEEN THE COMPANY AND THE HOLDER AS TO THE AVAILABILITY OF SUCH EXEMPTIONS, THEN THE HOLDER SHALL BE REQUIRED TO DELIVER TO THE COMPANY AN OPINION OF COUNSEL (SKILLED IN SECURITIES MATTERS, SELECTED BY THE HOLDER AND REASONABLY SATISFACTORY TO THE COMPANY) IN FORM AND SUBSTANCE SATISFACTORY TO COMPANY TO THE EFFECT THAT SUCH OFFER, SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS.”

 

  

3

  

(c)           In addition to the foregoing restrictions, any Warrant Stock issued upon exercise of this Warrant will be subject to additional restrictions on transfer, repurchase rights, and standstill provisions, set forth in the Stockholder Agreement.  The Warrant Stock issued upon exercise of this Warrant shall bear a legend reading substantially as follows:

 

“THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO AN AMENDED AND RESTATED STOCKHOLDER AGREEMENT DATED AS OF OCTOBER 1 2015, AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SECURITIES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF THAT AMENDED AND RESTATED STOCKHOLDER AGREEMENT, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER, REPURCHASE RIGHTS, STANDSTILL PROVISIONS AND VOTING ARRANGEMENTS, INCLUDING AN IRREVOCABLE PROXY, SET FORTH THEREIN.”

 

THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE TERMS OF AN AGREEMENT AND PLAN OF MERGER DATED AS OF OCTBER 1, 2015 (“MERGER AGREEMENT”) AND ARE SUBJECT TO VARIOUS RIGHTS OF OFFSET BY THE COMPANY UNDER THE MERGER AGREEMENT.

 

(d)           This Warrant may not be assigned, pledged, sold or otherwise transferred except in accordance with the terms and conditions of the Stockholder Agreement applicable to Restricted Securities (as such term is defined therein).  Any purported assignment prohibited by this Warrant shall be void.

 

(e)           So long as the Warrant Stock remains subject to the foregoing restrictions, the Company may maintain appropriate “stop transfer” orders with respect to such securities represented thereby on its books and records and with its transfer agent.

 

3.           Reservation of Shares.  The Company hereby agrees, represents and warrants that at all times there shall be reserved for issuance upon the exercise of this Warrant such number of shares of its Series B Preferred Stock (or other securities subject to this Warrant from time to time) as shall be required for issuance upon exercise of this Warrant.  The Company further agrees that all shares of Warrant Stock represented by this Warrant will be duly authorized and will, upon issuance and against payment of the Aggregate Exercise Price, be validly issued, fully paid and non-assessable.

 

4.           Capital Adjustments.  This Warrant is subject to the following further provisions:

 

(a)           Recapitalization, Reclassification and Succession.  If any recapitalization of the Company, reclassification of the Series B Preferred Stock, reorganization, split-off, spin-off, extraordinary dividend or distribution by the Company, merger or consolidation of the Company into or with a corporation or other business entity, sale or transfer of all or substantially all of the Company’s assets or of any successor corporation’s assets to any other corporation or business entity (any such corporation or other business entity being included within the meaning of the term “successor corporation”), or any event similar to any of the foregoing, including a Change in Control, shall be effected, directly or indirectly, in one or a series of related transactions (any of the forging being an “Adjustment Event”), at any time while this Warrant remains outstanding and unexpired, then, as a condition of such Adjustment Event, and, in any event, the Company agrees that lawful, equitable and adequate provision shall be made whereby the Holder of this Warrant thereafter shall have the right to receive upon the exercise hereof, and in lieu of the shares of Series B Preferred Stock immediately theretofore issuable upon the exercise of this Warrant, such shares of capital stock, securities or other property as may be issued or payable with respect to or in exchange, in connection with the Adjustment Event, for a number of outstanding shares of Series B Preferred Stock equal to the number of shares of Series B Preferred Stock immediately theretofore issuable upon the exercise of this Warrant, and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation.

 

(b)           Subdivision or Combination of Shares.  If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Series B Preferred Stock, the number of shares of Warrant Stock purchasable upon exercise of this Warrant and the Warrant Price shall be proportionately and equitably adjusted so as to prevent the enlargement or dilution of economic rights under this Warrant.

 

  

4

  

(c)           Stock Dividends and Distributions.  If the Company at any time while this Warrant is outstanding and unexpired shall issue or pay the holders of its Series B Preferred Stock, or take a record of the holders of its Series B Preferred Stock for the purpose of entitling them to receive, a dividend payable in, or other distribution of, Series B Preferred Stock (and/or other equity of the Company), then (i) the Warrant Price shall be adjusted in accordance with Section 4(d); and (ii) the number of shares of Warrant Stock purchasable upon exercise of this Warrant shall be adjusted to the number of shares of Series B Preferred Stock (and/or other equity of the Company) that Holder would have owned immediately following such action had this Warrant been exercised immediately prior thereto.

 

(d)           Warrant Price Adjustment.  Whenever the number of shares of Warrant Stock purchasable upon exercise of this Warrant is adjusted, as herein provided, the Warrant Price payable upon the exercise of this Warrant shall be proportionately and equitably adjusted.

 

(e)           Certain Shares Excluded.  The number of shares of Series B Preferred Stock outstanding at any given time for purposes of the adjustments set forth in this Section 4 shall exclude any shares then held in the treasury of the Company.

 

5.           Notice To Holders.

 

(a)           Notice of Record Date.  Without limiting Section 1(d), in case:

 

(i)           the Company shall take a record of the holders of its Series B Preferred Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend (other than a cash dividend payable out of earned surplus of the Company) or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities;

 

(ii)           any Adjustment Event; or

 

(iii)           approval by the Company’s Board of Directors of any dissolution, liquidation or winding-up of the Company;

 

then, and in each such case, subject to the last sentence of Section 5(b), the Company will mail or cause to be mailed to the Holder hereof a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which such Adjustment Event is to take place, and the time, if any and if applicable, is to be fixed, as of which the holders of record of Series B Preferred Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Series B Preferred Stock (or such other stock or securities) for securities or other property deliverable upon such Adjustment Event.  Such notice shall be mailed at least 15 days prior to the record date therein specified; provided, however, failure to provide any such notice shall not affect the validity of such transaction; provided, further, that the Company or its successor shall in no way be relieved of any liability for damages caused to the Holder caused by such failure to give the required notice.  In the event that this Warrant is to become exercisable on an accelerated basis in connection with any event described in this Section 5(a), the Company shall afford the Holder fair opportunity to exercise the Warrant effective immediately prior to such event.

 

(b)           Notice of Adjustment.  Whenever any adjustment shall be made pursuant to Section 4 hereof, the Company shall promptly notify the Holder of this Warrant of the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant after giving effect to such adjustment.  Notwithstanding the provisions of Section 5(a) and Section 5(b), the Company may delay such notice (and the 15-day time period set forth in Section 5(a) shall be reduced accordingly) to the extent required by applicable law or the rules of any applicable securities exchange or if such notice would have an adverse effect on the event requiring such adjustment.

 

  

5

  

6.           Loss, Theft, Destruction or Mutilation.  Upon receipt by the Company of evidence satisfactory to it of the ownership and the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of indemnity satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver a new Warrant of like tenor dated the date hereof.

 

7.           Warrant Holder not a Stockholder.  Without limiting rights of the Holder in respect of any shares of stock of the Company or other securities owned by the Holder, the Holder of this Warrant shall not be entitled by reason of holding this Warrant to any rights whatsoever as a stockholder of the Company.

 

8.           Setoff. This Warrant, and the Series B Preferred Stock issuable upon exercise of this Warrant, are subject to reduction and setoff as provided in, and in accordance with, the Merger Agreement to secure claims thereunder.

 

9.           Notices.  All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile or e mail, upon written confirmation of receipt by facsimile, e mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid.  All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

	
To the Company:

 

	  	
Autobytel Inc.

1887 MacArthur Blvd., Suite 200

Irvine, California 92612-1400

Attention:  Chief Legal Officer

Fax:  (949) 862-1323

Email: glennf@autobytel.com

 

	
With a copy (which shall not constitute notice) to:

 

	  	
Gibson, Dunn & Crutcher LLP

2029 Century Park East, Suite 4000

Los Angeles, California 90067

Attention:  Jonathan K. Layne

Facsimile:  (310) 552-7053

E-mail:  jlayne@gibsondunn.com

 

	
To any Holder:

 

	  	
The then-current address for the Stockholder Representative pursuant to the Merger Agreement

 

10.           Choice of Law.  This Warrant and all disputes or controversies arising out of or relating to this Warrant or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Delaware (including in respect of the statute of limitations or other limitations period applicable to any such dispute or controversy), without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware.

 

11.           Dispute Resolution; Forum.  The Company and Holder hereby agree that any dispute which may arise between them arising out of or in connection with this Warrant shall be resolved in accordance with the dispute resolution provisions set forth in Sections 6.10, 6.12, and 6.15 of the Merger Agreement.

 

12.           Severability.  Whenever possible, each provision or portion of any provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

[Remainder of this page intentionally left blank; signature page follows]

  

6

  

IN WITNESS WHEREOF, the undersigned has duly executed this Warrant as of the Issuance Date.

 

Autobytel Inc., a Delaware corporation

By:   /s/ Glenn E. Fuller                                           

             Glenn E. Fuller

           Executive Vice President, Chief Legal and

      Administrative Officer and Secretary

 

Accepted and Agreed:

 

PF Auto, Inc., a British Virgin Islands business company

By:   /s/ Matias de Tezanos                      

Name: Matias de Tezanos

Title:  Co-Managing Director and President

Ceiba International Corp., a Panama business company

By:   /s/ Peter Klose                                   

Name: Peter Klose

Title:  Managing Director

Picua Limited, a British Virgin Islands business company

By:   /s/ Manual Ayau                              

Name: Manual Ayau

Title: Director

Jeffrey H. Boyd., an individual

By:    /s/ Jeffrey H. Boyd                          

Robert J. Mylod, Jr., an individual

By:   /s/ Robert J. Mylod, Jr.                    

William Ferriolo, an individual

By:   /s/ William Ferriolo                          

Galeb3 Inc, a Florida corporation

By:    /s/ Jose Vargas                               

Name: Jose Vargas

Title:  President

Manatee Ventures Inc., a British Virgin Islands business company

By:   /s/ Matias de Tezanos                   

Name: Matias de Tezanos

Title:  President and Director

Julio Gonzalez Arrivillaga, an individual

By:   /s/ Julio Gonzalez                                 

 

 

 

[Signature Page to Warrant]

  

7

  

FORM OF EXERCISE NOTICE

 

[May only be executed by the registered holder hereof]

 

The undersigned Holder hereby exercises the right to purchase _________ shares of Series B Junior Preferred Stock, par value $0.001 per share (“Series B Preferred Stock”), of Autobytel Inc. evidenced by the within Warrant Certificate for an Aggregate Exercise Price of $_________, and tenders herewith payment for such shares in full by means of a cash payment.

 

Aggregate Exercise Price Calculation Table

 

	
Warrant Shares exercised

	
 

	 
	
    Warrant Price (as adjusted)

	
x

	 
	
    Aggregate Exercise Price

	
 

	 

 

_______________________________

(Holder Name)

_________________                                                                        ________________________________

(Date)                                                                                     (Holder Signature)

  

8

  

 

SCHEDULE A

 

LIST OF HOLDERS

 

	
 

Holder Name

 

	
 

Pro Rata Portion

	
PF Auto, Inc.

	
117,336

	
Ceiba International Corp.

	
8,535

	
Picua Limited

	
8,535

	
Jeffrey H. Boyd

	
4,386

	
Robert J. Mylod, Jr.

	
4,386

	
William Ferriolo

	
3,352

	
Galeb3 Inc

	
682

	
Manatee Ventures Inc.

	
682

	
Julio Gonzalez Arrivillaga

	
346

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