THIS AGREEMENT (“Agreement”) is by and between Redwood Management, LLC (“CLAIMANT” or "Redwood") and the undersigned StreamTrack, Inc., ("COMPANY" or "DEBTOR") and is entered into as of the effective date below, all with reference to the following facts, which the parties agree are true and correct:
CLAIMANT acquired, on or about this date, certain debt rights, noted below, along with the rights to common stock and conversion of a prior "assignor" as to the COMPANY;
CLAIMANT is, therefore, both an investor and a creditor of the COMPANY entitled to payment and conversion of outstanding debt securities, including common stock conversion of such debt securities, as referenced in agreement(s) and document(s), including between the parties hereto, such as listed below;
DEBTOR seeks to avoid dispute, retire debt from its books and records, make effort to improve its financial picture for potential acquisition and future fundings by eliminating or limiting the extent of debt the DEBTOR faces, and honor such conversion and related rights acquired by the CLAIMANT;
THEREFORE, THE PARTIES AGREE TO SETTLE, AND THE PURPOSE OF THIS AGREEMENT IS TO REFLECT SUCH SETTLEMENT;
NOW THEREFORE, the parties hereto hereby represent, warrant, and covenant with and to each other and confirm all of the above and following to professionals, and the transfer agent of COMPANY and others to whom it may concern, as follows:
1. Obligations Owing. The above Recitals are incorporated herein by reference. Reference is made to the debt securities identified on the signature page hereof (the "Debt"). As to the Debt, any past or current dispute, potential defenses and disputed considerations, etc., are waived by the COMPANY, and the debt obligation is hereby confirmed as owed. The COMPANY ratifies and confirms the validity of the Assignment and Assumption Agreement by and between the CLAIMANT acting as an investor and the prior assignor and this includes the common stock and conversion rights of the assignor surrendered to the CLAIMANT, which rights are aged as set forth on the signature page.
2 . Exchange. CLAIMANT and the COMPANY hereby agree to confirm the exchange of the Debt for securities of the COMPANY as follows: this securities agreement of the COMPANY to repay an amount equal to the principal amount of the Debt ("Principal") with interest at a rate set below per annum ("Interest") by the "Maturity Date" (below) with conversion rights to the CLAIMANT so that, at the election of the CLAIMANT, it may convert the Principal in whole or part from time to time into shares of common stock in the COMPANY (the "Shares"). This obligation of the COMPANY is in the nature of a debenture but in lieu of issuing a debenture of the COMPANY shall honor the exchange, payment obligation and conversion rights per this Agreement. Thus, concurrently with the execution of this Agreement, CLAIMANT surrenders hereby the Debt and its interest in the Debt strictly for the payment, conversion rights, Shares and related rights under this Agreement. CLAIMANT will endeavor to use best efforts, for non material file recording, to deliver to the COMPANY any promissory notes, commercial paper, or other evidences of the Debt but such ministerial obligation shall not be a condition to the conversion, Shares, and enforcement rights of this Agreement by CLAIMANT. With reference to Rule 144 promulgated under the Securities Act of 1933, as amended, the exchange hereby is made without any additional consideration applicable.
3 . Payment and Conversion Rights. The COMPANY promises to pay to CLAIMANT the Principal and Interest on the Maturity Date, or sooner if required hereby, unless to the extent of any completed conversion of Principal and or Interest as stated herein.
THE COMPANY MAY PREPAY ANY PORTION OF THE PRINCIPAL AMOUNT AT 125% OF SUCH AMOUNT OR MAXIMUM ALLOWED PER LAW, WHICHEVER IS LOWER, ALONG WITH ANY ACCRUED INTEREST AT ANY TIME UPON SEVEN DAYS WRITTEN NOTICE TO THE CLAIMANT, PROVIDED THE COMPANY IS NOT IN DEFAULT OF THIS AGREEMENT, SUBJECT TO THE TERMS HEREIN.
"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 (including any Late Fees) on, or liquidated damages in respect to this Agreement, 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 COMPANY or any of its subsidiaries or affiliates shall commence, or there shall be commenced against any of them, a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the COMPANY 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 COMPANY or any subsidiary thereof or there is commenced against the COMPANY or any subsidiary thereof any such bankruptcy, insolvency or other proceeding; or the COMPANY or any subsidiary thereof is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the COMPANY or any subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 5 Business Days; or the COMPANY or any subsidiary thereof makes a general assignment for the benefit of creditors; or the COMPANY 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 COMPANY or any subsidiary thereof shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of any debt or the COMPANY or any subsidiary thereof 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 COMPANY or any subsidiary thereof for the purpose of effecting any of the foregoing or adverse to this Agreement;
(iii) the COMPANY shall fail to timely file all reports required to be filed by it with the SEC pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise required by the Exchange Act, or cease to be subject to the reporting requirements of the Exchange Act, or as required to be deemed a current public company as to disclosure including on any exchange or over the counter trading medium and or the COMPANY is in, or accused of, being in violation of any law or regulation by written demand, court proceeding or otherwise;
(iv) the material breach of any promise or representation in this Agreement and or any related representation or agreement made by the COMPANY and or any of its officers with the Claimant, which shall include, without limitation, the failure to deliver shares of common stock due CLAIMANT on a conversion within three Business Days from the date of conversion or sooner, which delivery must be otherwise made per reasonable specifications of the CLAIMANT (e.g. to brokerage firm account);
(v) The COMPANY or any subsidiary of the COMPANY 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 COMPANY or any subsidiary of the COMPANY in an amount exceeding $25,000, 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;
(vi) Any cessation of operations by COMPANY or COMPANY admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the COMPANY’S ability to continue as a “going concern” shall not be an admission that the COMPANY cannot pay its debts as they become due;
(vii) The failure by COMPANY to maintain any assets which are necessary to conduct its business (whether now or in the future);
(viii) The restatement of any financial statements filed by the COMPANY with the SEC for any date or period from two years prior to the date of this Agreement and until all amount due to Claimant hereunder are no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Debenture or the Purchase Agreement; or
(ix) The Depository Trust Company (“DTC”) places a “chill” on the deposit of additional securities of the COMPANY with DTC.
If the COMPANY fails to perform hereunder by delivering Shares or paying Principal and or Interest within 3 Business Days of said being due, then for the first 30 calendar days from the due date of said performance, the COMPANY shall also owe payable immediately an amount equal to $1,000 per day as a reasonable "Late Fee" in addition to any other damages and reasonable attorney fees and costs payable, to cover, on a non accountable basis, the time, expense, efforts and or distress of the CLAIMANT having to focus its management, advisors, and counselors on the matter of the COMPANY failing to honor its written obligations, and said figure is deemed a reasonable liquidated damages provision and is not an election of remedy and is non exclusive so the CLAIMANT can add and pursue all rights otherwise.
If any Event of Default occurs and is continuing, the full Principal amount of this Agreement, together with Interest and Late Fees and other amounts owing in respect thereof, shall become immediately due and payable in cash except the CLAIMANT may elect any part thereof to be paid in Shares as part of any conversion hereunder in which case such Shares shall be due.
The CLAIMANT need not provide and the COMPANY hereby waives any presentment, demand, protest or other notice of any kind, and the CLAIMANT 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 CLAIMANT only in writing at any time prior to payment hereunder and the CLAIMANT shall have all rights and elections it is entitled to hereunder and or under law. Unless otherwise noted expressly herein in writing, no grace period applies.
At any time until both the Principal and Interest is paid in full and all conversions have been honored by the COMPANY and this Agreement is no longer outstanding, this Agreement, including interest and principal, shall be convertible into shares of Common Stock in the COMPANY at a 45% percent discount to the lowest traded price, determined on the then current trading market for the COMPANY’S common stock, for 15 trading days prior to conversion (the “Set Price”). The CLAIMANT shall effect conversions by delivering to the COMPANY the form of Notice of Conversion attached hereto as Exhibit C (a "Notice of Conversion"), specifying the date on which such conversion is to be effected (a "Conversion Date") and Shares shall then be delivered by the COMPANY within three Business Days (72 hours). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is provided hereunder. To effect conversions hereunder, the CLAIMANT shall not be required to otherwise physically surrender anything to the COMPANY. If the COMPANY does not request, from its transfer agent, the issuance of the shares underlying this Agreement after receipt of a Notice of Conversion within three Business Days (72 hours) following the date of Notice of Conversion, or fails to timely (within 72 hours) deliver the Shares per the instructions of the CLAIMANT, free and clear of all legends in legal free trading form, the COMPANY shall be responsible to also promptly pay CLAIMANT for any differential in the value of the converted Shares underlying this Agreement between the value of the closing price on the date the Shares should have been delivered and the date the Shares are delivered. The CLAIMANT and any assignee, by acceptance of this Agreement, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Agreement, the unpaid and unconverted Principal amount of this Agreement may be less than the amount stated on the face hereof. The parties hereby agree that the COMPANY will cover all legal costs associated with the issuance of Opinion Letter(s) from Company counsel to the Transfer Agent. In addition, if the COMPANY fails to timely (within 72 hours, 3 business days), deliver the shares per the instructions of the CLAIMANT, free and clear of all legends in legal free trading form, the COMPANY shall allow CLAIMANT to add two (2) days to the look back (the mechanism used to obtain the conversion price along with discount) for each day the COMPANY fails to timely (within 72 hours, 3 business days)) deliver shares, on the next two conversions.
If the COMPANY, at any time while this Agreement is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the COMPANY pursuant to this Agreement, including as interest thereon), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the COMPANY, then the Set Price shall be either (i) as agreed in writing by the CLAIMANT in its discretion or if not agreed to by CLAIMANT or reasonably objected to by the COMPANY in writing to the CLAIMANT promptly before any such corporate change, (ii) be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stock as to such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. Whenever the Set Price is adjusted as noted above in this paragraph the COMPANY shall promptly, within one Business Day, deliver to each CLAIMANT a notice setting forth the Set Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
If, at any time while this Agreement is outstanding: (A) the COMPANY effects any merger or consolidation of the COMPANY with or into another Person, (B) the COMPANY effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the COMPANY or another Person) is completed pursuant to which CLAIMANTs of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the COMPANY effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then the CLAIMANT may declare this Agreement in default or, if it elects in writing to the COMPANY, upon any subsequent conversion, the CLAIMANT shall have the right to receive, for each underlying share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the CLAIMANT of one share of Common Stock of the COMPANY (the "Alternate Consideration"). For purposes of any such conversion, the determination of the Set Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the COMPANY shall apportion the Set Price among the Alternate Consideration in a reasonable manner, but only if consented to in writing by the CLAIMANT, reflecting the relative value of any different components of the Alternate Consideration. If shareholders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the CLAIMANT shall be given the same choice as to the Alternate consideration it receives upon any conversion of this Agreement following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the COMPANY or surviving entity in such Fundamental Transaction shall issue to the CLAIMANT a new Agreement consistent with the foregoing provisions and evidencing the CLAIMANT'S right to convert such Agreement into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is affected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph and insuring that this Agreement (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control Transaction, then at the request of the CLAIMANT delivered before the 90 th calendar day after such Fundamental Transaction, the COMPANY (or any such successor or surviving entity) will purchase the Agreement from the CLAIMANT for a purchase price, payable in cash within 10 business days of such request, equal to the 125% or maximum permitted by law whichever is lower, of the remaining unconverted Principal amount of this Agreement on the date of such request, plus all accrued and unpaid Interest thereon, plus all other accrued and unpaid amounts due hereunder.