EXHIBIT 4.7
NEITHER THIS DEBENTURE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
DEBENTURE 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 THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES. THIS DEBENTURE AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THIS DEBENTURE MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
ORIGINAL ISSUE DATE:
[ ]
$[ ]
No. [ ]
MILLENNIUM CELL INC.
SECURED CONVERTIBLE DEBENTURE
DUE ON THE THIRD YEAR ANNIVERSARY OF THE [ORIGINAL ISSUE DATE](1)
[ORIGINAL ISSUE DATE OF THE INITIAL DEBENTURES](2)
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of Millennium Cell Inc., a corporation organized under the laws of
the state of Delaware (the "COMPANY"), designated as its Secured Convertible
Debentures, due on the third year anniversary of the Original Issue Date (as
defined herein) in the aggregate principal amount of [ ] Million Dollars ($[
](3) (collectively, the "DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to the order of [ ] or
its registered assigns (the "HOLDER") the principal sum of [ ] Dollars ($[ ])
and any additional sums due pursuant to the terms hereof on the third year
anniversary of the [Original Issue Date](4) [original issue date of the Initial
Debentures (as defined in the Purchase Agreement)](5), or such
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(1) Only with respect to Initial Debentures.
(2) Only with respect to Additional Debentures
(3) $9,000,000 - Initial Debentures
$3,000,000 - Additional Debentures
(4) Only with respect to Initial Debentures.
(5) Only with respect to Additional Debentures
earlier date as the Debentures are required or permitted to be repaid hereunder
("MATURITY DATE"), and to pay interest to the Holder on the principal amount of
this Debenture in accordance with the provisions hereof. This Debenture is
subject to the following additional provisions.
1. Definitions. As used in this Debenture, the following terms
shall have the meanings set forth in this Section 1:
"ADJUSTMENT DATE" means the tenth Trading Day following the
Delivery Date.
"ADJUSTMENT NOTICE" means a written notice delivered by the
Company to a Holder pursuant to Section 6(c), indicating the Company's
intent to adjust the Conversion Price pursuant to Section 6(c).
["ADJUSTMENT PERCENTAGE" means, as of any Adjustment Date, if
the Holder shall have converted prior thereto an aggregate principal
amount of Debentures between: (i) $0 and $2,500,000, 88%; (ii)
$2,500,001 and $5,000,000, 90%; (iii) $5,000,001 and $7,500,000, 92%;
(iv) $7,500,001 and $9,000,000, 94%.](6)
["ADJUSTMENT PERCENTAGE" means, as of any Adjustment Date, if
the Holder shall have converted prior thereto an aggregate principal
amount of Debentures between: (i) $0 and $1,000,000, 94%; and (v)
$1,000,001 to $3,000,000, 96%.](7)
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any subsidiary thereof commences a case or other proceeding
under any bankruptcy, reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or Liquidation or similar
law of any jurisdiction relating to the Company or any subsidiary
thereof; (b) there is commenced against the Company or any subsidiary
thereof any such case or proceeding that is not dismissed within 60
days after commencement; (c) 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; (d) the Company or
any subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within 60 days; (e) the Company or any subsidiary
thereof makes a general assignment for the benefit of creditors; (f)
the Company or any subsidiary thereof fails to pay, or states that it
is unable to pay or is unable to pay, its debts generally as they
become due; (g) the Company or any subsidiary thereof calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any subsidiary
thereof, by any act or failure to act, expressly indicates its consent
to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
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(6) Only for Initial Debentures.
(7) Only for Additional Debentures.
-2-
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York or the State of New Jersey are
authorized or required by law or other governmental action to close.
"CHANGE OF CONTROL" means the occurrence of any of: (i) 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 Company, by contract or otherwise) of
in excess of 33% of the voting securities of the Company, (ii) a
replacement at one time or over time of more than one-half of the
members of the Company's board of directors 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), (iii) the merger of the
Company with or into another entity that is not wholly-owned by the
Company, consolidation or sale of 50% or more of the assets of the
Company in one or a series of related transactions, or (iv) the
execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"CLOSING DATE" shall have the meaning set forth in the
Purchase Agreement.
"CLOSING PRICE" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on an Eligible Market, the closing sales
price per share of the Common Stock for such date (or the nearest
preceding date) on the primary Eligible Market on which the Common
Stock is then listed or quoted; (b) if the Common Stock is not then
listed or quoted on an Eligible Market and if prices for the Common
Stock are then quoted on the OTC Bulletin Board, the closing sales
price per share of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is
not then listed or quoted on an Eligible Market or the OTC Bulletin
Board and if prices for the Common Stock are then reported in the "Pink
Sheets" published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent sales price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share
of Common Stock as determined by an independent appraiser selected in
good faith by the Holder.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, $.001 par
value, and stock of any other class into which such shares may be
reclassified or changed.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or a subsidiary thereof which entitle the holder thereof to acquire
Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
-3-
the holder thereof to receive, Common Stock or other securities that
entitle the holder to receive, directly or indirectly, Common Stock.
"COMPANY CONVERSION DATE" means the tenth (10th) day
immediately following the date a Company Conversion Notice together
with the Conversion Schedule is delivered to the Holder pursuant to
Section 6(b).
"COMPANY CONVERSION NOTICE" means a written notice in the form
attached hereto as Exhibit B.
"COMPANY PREPAYMENT PRICE" for any Debentures which shall be
subject to prepayment pursuant to Section 8(a), shall equal the sum of:
(i)105% of the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of such Debentures.
"CONVERSION DATE" means either a Holder Conversion Date, a
Company Conversion Date or an Adjustment Date.
"CONVERSION NOTICE" means either a Holder Conversion Notice or
a Company Conversion Notice.
"CONVERSION PRICE" means the Initial Conversion Price, subject
to adjustment from time to time pursuant to Sections 6(c) (solely with
respect to conversions pursuant to Section 6(c)) and 6(j).
"DELIVERY DATE" means the date an Adjustment Notice is
delivered to the Holder pursuant to Section 6(c).
"EFFECTIVE DATE" means the date that the initial Registration
Statement required by the Registration Rights Agreement is first
declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
the American Stock Exchange, the Nasdaq or the Nasdaq Small Cap Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EQUITY CONDITIONS" means, with respect to a specified
issuance of Common Stock, that each of the following conditions is
satisfied: (i) the number of authorized but unissued and otherwise
unreserved shares of Common Stock is sufficient for such issuance; (ii)
such shares of Common Stock are registered for resale by the Holder
pursuant to an effective registration statement, and the prospectus
thereunder is available for use by the Holder to sell such shares or
all such shares may be sold without volume restrictions pursuant to
Rule 144(k) under the Securities Act; (iii) the Common Stock is listed
or quoted (and is not suspended from trading) on an Eligible Market and
such shares of Common Stock are approved for listing on such Eligible
Market upon issuance;
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(iv) such issuance would be permitted in full without violating
[Section 6(d)(ii) hereof or](8) the rules or regulations of the
Eligible Market on which such shares are listed or quoted; (v) no Event
of Default nor any event that with the passage of time and without
being cured would constitute a Event of Default has occurred and not
been cured, and (vii) no public announcement of a pending or proposed
Change of Control transaction has occurred that has not been
consummated.
"EVENT OF DEFAULT" means the occurrence of 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 principal or
liquidated damages in respect of any Debentures, as and when the same
becomes due and payable (whether by acceleration or otherwise) or any
default in the payment of interest in respect of any Debentures, within
five Business Days of when the same becomes due and payable;
(ii) a Bankruptcy Event;
(iii) the Common Stock is not listed or quoted, or is
suspended from trading, on an Eligible Market for an aggregate of
twelve Trading Days (which need not be consecutive Trading Days),
provided, that voluntary suspensions of the Common Stock from an
Eligible Market by the Company for less than one hour at a time to
disseminate material information shall not be included within such
number of Trading Days;
(iv) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion
hereunder that comply with the provisions hereof prior to the fifth
Business Day after the Conversion Date or the Company shall provide
notice to any Holder, including by way of public announcement, at any
time, of its intention not to comply with requests for conversion of
Debentures in accordance with the terms hereof;
(v) the Company shall fail to have available a
sufficient number of authorized and unreserved shares of Common Stock
to issue to such Holder upon a conversion hereunder;
(vi) the Company shall fail for any reason to pay in
full the amount of cash due pursuant to a Buy-In within seven days
after notice therefor is delivered hereunder or shall fail to pay any
liquidated damages due pursuant to the Transaction Documents within
seven days of the date of the request for such payment;
(vii) the occurrence of a Change of Control;
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(8) Only with respect to Initial Debentures.
-5-
(viii) during the Effectiveness Period (as defined in
the Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder shall not be
permitted to resell Registrable Securities (as defined in the
Registration Rights Agreement) under the Registration Statement, in
either case, for more than seven consecutive Trading Days or an
aggregate of twenty Trading Days (which need not be consecutive Trading
Days);
(ix) the Company defaults in the timely performance
of any other obligation under the Transaction Documents [(other than in
connection with the failure to issue the Additional Debentures and
obtain the Additional Letter of Credit (as defined in the Purchase
Agreement) due to the inability of the Company to obtain the
Shareholder Approval or meet the condition set forth in Section
2.4(b)(iii) of the Purchase Agreement)](9) and such default continues
uncured for a period of five Trading Days after the date on which
notice of such default is first given to the Company by the Holder (it
being understood that no prior notice need be given in the case of a
default that cannot reasonably be cured within five Trading Days);
(x) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holder
prior to the expiration of ten days from the Event Date (as defined in
the Registration Rights Agreement) relating thereto;
(xi) the Company or any Subsidiary defaults 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 in an amount exceeding $500,000, whether such
indebtedness now exists or is hereafter created, and such default
results in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;
or
(xii) either: (A) the Letter of Credit (as defined in
Section 2(a)) shall be revoked, withdrawn, terminated or disaffirmed by
the Bank (as defined in Section 2(a)) or (B) the Holder shall have
received notification from the Bank pursuant to the Letter of Credit
that the Letter of Credit shall not be renewed and: (x) 45 days shall
have elapsed since the delivery of such notification, (y) such
non-renewal shall not have been withdrawn by the Bank prior to such
45th day and (z) the Company shall not have delivered a substitute
letter of credit in form and substance satisfactory to the Holder in
its sole and absolute discretion.
"FINAL RELEASE DATE" means, subsequent to the Effective Date,
the tenth (10th) Trading Day immediately following a period of twenty
consecutive Trading Days during
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(9) Only with respect to Initial Debentures.
-6-
which the Closing Prices on each of such twenty consecutive Trading
Days is greater than 120% of the Initial Conversion Price.
"HOLDER CONVERSION DATE" means the date a Holder Conversion
Notice together with the Conversion Schedule is delivered to the
Company pursuant to Section 6(a).
"HOLDER CONVERSION NOTICE" means a written notice in the form
attached hereto as Exhibit A.
"HOLDER PREPAYMENT PRICE" for any Debentures required to be
prepaid pursuant to Section 8(b) shall equal the sum of: (i) the
principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"INITIAL CONVERSION PRICE" shall initially equal $4.25.
"INTEREST PAYMENT DATE" means each March 31, June 30,
September 30 and December 31, beginning on the first such date
following the Original Issue Date, except if such date is not a Trading
Day, in which case such Interest Payment Date shall be the next
succeeding Trading Day.
"INDEX PRICE" means the average of the VWAP's for the 10
consecutive Trading Days immediately following the Delivery Date.
"INTEREST RATE" means a rate of interest paid from time to
time on money market accounts held at First Union National Bank.
"LIQUIDATION" means for any Person, any liquidation,
dissolution or winding-up of such Person, whether voluntary or
involuntary, by operation or law or otherwise.
"MANDATORY CONVERTIBLE AMOUNT" means $500,000, provided, that
with respect to each Adjustment Date, such amount may be increased up
to $2,500,000 by mutual consent of the Holder and the Company reached
prior to the applicable Adjustment Date.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal
the sum of: (i) the greater of (A) 130% of the principal amount of
Debentures to be prepaid and, if applicable, the Reinstated Principal,
plus all accrued and unpaid interest thereon, and (B) the principal
amount of Debentures to be prepaid and, if applicable, the Reinstated
Principal, plus all accrued and unpaid interest thereon, divided by the
Conversion Price on the Trading Day immediately preceding (x) the date
of the Event of Default or (y) the date the Mandatory Prepayment Amount
is paid in full, whichever is less, multiplied by the Closing Price on
(x) the date of the Event of Default or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is greater, and (ii) all
other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.
"NASDAQ" means the Nasdaq National Market.
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"ORIGINAL ISSUE DATE" means the date of the first issuance of
any Debentures, regardless of the number of transfers of any particular
Debenture and regardless of the number of certificates which may be
issued to evidence such Debentures.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened in
writing concerning the interpretation, enforcement or defense of any
transaction contemplated by any Transaction Document (whether brought
against a party hereto or such parties affiliates, directors, officers,
employees or agents).
"PURCHASE AGREEMENT" means the Securities Purchase Agreement,
dated as of June 19, 2002, to which the Company and the original
Holders are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of June 19, 2002, to which the Company and the
original Holders are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements of the Registration Rights Agreement and
covering the resale of, among other things, all Underlying Shares by
the Holders who shall be named as "selling stockholders" thereunder.
"REINSTATED PRINCIPAL" means the principal amount of
Debentures converted during the ten Trading Days preceding the delivery
of an Event of Default Notice, for which the Company issued or was
obligated to issue Underlying Shares to the Holder.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY" shall have the meaning set forth in the Purchase
Agreement.
"TRADING DAY" means: (a) a day on which the shares of Common
Stock are traded on an Eligible Market, or (b) if the shares of Common
Stock are not listed on an Eligible Market, a day on which the shares
of Common Stock are traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the shares of Common Stock are not
quoted on the OTC Bulletin Board, a day on which the shares of Common
Stock are quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, that in
the event that the shares of Common Stock are not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean a
Business Day.
-8-
"TRANSACTION DOCUMENTS" shall have the meaning set forth in
the Purchase Agreement.
"UNDERLYING SHARES" means, collectively, the shares of Common
Stock issuable upon conversion of Debentures in accordance with the
terms hereof.
"VWAP" means on any particular Trading Day or for any
particular period, the volume weighted average trading price per share
of Common Stock on such date or for such period on an Eligible Market
as reported by Bloomberg L.P., or any successor performing similar
functions.
"WARRANTS" shall have the meaning set forth in the Purchase
Agreement.
2. Letter of Credit.
(a) This Debenture is the debenture referred to in an
irrevocable letter of credit issued by First Union National Bank (the "BANK") in
favor of the Holder in an original amount of $[ ](10), a copy of which is
annexed hereto as Annex A (the "LETTER OF CREDIT"). The Company hereby
acknowledges that the Holder and any subsequent Holder shall be entitled to the
benefits of the Letter of Credit and covenants and agrees that it will not
impair the Holder's rights under the Letter of Credit and (except to the extent
provided in Section 2(b)) shall maintain the Letter of Credit in full force and
effect.
(b) The Holder agrees that the face amount of the
Letter of Credit shall be reduced from time to time pursuant to the terms set
forth below:
(i) subsequent to each Conversion Date, the
face amount of the Letter of Credit shall be reduced on the date on which the
Holder receives the Underlying Shares it is entitled to receive subsequent to
such Conversion Date pursuant to Section 6(e), by an amount equal to the
principal amount of Debentures converted on such Conversion Date less any
interest payment accreted to principal up to such date;
(ii) the face amount of the Letter of Credit
shall be reduced by an amount equal to the Holder Prepayment Price or the
Company Prepayment Price paid by the Company pursuant to the delivery of a
Holder Prepayment Notice or Company Prepayment Notice, as applicable, as set
forth in Section 8, upon receipt by the Holder of such payment; and
(iii) on the Final Release Date and provided
that: (A) the Equity Conditions are satisfied on such date with respect to the
Underlying Shares issuable upon conversion in full of the then outstanding
principal amount of Debentures and (B) the Underlying Shares issuable upon
conversion in full of the then outstanding principal amount of Debentures
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(10) $9,000,000 - Initial Debentures
$3,000,000 - Additional Debentures
-9-
would not violate Section 6(d)(i), the Letter of Credit shall be canceled and
shall cease to secure any Debentures which may be outstanding as of such Final
Release Date.
(c) The Holder shall, within five Trading Days of the
occurrence of any of the events set forth in Section 2(b), provide the Bank with
Exhibit C attached to the Letter of Credit indicating the occurrence of such
event.
(d) Upon the failure of the Company to timely pay to the
Holder any amount which is then due and payable to the Holder under this
Debenture, whether pursuant to Section 7, Section 8 or any other applicable
Section herein, the Holder shall be entitled to draw on the Letter of Credit to
the extent of any such payment or payments so due to the Holder is not timely
paid by the Company.
(e) Any amounts received by the Holder pursuant to a draw on
the Letter of Credit shall be applied against all unsatisfied obligations of the
Company under this Debenture.
3. Interest.
(a) The Company shall pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture
(including any interest added to such principal in accordance with this Section
3) at an annual rate equal to the Interest Rate, payable quarterly in arrears on
each Interest Payment Date. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date.
(b) Subject to the conditions and limitations set forth below,
the Company need not pay interest under this Debenture in cash, but may add the
amount of such interest to the principal amount of this Debenture. To pay the
interest payable on an Interest Payment Date in cash, the Company must deliver
written notice to the Holder indicating its election to make such cash payment
at least 20 calendar days prior to such Interest Payment Date, but the Company
may indicate in any such notice that the election contained therein shall
continue for subsequent Interest Payment Dates until revised on not less than 20
calendar days notice prior to an Interest Payment Date. Failure to timely
provide such written notice shall be deemed an election by the Company to
accrete the amount of any interest to the principal amount of this Debenture,
unless payment of interest in such manner is not permitted at the time of any
such payment, in which case such interest must be paid in cash on the Interest
Payment Date. All interest payable on any Interest Payment Date must be paid in
the same manner.
(c) Notwithstanding the foregoing, the Company may not pay
interest by accreting the amount thereof to the principal amount of the
Debentures unless, on the Interest Payment Date, the Equity Conditions are
satisfied with respect to all of the Underlying Shares then issuable upon
conversion in full of all outstanding Debentures (after giving effect to such
addition to principal). If the Company is required but fails to pay interest in
cash on any Interest Payment Date, the Holder may (but shall not be required
to), by notice to the Company, treat such interest as if it had been accreted to
the principal amount of this Debenture as of such Interest Payment Date.
-10-
4. Registration of Debentures. The Company shall register the
Debentures upon records to be maintained by the Company for that purpose (the
"DEBENTURE REGISTER") in the name of each record holder thereof from time to
time. The Company may deem and treat the registered Holder as the absolute owner
hereof for the purpose of any conversion hereof or any payment of interest
hereon, and for all other purposes, absent actual notice to the contrary.
5. Registration of Transfers and Exchanges. The Company shall register
the transfer of any portion of this Debenture in the Debenture Register upon
surrender of this Debenture to the Company at its address for notice set forth
herein. Upon any such registration or transfer, a new debenture, in
substantially the form of this Debenture (any such new debenture, a "NEW
DEBENTURE"), evidencing the portion of this Debenture so transferred shall be
issued to the transferee and a New Debenture evidencing the remaining portion of
this Debenture not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Debenture by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and obligations of
a holder of a Debenture. 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 or other fee
will be imposed in connection with any such registration of transfer or
exchange. Transfers of this Debenture and the Underlying Shares issuable on
conversion thereof hereby are governed by Section 4.1 of the Purchase Agreement.
6. Conversion
(a) At the option of the Holder. All or any portion of the
principal amount of this Debenture then outstanding shall be convertible into
shares of Common Stock at the Conversion Price (subject to limitations set forth
in Section 6(d)), at the option of the Holder, at any time and from time to time
from and after the Original Issue Date. Holders shall effect conversions under
this Section 6(a), by delivering to the Company a Holder Conversion Notice
together with a schedule in the form of Schedule 1 attached hereto (the
"CONVERSION SCHEDULE"). The number of Underlying Shares issuable upon any
conversion hereunder shall (subject to limitations set forth in Section 6(d))
equal the outstanding principal amount of this Debenture to be converted
(including any interest payments accreted to principal pursuant to the terms
hereof) divided by the Initial Conversion Price. If the Holder is converting
less than all of the principal amount represented by this Debenture, or if a
conversion hereunder may not be effected in full due to the application of
Section 6(d)(i), the Company shall honor such conversion to the extent
permissible hereunder and shall promptly deliver to the Holder a Conversion
Schedule indicating the principal amount which has not been converted.
(b) At the option of the Company. Subject to the conditions
set forth in this Section 6(b) and Section 6(d), at any time after the earlier
of (x) the first year anniversary of the Original Issue Date and (y) the 14th
month anniversary of the Closing Date, the Company may require a conversion, at
the Conversion Price and on the Company Conversion Date, of all or a portion of
the outstanding principal amount of this Debenture if: (i) both: (A) the average
of the Closing Prices during any 30 consecutive Trading Days following the first
year anniversary of the Closing Date is equal to or greater than 120% of the
Initial Conversion Price and (B) the Closing Price for each of 15 Trading Days
(which need not be consecutive) during such 30
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consecutive Trading Day period is equal to or greater than 120% of the Initial
Conversion Price and (ii) all of the Equity Conditions are satisfied as of the
Company Conversion Date with respect to the Underlying Shares potentially
issuable in connection with such proposed conversion. The Company shall exercise
its right to require conversions hereunder by delivering to the Holder a Company
Conversion Notice together with a Conversion Schedule within 10 Business Days of
the satisfaction of the condition set forth in clause (i) of the immediately
preceding sentence. Notwithstanding anything herein to the contrary, if any of
the conditions set forth in clauses (i) and (ii) herein shall cease to be in
effect during the period between the date of the delivery of the Company
Conversion Notice and the Company Conversion Date, then the Holder subject to
such conversion may elect, by written notice to the Company given at any time
after any such conditions shall cease to be in effect, to invalidate ab initio
such conversion. The number of Underlying Shares issuable upon any conversion
hereunder shall (subject to limitations set forth in Section 6(d)) equal the
outstanding principal amount of this Debenture to be converted (including any
interest payments accreted to principal pursuant to the terms hereof) divided by
the Initial Conversion Price. The conversion subject to each Company Conversion
Notice, once given, shall be irrevocable as to the Company. If the conversion of
a principal amount of Debentures indicated in a Company Conversion Notice would
result in the issuance to the Holder of Underlying Shares in excess of the
amount permitted pursuant to Section 6(d)(i), the Holder shall notify the
Company of this fact and the Company shall: (x) honor the conversion for the
maximum principal amount of Debentures permitted, pursuant to Section 6(d)(i),
to be converted on such Company Conversion Date and (y) cancel the Company
Conversion Notice with respect to the portion of the principal amount of
Debentures the conversion of which would violate Section 6(d)(i).
(c) Company's option to adjust Conversion Price and force
conversion. At any time and from time to time after [the later to occur of: (i)
the second month anniversary of the Closing Date and (ii) the Effective
Date](11) [the date on which the Initial Debentures (as defined in the Purchase
Agreement) shall no longer be outstanding](12), the Company shall have the
option, upon the delivery of an Adjustment Notice to the Holder, to adjust the
Conversion Price then in effect with respect to the Mandatory Convertible Amount
applicable to such Adjustment Notice to equal the lesser of: (A) the Initial
Conversion Price and (B) the product of (x) the applicable Adjustment Percentage
and (y) the Index Price. Subject to the terms hereof (including, without
limitation, Section 6(d)(i)), on each Adjustment Date immediately following the
delivery of an Adjustment Notice, the applicable Mandatory Convertible Amount
shall be converted into Underlying Shares at the Conversion Price as adjusted on
such Adjustment Date pursuant to the terms of the immediately preceding
sentence, provided, that such conversion shall only occur if all of the Equity
Conditions are satisfied as of the Adjustment Date with respect to the
Underlying Shares potentially issuable in connection with such proposed
conversion. Notwithstanding anything herein to the contrary, the Company shall
not be entitled to deliver an Adjustment Notice prior to the tenth (10th)
Trading Day immediately following the immediately preceding Delivery Date. If a
conversion of the Mandatory Convertible Amount would result in the issuance to
the Holder of Underlying Shares
----------
(11) Only with respect to the Initial Debentures
(12) Only with respect to the Additional Debentures.
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in excess of the amount permitted pursuant to Section 6(d)(i), the Holder shall
notify the Company of this fact and the Company shall: (x) honor the conversion
for the maximum principal amount of Debentures permitted, pursuant to Section
6(d)(i), to be converted on the applicable Adjustment Date and (y) cancel the
portion of the Mandatory Convertible Amount the conversion of which would
violate Section 6(d)(i).
(d) Certain Conversion Restrictions.
(i) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by a Holder upon any
conversion of Debentures (or otherwise in respect hereof) shall be limited to
the extent necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Holder and its affiliates and any other Persons whose beneficial ownership
of Common Stock would be aggregated with such Holder's for purposes of Section
13(d) of the Exchange Act, does not exceed 9.999% of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such conversion). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of a
Holder Conversion Notice hereunder will constitute a representation by the
applicable Holder that it has evaluated the limitation set forth in this
paragraph and determined that issuance of the full number of Underlying Shares
issuable in respect of such Conversion Notice does not violate the restriction
contained in this paragraph. This provision shall not restrict the number of
shares of Common Stock which a Holder may receive or beneficially own in order
to determine the amount of securities or other consideration that such Holder
may receive in the event of a merger, sale or other business combination or
reclassification involving the Company as contemplated herein.
(ii) [If the Company has not previously obtained Shareholder
Approval (as defined below), then the Company may not issue in excess of the
Issuable Maximum upon conversions of the Debentures. The "ISSUABLE MAXIMUM"
means a number of shares equal to 3,185,000, less: any number of shares of
Common Stock previously issued upon conversion of this Debenture and any other
Initial Debentures and exercise of any Warrants issued to the Holder on or prior
to the Original Issue Date. Each Holder shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing: (x) the principal
amount of Debentures issued and sold to such Holder on the Original Issue Date
by (y) the aggregate principal amount of Debentures issued and sold by the
Company on the Original Issue Date. If any Holder shall no longer hold
Debentures, then such Holder's remaining portion of the Issuable Maximum shall
be allocated pro-rata among the remaining Holders. If on any Conversion Date:
(A) the aggregate number of shares of Common Stock that would then be issuable
upon conversion in full of all then outstanding principal amount of Debentures
would exceed the Issuable Maximum, and (B) the Company shall not have previously
obtained the vote of shareholders, as may be required by the applicable rules
and regulations of the Nasdaq (or any successor entity) applicable to approve
the issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the "SHAREHOLDER APPROVAL"), then, the Company
shall issue to the converting Holder a number of shares of Common Stock equal to
such Holder's pro-rata portion (which shall be calculated pursuant to the terms
hereof) of the Issuable Maximum and, with respect to the remainder of the
principal amount of Debentures
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then held by such Holder for which a conversion would result in an issuance of
shares of Common Stock in excess of such Holder's pro-rata portion (which shall
be calculated pursuant to the terms hereof) of the Issuable Maximum (the "EXCESS
PRINCIPAL AMOUNT"), the applicable Holder shall have the right to require the
Company to either: (1) obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 90th day
after such request, or (2) pay cash, in an amount equal to the Excess Principal
Amount (and accrued and unpaid interest thereon). If a Holder shall have elected
the first option pursuant to the immediately preceding sentence and the Company
shall have failed to obtain the Shareholder Approval on or prior to the 90th day
after such request, then within three (3) days of such 90th day, the Company
shall pay cash to such Holder an amount equal to Excess Principal Amount (and
accrued and unpaid interest thereon). Notwithstanding anything herein to the
contrary, if on any date other than a Conversion Date: (A) the aggregate number
of shares of Common Stock that would then be issuable upon conversion in full of
all then outstanding principal amount of Debentures would exceed the Issuable
Maximum, and (B) the Company shall not have previously obtained the Shareholder
Approval, then, the Holder shall be entitled to require the Company to pay to it
in cash an amount equal to the principal amount of Debentures (and accrued and
unpaid interest thereon) then held by such Holder for which a potential
conversion on such date would result in an issuance of shares of Common Stock in
excess of such Holder's pro-rata portion (which shall be calculated pursuant to
the terms hereof) of the Issuable Maximum. The outstanding principal amount of
Debentures shall be reduced by the Excess Principal Amount upon the Holder's
receipt of the Excess Principal Amount pursuant to the terms hereof. The Company
and the Holder understand and agree that shares of Common Stock issued to and
then held by the Holder as a result of conversions of Debentures shall not be
entitled to cast votes on any resolution to obtain Shareholder Approval pursuant
hereto.](13)
(e) Mechanics of Conversion. By the third Trading Day after
each Conversion Date, the Company shall issue or cause to be issued and cause to
be delivered to or upon the written order of the Holder and in such name or
names as the Holder may designate a certificate for the Underlying Shares
issuable upon such conversion which, unless required by the Purchase Agreement,
shall be free of all restrictive legends. The Holder, or any Person so
designated by the Holder to receive Underlying Shares, shall be deemed to have
become the holder of record of such Underlying Shares as of the Conversion Date.
If the Company's transfer agent is eligible to participate in the Depositary
Trust Corporation DWAC system and no legends are required to be included on the
certificates representing Underlying Shares pursuant to the Purchase Agreement,
the Company shall, upon request of the Holder, use its best efforts to deliver
Underlying Shares hereunder electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions.
(f) To effect conversions hereunder, the Holder shall not be
required to physically surrender this Debenture unless the aggregate principal
amount represented by such Debenture is being converted, in which event, the
Holder shall deliver such Debenture promptly to the Company (it being understood
that such delivery is not a condition precedent to the Company's obligations to
deliver Underlying Shares upon such conversion). Conversions
----------
(13) Only with respect to the Initial Debentures.
-14-
hereunder shall have the effect of lowering the outstanding principal amount
represented by such Debenture in an amount equal to the applicable conversion,
which shall be evidenced by entries set forth in the Conversion Schedule which
will be maintained by the Company and the Holder and be binding on both parties
absent manifest error.
(g) The Company's obligations to issue and deliver Underlying
Shares upon conversion of this Debenture in accordance with the terms hereof
(including, without limitations, Section 6(d)) are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Underlying Shares.
(h) If by the third Trading Day after a Conversion Date the
Company fails to deliver to the Holder such Underlying Shares in such amounts
and in the manner required pursuant to Section 6(e), then the Holder will have
the right to rescind such conversion.
(i) If by the third Trading Day after a Conversion Date the
Company fails to deliver to the Holder such Underlying Shares in such amounts
and in the manner required pursuant to Section 6(e), and if after such third
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of 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 Company 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 shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (1) the aggregate number of Underlying Shares that the
Company was required to deliver to the Holder in connection with the conversion
at issue by (2) the Closing Price at the time of the obligation giving rise to
such purchase obligation and (B) at the option of the Holder, either reinstate
the principal amount of Debentures and equivalent number of Underlying Shares
for which such conversion was not timely honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its conversion and delivery obligations hereunder. For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
with a market price on the date of conversion totaling $10,000, under clause (A)
of the immediately preceding sentence, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In.
(j) Adjustments to Conversion Price. The Conversion Price in
effect on any Conversion Date shall be subject to adjustments in accordance with
this Section 6(j):
(i) Stock Dividends and Splits. If the Company, at
any time while any Debentures are outstanding, (i) pays a stock dividend on its
Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common
-15-
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.
(ii) Additional Distributions. If the Company, at any
time while any Debentures are outstanding, shall distribute to all holders of
Common Stock (and not to Holders) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security, then in each such
case the Conversion Price at which the principal amount of Debentures shall
thereafter be convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Closing Price determined as of the record date
mentioned above, and of which the numerator shall be such Closing Price on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith. In either case the adjustments shall be described in a statement
provided to the Holders of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(iii) Subsequent Equity Sales. If the Company or any
subsidiary thereof, as applicable, at any time while this Debenture is
outstanding, shall issue shares of Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at a price per share
less than the Conversion Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights issued in connection
with such issuance, be entitled to receive shares of Common Stock at a price
less than the Conversion Price, such issuance shall be deemed to have occurred
for less than the Conversion Price), then, at the option of the Holder for such
conversions as it shall indicate, the Conversion Price shall be adjusted to
mirror the conversion, exchange or purchase price for such Common Stock or
Common Stock Equivalents (including any reset provisions thereof) at issue. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Company shall notify the Holder in writing, no later than the
Trading Day following the issuance of any Common Stock or Common Stock
Equivalent subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms. No further adjustments shall be made to the Conversion Price upon
the actual issuance of Common Stock upon conversion or exercise of the
applicable Common Stock Equivalent. Notwithstanding the foregoing, no adjustment
will be made under this Section 6(j)(iii) in respect of:
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(A) Any grant of an option or warrant for Common
Stock or issuance of any shares of Common Stock upon the exercise of any options
or warrants to employees, officers and directors of or consultants to the
Company pursuant to any stock option plan, employee stock purchase plan or
similar plan or incentive or consulting arrangement approved by the Company's
board of directors;
(B) Any rights or agreements to purchase Common Stock
Equivalents outstanding on the date hereof and as specified in Schedule 3.1(g)
to the Purchase Agreement (but not as to any amendments or other modifications
to the number of Common Stock issuable thereunder, the terms set forth therein,
or the exercise price set forth therein);
(C) Any Common Stock or Common Stock Equivalents
issued for consideration other than cash pursuant to a merger, consolidation,
acquisition or other similar business combination;
(D) Any issuances of Common Stock or Common Stock
Equivalents to a Person which is or will be, itself or through its subsidiaries,
an operating company in a business related to or complementary with the business
of the Company and in which the Company receives reasonably material benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities;
(E) Any Common Stock Equivalents that entitle the
holders thereof to acquire up to 500,000 shares of Common Stock issued pursuant
to any equipment leasing arrangement;
(F) Any Common Stock or Common Stock Equivalents
issued to pay all or a portion of any investment banking, finders or similar fee
or commission, which entitles the holders thereof to acquire shares of Common
Stock at a price not less than the market price of the Common Stock on the date
of such issuance and which is not subject to any adjustments other than on
account of stock splits and reverse stock splits;
(G) Any shares of Common Stock issued upon the
exercise of the Warrants or any similar warrant or conversion of the Debentures
issued pursuant to the Purchase Agreement;
(H) a bona fide underwritten public offering of the
Common Stock resulting in gross proceeds in excess of $15 million to the Company
(it being understood that equity line transactions, including any on going
warrant financing, or any similar arrangements shall not constitute a bona fide
underwritten public offering of the Common Stock for the purposes hereof); or
(I) Any adjustment to the Conversion Price pursuant
to Section 6(c).
(iv) Calculations. All calculations under this Section 6(j)
shall be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. The number of
-17-
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
(v) Notice of Adjustments. Whenever the Conversion
Price is adjusted pursuant to the terms hereof the Company shall promptly mail
to each Holder, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(k) Fundamental Transactions. If, at any time while this
Debenture is outstanding: (i) the Company effects any merger or consolidation of
the Company with or into another Person, (ii) the Company effects any sale of
all or substantially all of its assets in one or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (iv) 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 Holder shall have the
right thereafter to receive, upon conversion of the outstanding principal amount
of this Debenture, the same amount and kind 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 holder of the number of Underlying Shares then issuable upon conversion in
full of the outstanding principal amount of this Debenture (the "ALTERNATE
CONSIDERATION"). For purposes of any such exercise, the determination of the
Conversion 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 Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any conversion of the outstanding principal amount of this
Debenture following such Fundamental Transaction. At the Holder's option and
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall, either (i) issue to the Holder a new debenture substantially
in the form of this Debenture and consistent with the foregoing provisions
(omitting Section 6(j)(iii) hereof) and evidencing the Holder's right to
purchase the Alternate Consideration at the Conversion Price upon conversion
thereof, or (ii) purchase the Debenture from the Holder for a purchase price,
payable in cash within five Trading Days after such request (or, if later, on
the effective date of the Fundamental Transaction), equal to the Black Scholes
value of the remaining unconverted portion of the outstanding principal amount
of this Debenture (together with any accrued but unpaid interest thereon) on the
date of the Fundamental Transaction as well as assumptions reasonably mutually
acceptable to the Company and the Holder, provided that for purposes of such
calculation, the market price of the Common Stock shall be the closing bid price
of the Common Stock on the Trading Day immediately preceding the public
announcement of the Fundamental Transaction and the volatility factor shall be
determined by reference to the 12 month average industry volatility measures.
The terms of any agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or
-18-
surviving entity to comply with the provisions of this paragraph (k) and
insuring that the Debenture (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
(l) Reclassifications; Share Exchanges. 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
(other than compulsory share exchanges which constitute Change of Control
Transactions), the Holders of the Debentures then outstanding shall have the
right thereafter to convert such shares only 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 reclassification or share exchange, and the Holders
shall be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Debentures could have been converted immediately prior to
such reclassification or share exchange would have been entitled. This provision
shall similarly apply to successive reclassifications or share exchanges.
(m) Notice of Corporate Events. If (a) the Company shall
declare a dividend (or any other distribution) on the Common Stock, (b) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (c) the Company shall authorize the granting to all holders of
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 Company shall be required in connection with any Change of
Control transaction or Fundamental Transaction, (e) the entering into an
agreement to effectuate a Change of Control transaction or Fundamental
Transaction, or (f) the Company shall authorize the Liquidation of the Company;
then the Company shall file a press release or Current Report on Form 8-K to
disclose such occurrence and notify the Holders at their last addresses as they
shall appear upon the stock books of the Company, at least 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 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 any such Change of Control transaction or
Fundamental Transaction is expected to become effective or close, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities, cash or other property
deliverable upon any such Change of Control Transaction or Fundamental
Transaction. Holders are entitled to convert principal amount of this Debenture
during the 20-day period commencing the date of such notice to the effective
date of the event triggering such notice.
(n) The Company 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 Debentures, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares of
Common Stock as shall be issuable upon the conversion of all outstanding
principal amount of Debentures. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized and issued and fully paid and nonassessable.
-19-
(o) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Price on the applicable
Conversion Date. If any fraction of an Underlying Share would, except for the
provisions of this Section 6(o), be issuable upon a conversion hereunder, the
Company shall pay an amount in cash equal to the Conversion Price multiplied by
such fraction.
(p) The issuance of certificates for Common Stock on
conversion of principal amount of this Debenture shall be made without charge to
the Holders 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 Company 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 Debentures so
converted.
(q) Any and all notices or other communications or deliveries
to be provided by the Holders, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile or sent by a
nationally recognized overnight courier service, addressed to the attention of
the Chief Financial Officer of the Company addressed to 0 Xxxxxxxxxx Xxx Xxxx,
Xxxxxxxxx, Xxx Xxxxxx, Facsimile No.: (000) 000-0000, or to such other address
or facsimile number as shall be specified in writing by the Company for such
purpose. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to each Holder at the facsimile telephone number or address of such
Holder appearing on the books of the Company, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section 6(q) prior to 6:30 p.m. (New York City time)(with
confirmation of transmission), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section 6(q) later than 6:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time) on such
date (with confirmation of transmission), (iii) upon receipt, if sent by a
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
7. Prepayments Upon Events of Default. Upon the occurrence of an Event
of Default, each Holder shall (in addition to all other rights it may have
hereunder or under applicable law), have the right exercisable at the sole
option of such Holder, and by delivery of a written notice to the Company to
require the Company (an "EVENT OF DEFAULT NOTICE"), to prepay all or a portion
of the Debentures then held by such Holder and, at the option of the Holder, all
or a portion of the Reinstated Principal, for an amount, in cash, equal to the
Mandatory Prepayment Amount. The Mandatory Prepayment Amount shall be due and
payable within five Trading Days of the date of the Event of Default Notice. For
purposes of this Section 7, principal amount of Debentures shall remain
outstanding until such date as the Holder shall have received Underlying Shares
upon a conversion (or attempted conversion) thereof that meets the requirements
hereof. Notwithstanding anything herein to the contrary, upon the occurrence
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of a Bankruptcy Event, all outstanding principal and accrued but unpaid interest
on this Debenture shall immediately become due and payable in full in cash,
without any further action by the Holder, and the Company shall immediately be
obligated to pay the Mandatory Prepayment Amount pursuant to this paragraph as
if the Holder had delivered a Event of Default Notice immediately prior to the
occurrence of any such Event of Default. The Holder need not provide and the
Company 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 Xxxxxx 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.
8. Other Prepayments
(a) Prepayment at the Option of the Company.
(i) At any time following the Original Issue Date and
prior to the Maturity Date, upon delivery of a written notice to the Holder (a
"COMPANY PREPAYMENT NOTICE" and the date such notice is delivered by the
Company, the "COMPANY NOTICE DATE"), the Company shall be entitled to prepay a
principal amount of Debentures equal to the lesser of (x) the aggregate
outstanding principal amount of Debentures then held by the Holder and (y) the
principal amount of Debentures which may be converted without violation of
Section 6(d)(i), in either case, for an amount in cash equal to the Company
Prepayment Price. Notwithstanding anything herein to the contrary, the Company
shall only be entitled to deliver a Company Prepayment Notice pursuant to the
terms hereof if the Equity Conditions are satisfied with respect to all shares
of Common Stock issuable upon a Company Notice Date. If any of Equity Conditions
shall cease to be in effect during the period between the Company Notice Date
and the date the Company Prepayment Price is paid in full, then the Holder
subject to such prepayment may elect, by written notice to the Company given at
any time after any of the Equity Conditions shall cease to be in effect, to
invalidate ab initio such optional prepayment, notwithstanding anything herein
contained to the contrary. The Holder may convert any portion of the outstanding
principal amount of the Debentures subject to a Company Prepayment Notice prior
to the date that the Company Prepayment Price is due and paid in full. Once
delivered, the Company shall not be entitled to rescind a Company Prepayment
Notice.
(ii) The Company Prepayment Price shall be due on the
20th Trading Day immediately following the Company Notice Date. Any such
prepayment shall be free of any claim of subordination. If any portion of the
Company Prepayment Price shall not be timely paid by the Company, interest shall
accrue thereon at the rate of 12% per annum (or the maximum rate permitted by
applicable law, whichever is less) until the Company Prepayment Price plus all
such interest is paid in full, which payment shall constitute liquidated damages
and not a penalty. In addition, if any portion of the Company Prepayment Price
remains unpaid after such date, the Holder subject to such prepayment may elect
by written notice to the Company to invalidate ab initio such Company Prepayment
Notice with respect to the unpaid amount, notwithstanding anything herein
contained to the contrary. If the Holder makes such an election, this Debenture
shall be reinstated with respect to such unpaid amount and the Company shall no
longer have any prepayment rights under this Section 8.
-21-
(b) Prepayment at the Option of the Holder.
(i) At any time following the Effective Date and
prior to the Maturity Date, the Holder shall have the right, exercisable at the
sole option of the Holder, and by delivery of a written notice (a "HOLDER
PREPAYMENT NOTICE" and the date such notice is delivered by the Holder, the
"HOLDER NOTICE DATE") to the Company, to require the Company to prepay all or a
portion of the Debentures then held by the Holder for an amount in cash, equal
to the Holder Prepayment Price which shall be due and payable on the 20th
Trading Day following the delivery of the Holder Prepayment Notice by the
Holder. Notwithstanding anything herein to the contrary, the Holder shall only
be entitled to deliver a Holder Prepayment Notice pursuant to the terms hereof
if either: (x) during the eighteen (18) months immediately following the Closing
Date, the Holder has not converted [more than 66 2/3% of the original principal
amount of Debentures issued to it on the Original Issue Date](14) [more than 66
2/3% of the original principal amount of Initial Debentures issued to it on the
Initial Settlement Date (as defined in the Purchase Agreement)](15) or (y) at
any time prior to the Maturity Date, the Company shall issue shares of Common
Stock or Common Stock Equivalents entitling any Person to acquire shares of
Common Stock other than (A) a grant of an option or warrant for Common Stock or
issuance of any shares of Common Stock upon the exercise of any options or
warrants to employees, officers and directors of or consultants to the Company
pursuant to any stock option plan, employee stock purchase plan or similar plan
or incentive or consulting arrangement approved by the Company's board of
directors or (B) any issuances of Common Stock or Common Stock Equivalents to a
Person which is or will be, itself or through its subsidiaries, an operating
company in a business related to or complementary with the business of the
Company and in which the Company receives reasonably material benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities.
(ii) If any portion of the Holder Prepayment Price
due pursuant to the terms hereof remains unpaid after such date, the Holder may
elect by written notice to the Company to invalidate ab initio such Holder
Prepayment Notice with respect to the unpaid amount, notwithstanding anything
herein contained to the contrary. If the Holder makes such an election, this
Debenture shall be reinstated with respect to such unpaid amount. For purposes
of this Section 8, principal amount of Debentures shall remain outstanding until
such date as the Holder shall have received Underlying Shares upon a conversion
(or attempted conversion) thereof that meets the requirements hereof. The Holder
may convert any portion of the outstanding principal amount of the Debentures
subject to a prepayment hereunder prior to the date that the Holder Prepayment
Price is due and paid in full.
9. Ranking. This Debenture ranks pari passu with all other
Debentures now or hereafter issued pursuant to the Transaction Documents. No
indebtedness of the Company is senior to this Debenture in right of payment,
whether with respect of interest, damages or upon liquidation or dissolution or
otherwise. The Company will not, and will not permit any
----------
(14) Only with respect to the Initial Debentures.
(15) Only with respect to the Additional Debentures.
-22-
Subsidiary to, directly or indirectly, enter into, create, incur, assume or
suffer to exist indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom, that is senior in any respect to the Company's
obligations under the Debentures.
10. Miscellaneous.
(a) This Debenture shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Xxxxxxxxx may be amended only in writing signed by the Company and the Holder
and their successors and assigns.
(b) Subject to Section 10(a), above, nothing in this Debenture
shall be construed to give to any Person other than the Company and the Holder
any legal or equitable right, remedy or cause under this Debenture. This
Debenture shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "NEW
YORK COURTS"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for any proceeding, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court or that a New York
Court is an inconvenient forum for such Proceeding. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Debenture and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal Proceeding. If either party shall
commence a Proceeding, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its attorney's fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
(d) The headings herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this
Debenture shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Debenture shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Debenture.
-23-
(f) No provision of this Debenture may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Holder or, or, in the case of a waiver, by the Holder. No waiver
of any default with respect to any provision, condition or requirement of this
Debenture shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
(g) If it shall be found that any interest due hereunder shall
violate applicable laws governing usury, the applicable rate of interest due
hereunder shall be reduced to the maximum permitted rate of interest under such
law.
-24-
(h) Except pursuant to Sections [6(d)(ii)](16), 7 and 8
hereunder, the outstanding principal amount and interest under this Debenture
may not be prepaid by the Company without the prior written consent of the
Holder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
----------
(16) Only with respect to Initial Debentures.
-25-
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
MILLENNIUM CELL INC.
By:________________________________
Name:
Title:
-26-
EXHIBIT A
HOLDER CONVERSION NOTICE
(To be Executed by the Registered Holder
in order to convert Debentures)
The undersigned hereby elects to convert the principal amount of
Debenture indicated below, into shares of Common Stock of Millennium Cell Inc.,
as of the date written below. If shares are to be issued in the name of a Person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any. All terms used in this notice shall have the meanings set forth in the
Debenture.
Conversion calculations:
_________________________________________________________
Date to Effect Conversion
_________________________________________________________
Principal amount of Debenture owned prior to conversion
_________________________________________________________
Principal amount of Debenture to be Converted
(including _______________ of interest added under Section
3(b) of the Debenture)
_________________________________________________________
Principal amount of Debenture remaining after Conversion
_________________________________________________________
Number of shares of Common Stock to be Issued
_________________________________________________________
Applicable Conversion Price
_________________________________________________________
Name of Holder
By:______________________________________________________
Name:
Title:
[] By the delivery of this Conversion Notice the Holder
represents and warrants to the Company that its ownership of
the Common Stock does not exceed the restrictions set forth in
Section 6(d) of the Debenture.
EXHIBIT B
COMPANY CONVERSION NOTICE
(To be executed by the Company
in order to convert the Debenture)
The undersigned in the name and on behalf of Millennium Cell Inc.,
hereby elects to convert the principal amount of Debenture indicated below, into
shares of Common Stock of Millennium Cell Inc., as of the date written below. If
shares are to be issued in the name of a Person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any. All terms used in this
notice shall have the meanings set forth in the Debenture.
Conversion calculations:
_________________________________________________________
Date to Effect Conversion
_________________________________________________________
Principal amount of Debenture owned prior to conversion
_________________________________________________________
Principal amount of Debenture to be Converted
(including _______________ of interest added under Section
3(b) of the Debenture)
_________________________________________________________
Principal amount of Debenture remaining after Conversion
_________________________________________________________
Number of shares of Common Stock to be Issued
_________________________________________________________
Applicable Conversion Price
_________________________________________________________
Name of Holder
By:______________________________________________________
Name:
Title:
MILLENNIUM CELL INC.
By:______________________________________________________
Name:
Title:
-2-
SCHEDULE 1
CONVERSION SCHEDULE
Secured Convertible Debentures due on the third year anniversary of the
[Original Issue Date](17) [original issue date of the Initial Debentures](18) in
the aggregate principal amount of $[ ](19) issued by Millennium Cell Inc. This
Conversion Schedule reflects conversions made under the above referenced
Debentures.
Dated:
Date of Conversion Amount of Aggregate Principal Applicable Conversion
Conversion Amount Remaining Price
Subsequent to
Conversion
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________
----------
(17) Only with respect to Initial Debentures.
(18) Only with respect to Additional Debentures
(19) $9,000,000 - Initial Debentures
$3,000,000 - Additional Debentures
-3-
ANNEX A
OUR CREDIT NO. ISSUE DATE EXPIRY DATE LETTER OF CREDIT AMOUNT
-------------- ---------- ----------- -----------------------
XXX __/__/ 2002 __/__/2003 USD [$9,000,000/$3,000,000]
BENEFICIARY APPLICANT
[PURCHASER] MILLENNIUM CELL INC.
0 XXXXXXXXXX XXX XXXX
XXXXXXXXX, XX 00000
DEAR BENEFICIARY:
WE HEREBY ESTABLISH OUR CLEAN STANDBY LETTER OF CREDIT IN YOUR FAVOR, AS
BENEFICIARY, WHICH IS AVAILABLE BY PAYMENT AGAINST THE FOLLOWING DOCUMENTS:
1) A DOCUMENT TITLED ON ITS FACE "SIGHT DRAFT" IN ACCORDANCE WITH EXHIBIT A,
ATTACHED HERETO AND APPROPRIATELY COMPLETED.
2) AN ORIGINAL OF A "CERTIFICATE OF DRAW", IN THE FORM OF EXHIBIT B, ATTACHED
HERETO, APPROPRIATELY COMPLETED AND SIGNED BY AN AUTHORIZED OFFICER OF THE
BENEFICIARY.
3) THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY, FOR OUR
ENDORSEMENT. (IF YOUR DEMAND REPRESENTS A PARTIAL DRAWING HEREUNDER, WE
WILL ENDORSE THE ORIGINAL CREDIT AND RETURN SAME TO YOU FOR POSSIBLE FUTURE
CLAIMS. IF, HOWEVER, YOUR DEMAND REPRESENTS A FULL DRAWING OR IF SUCH
DRAWING IS PRESENTED ON THE DAY OF THE RELEVANT EXPIRATION DATE HEREOF, WE
WILL HOLD THE ORIGINAL FOR OUR FILES AND REMOVE SAME FROM CIRCULATION.)
THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND SUCH
UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED OR AMPLIFIED BY REFERENCE
TO ANY DOCUMENT OR INSTRUMENT REFERRED TO HEREIN OR IN WHICH THIS LETTER OF
CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES AND ANY SUCH
REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY DOCUMENT OR
INSTRUMENT.
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY
EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM THE PRESENT OR ANY FUTURE EXPIRY
DATE UNLESS AT LEAST 60 DAYS (SIXTY DAYS) PRIOR TO SUCH EXPIRATION DATE, WE
NOTIFY YOU IN WRITING BY CERTIFIED MAIL OR EXPRESS COURIER THAT WE ELECT NOT TO
RENEW THIS LETTER OF CREDIT FOR ANY SUCH ADDITIONAL ONE YEAR PERIOD. HOWEVER,
THIS STANDBY LETTER OF CREDIT SHALL NOT BE EXTENDED BEYOND __/__/2005* WHICH
WILL BE CONSIDERED THE FINAL EXPIRATION DATE.
WE ENGAGE WITH YOU THAT ALL DOCUMENTS PRESENTED IN COMPLIANCE WITH THE TERMS OF
THIS LETTER OF CREDIT WILL BE DULY HONORED BY US IF DELIVERED TO WACHOVIA BANK,
NATIONAL ASSOCIATION, ATTN: LETTER OF CREDIT DEPARTMENT, MAIL CODE NC 0000, 000
XXXXXX XXXXXX, XXXXXXX-XXXXX, XXXXX XXXXXXXX 00000, PRIOR TO 3 P.M. ON OR BEFORE
THE EXPIRATION DATE HEREOF.
SEE CONTINUATION
[Debenture maturity plus 10 Trading Days]
ATTACHED TO AND FORMING PART OF STANDBY CREDIT NO. XXX PAGE TWO
UPON RECEIPT BY THE UNDERSIGNED OF A CERTIFICATE IN THE FORM OF EXHIBIT C
ATTACHED HERETO SIGNED BY AN AUTHORIZED OFFICER OF BENEFICIARY, STATING THAT THE
AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE DEBENTURE HAS BEEN REDUCED BY
EITHER PAYMENT OR CONVERSION INTO CAPITAL STOCK AND SETTING FORTH THE AMOUNT OF
SUCH REDUCTION, AND ACCOMPANIED BY THE ORIGINAL COPY OF THIS STANDBY LETTER OF
CREDIT, WE WILL ENDORSE THIS STANDBY LETTER OF CREDIT TO REFLECT A REDUCTION OF
THE UNDRAWN FACE AMOUNT THEREOF BY AN AMOUNT EQUAL TO THE AMOUNT OF SUCH
REDUCTION AS SET FORTH IN SUCH CERTIFICATE, AND WILL RETURN SUCH STANDBY LETTER
OF CREDIT TO BENEFICIARY. IT IS A CONDITION OF THIS LETTER OF CREDIT THAT
DOCUMENTS MAY ALSO BE PRESENTED AT THE COUNTERS OF OUR NEW YORK BRANCH LOCATED
AT 00 XXXX XXXXX, XXX XXXX, XX 00000 FOR FURTHER DELIVERY TO WACHOVIA BANK,
NATIONAL ASSOCIATION, ATTN: LETTER OF CREDIT DEPARTMENT, MAIL CODE NC 0000, 000
XXXXXX XXXXXX, XXXXXXX-XXXXX, XXXXX XXXXXXXX 00000.
NOTE: IN THE EVENT THAT THE BENEFICIARY ELECTS TO PRESENT DOCUMENTS AT THE
COUNTER OF OUR NEW YORK BRANCH, THE BENEFICIARY MUST IMMEDIATELY INSTRUCT THE
BRANCH MANAGER [insert name] TO CONTACT ONE OF THE FOLLOWING PERSONS IN THE
STANDBY LETTER OF CREDIT DEPARTMENT:
1) XXXXX XXXXXX, SUPERVISOR (000) 000-0000
2) XXXXXX XXXXXX, MANAGER (000) 000-0000
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED HEREIN THIS LETTER OF CREDIT IS
SUBJECT TO THE "INTERNATIONAL STANDBY PRACTICES 98 (15P 98), PUBLICATION NO.
590." ALL INQUIRIES REGARDING THIS CREDIT SHOULD BE DIRECTED TO US AT OUR PHONE
NUMBER 0-000-000-0000.
________________________________________
AUTHORIZED SIGNATURE
EXHIBIT A
SIGHT DRAFT
$__________________ [CITY], [STATE]
[MONTH] __, 200_
AT SIGHT, PAY TO THE ORDER OF [PURCHASER] THE SUM OF [AMOUNT IN WORDS]
DOLLARS ($__________).
XXXXX RECEIVED, AND CHARGE TO THE ACCOUNT OF MILLENNIUM CELL INC. DRAWN
UNDER FIRST UNION NATIONAL BANK STANDBY LETTER OF CREDIT NO. XXX, DATED ______,
2002, ISSUED BY FIRST UNION NATIONAL BANK IN FAVOR OF [PURCHASER] FOR THE
ACCOUNT OF MILLENNIUM CELL INC.
[PURCHASER]
BY:____________________
NAME:
TITLE:
PLEASE REMIT PROCEEDS TO OUR ACCOUNT AT:
EXHIBIT B
CERTIFICATE OF DRAW
THE UNDERSIGNED HEREBY CERTIFIES TO FIRST UNION NATIONAL BANK (THE
"BANK") WITH REFERENCE TO THE STANDBY LETTER OF CREDIT NO. XXX (THE "LETTER OF
CREDIT") ISSUED BY THE BANK IN FAVOR OF [PURCHASER],THAT:
1. I AM THE __________ OF [PURCHASER] AND AM AUTHORIZED TO EXECUTE AND DELIVER
THIS CERTIFICATE TO THE BANK ON BEHALF OF [PURCHASER]
2. PURSUANT TO SECTION 2(C) OF THE SECURED CONVERTIBLE DEBENTURE DATED ______
___, 2002, MADE BY MILLENNIUM CELL INC. PAYABLE TO THE ORDER OF [PURCHASER]
IN THE ORIGINAL PRINCIPAL AMOUNT OF [$9,000,000.00/$3,000,000.00] (THE
"DEBENTURE"), [PURCHASER] IS ENTITLED TO $_____________ UNDER THE LETTER OF
CREDIT.
3. THE AMOUNT OF THE LETTER OF CREDIT DISBURSEMENT DEMANDED HEREBY IS
$ ________ .
IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND THIS __ DAY OF _____ 200__.
[PURCHASER]
BY:___________________________
NAME:
TITLE:
EXHIBIT C
CERTIFICATE OF REDUCTION
THE UNDERSIGNED HEREBY CERTIFIES TO FIRST UNION NATIONAL BANK (THE
"BANK") WITH REFERENCE TO THE STANDBY LETTER OF CREDIT NO. XXX (THE "LETTER OF
CREDIT") ISSUED BY THE BANK IN FAVOR OF [NAME OF BENEFICIARY], THAT:
1. I AM THE ____________ OF [PURCHASER] AND AM AUTHORIZED TO
EXECUTE AND DELIVER THIS CERTIFICATE TO THE BANK ON BEHALF OF [PURCHASER]
2. THE UNDRAWN FACE AMOUNT OF THE LETTER OF CREDIT AS OF THE DATE HEREOF
EQUALS $__________.
3. THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT UNDER THE SECURED CONVERTIBLE
DEBENTURE DATED ________ __, 2002 MADE BY MILLENNIUM CELL INC. PAYABLE TO
THE ORDER OF [PURCHASER] IN THE ORIGINAL PRINCIPAL AMOUNT OF
[$9,000,000.00/[$3,000,000.00] (THE "DEBENTURE") HAS BEEN REDUCED BY
[PAYMENT IN THE AMOUNT OF $______ BY MILLENNIUM CELL INC.] [VIRTUE OF THE
CONVERSION OF $_________ OF SUCH PRINCIPAL AMOUNT OUTSTANDING ON THE
DEBENTURE INTO SHARES OF CAPITAL STOCK OF MILLENNIUM CELL INC.] ON ______,
200_.
4. WE CONSENT TO A REDUCTION IN THE UNDRAWN FACE AMOUNT OF THE LETTER OF
CREDIT BY $[INSERT DOLLAR AMOUNT SET FORTH IN PARAGRAPH 3 ABOVE] AS OF
[INSERT DATE SET FORTH IN PARAGRAPH 3 ABOVE].
5. THE ORIGINAL COPY OF THE LETTER OF CREDIT IS ATTACHED HERETO.
IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND THIS __ DAY OF _____ 200__.
[PURCHASER]
BY:________________________
NAME:
TITLE:
[APPLICANT]
BY:________________________
NAME:
TITLE:
