Contract
EXECUTION
COPY
Dated:
August 17, 2007
NEITHER
THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE
SECURITIES LAWS.
| No. DLKR-3 |
$90,000
|
Due
August 16, 2009
This
Secured Convertible Debenture (the “Debenture”)
is
issued by DELEK
RESOURCES, INC., a
Florida
corporation (the “Obligor”),
to
YA
GLOBAL INVESTMENTS, L.P.
(the
“Holder”),
pursuant to that certain Purchase Agreement (the “Purchase
Agreement”)
of
even date herewith.
FOR
VALUE RECEIVED,
the
Obligor hereby promises to pay to the Holder or its successors and assigns
the
principal sum of Ninety Thousand Dollars ($90,000) together with accrued
but
unpaid interest on or before August 16, 2009 (the “Maturity
Date”)
in
accordance with the following terms:
Interest.
Interest shall accrue on the outstanding principal balance hereof at
an annual
rate equal to ten percent (10%). Interest shall be calculated on the
basis of a
365-day year and the actual number of days elapsed, to the extent permitted
by
applicable law. Interest hereunder will be paid to the Holder or its
assignee
(as defined in Section
5)
in
whose name this Debenture is registered on the records of the Obligor
regarding
registration and transfers of Debentures (the “Debenture
Register”).
Right
of Redemption.
The
Obligor at its option shall have the right, with three (3) business days
advance
written notice (the “Redemption
Notice”),
to
redeem a portion or all amounts outstanding under this Debenture prior
to the
Maturity Date provided that the Closing Bid Price of the of the Obligor’s Common
Stock, as reported by Bloomberg, LP, is less than the Fixed Conversion
Price at
the time of the Redemption Notice. The Obligor shall pay an amount equal
to the
principal amount being redeemed plus a redemption premium (“Redemption
Premium”)
equal
to twenty percent (20%) of the principal amount being redeemed, and accrued
interest, (collectively referred to as the “Redemption
Amount”).
The
Obligor shall deliver to the Holder the Redemption Amount on the third
(3rd)
business day after the Redemption Notice.
Notwithstanding
the foregoing in the event that the Obligor has elected to redeem a portion
of
the outstanding principal amount and accrued interest under this Debenture
the
Holder shall be permitted to convert all or any portion of this Debenture
during
such three business day period.
Security
Agreements.
This
Debenture is secured by a pledge and escrow agreement of dated August
1, 2006
among the Holder, Xxxxxxx Xxxxxxxxx, and the Escrow Agent (the “Pledge
Agreement”)
and a
Security Agreement (the “Security
Agreement”)
dated
August 1, 2007 between the Obligor and the Holder and specifically a
pledge of
the Obligors interests pursuant to the Joint Agreement (as defined in
the
Purchase Agreement).
Consent
of Holder to Sell Capital Stock or Grant Security Interests.
So
long
as any of the principal amount or interest on this Debenture remains
unpaid and
unconverted, the Obligor shall not, without the prior consent of the
Holder, (i)
issue or sell any shares of Common Stock or preferred stock without
consideration or for consideration per share less than the Closing Bid
Price of
the Common Stock determined immediately prior to its issuance, (ii) issue
or
sell any preferred stock, warrant, option, right, contract, call, or
other
security or instrument granting the holder thereof the right to acquire
Common
Stock without consideration or for consideration per share less than
the Closing
Bid Price of the Common Stock determined immediately prior to its issuance,
(iii)
enter into any security instrument granting the holder a security interest
in
any of the assets of the Obligor, or
(iv)
file any
registration statements on Form S-8.
Rights
of First Refusal.
For
period of eighteen (18) months from the date hereof, so long as any portion
of
this Debenture is outstanding (including principal or accrued interest),
if the
Obligor intends to raise additional capital by the issuance or sale of
capital
stock of the Obligor, including without limitation shares of any class
of Common
Stock, any class of preferred stock, options, warrants or any other securities
convertible or exercisable into shares of Common Stock (whether the offering
is
conducted by the Obligor, underwriter, placement agent or any third party)
the
Obligor shall be obligated to offer to the Holder such issuance or sale
of
capital stock, by providing in writing the principal amount of capital
it
intends to raise and outline of the material terms of such capital raise,
prior
to the offering such issuance or sale of capital stock to any third parties
including, but not limited to, current or former officers or directors,
current
or former shareholders and/or investors of the obligor, underwriters,
brokers,
agents or other third parties. The Holder shall have ten (10) business
days from
receipt of such notice of the sale or issuance of capital stock to accept
or
reject all or a portion of such capital raising offer.
This
Debenture is subject to the following additional provisions:
Section
1. This
Debenture is exchangeable for an equal aggregate principal amount of
Debentures
of different authorized denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration of transfer
or
exchange.
Section
2. Events
of Default.
(a) An
“Event
of Default”,
wherever used herein, means any one of the following events (whatever
the reason
and whether it shall be voluntary or involuntary or effected by operation
of law
or pursuant to any judgment, decree or order of any court, or any order,
rule or
regulation of any administrative or governmental body):
(i) Any
default in the payment of the principal of, interest on or other charges
in
respect of this Debenture, free of any claim of subordination, as and
when the
same shall become due and payable (whether on a Conversion Date or the
Maturity
Date or by acceleration or otherwise);
2
(ii) The
Obligor shall fail to observe or perform any other covenant, agreement
or
warranty contained in, or otherwise commit any breach or default of any
provision of this Debenture (except as may be covered by Section
2(a)(i)
hereof)
or any Transaction Document (as defined in Section
5)
which
is not cured with in the time prescribed;
(iii) The
Obligor or any subsidiary of the Obligor shall commence, or there shall
be
commenced against the Obligor or any subsidiary of the Obligor under
any
applicable bankruptcy or insolvency laws as now or hereafter in effect
or any
successor thereto, or the Obligor or any subsidiary of the Obligor commences
any
other proceeding under any reorganization, arrangement, adjustment of
debt,
relief of debtors, dissolution, insolvency or liquidation or similar
law of any
jurisdiction whether now or hereafter in effect relating to the Obligor
or any
subsidiary of the Obligor or there is commenced against the Obligor or
any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or
any
subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any
order of
relief or other order approving any such case or proceeding is entered;
or the
Obligor or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or
any
substantial part of its property which continues undischarged or unstayed
for a
period of sixty one (61) days; or the Obligor or any subsidiary of the
Obligor
makes a general assignment for the benefit of creditors; or the Obligor
or any
subsidiary of the Obligor shall fail to pay, or shall state that it is
unable to
pay, or shall be unable to pay, its debts generally as they become due;
or the
Obligor or any subsidiary of the Obligor shall call a meeting of its
creditors
with a view to arranging a composition, adjustment or restructuring of
its
debts; or the Obligor or any subsidiary of the Obligor shall by any act
or
failure to act expressly indicate its consent to, approval of or acquiescence
in
any of the foregoing; or any corporate or other action is taken by the
Obligor
or any subsidiary of the Obligor for the purpose of effecting any of
the
foregoing;
(iv) The
Obligor or any subsidiary of the Obligor shall default in any of its
obligations
under any other debenture or any mortgage, credit agreement or other
facility,
indenture agreement, factoring agreement or other instrument under which
there
may be issued, or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or factoring
arrangement of the Obligor or any subsidiary of the Obligor in an amount
exceeding $100,000, whether such indebtedness now exists or shall hereafter
be
created and such default shall result in such indebtedness becoming or
being
declared due and payable prior to the date on which it would otherwise
become
due and payable;
(v) The
Common Stock shall cease to be quoted for trading or listing for trading
on
either the Nasdaq OTC Bulletin Board (“OTCBB”),
or if
then listed on Nasdaq Capital Market, New York Stock Exchange, American
Stock
Exchange or the Nasdaq National Market (each, a “Subsequent
Market”)
shall
cease to be quoted for trading or listing on such Subsequent Market and
shall
not again be quoted or listed for trading thereon within five (5) Trading
Days
of such delisting;
3
(vi) The
Obligor or any subsidiary of the Obligor shall be a party to any Change
of
Control Transaction (as defined in Section
5);
(vii) The
Obligor shall fail for any reason to deliver Common Stock certificates
to a
Holder prior to the fifth (5th)
Trading
Day after a Conversion Date or the Obligor shall provide notice to the
Holder,
including by way of public announcement, at any time, of its intention
not to
comply with requests for conversions of this Debenture in accordance
with the
terms hereof;
(viii) The
Obligor shall fail for any reason to deliver the payment in cash pursuant
to a
Buy-In (as defined herein) within three (3) days after notice is claimed
delivered hereunder;
(ix) The
occurrence of any default under the secured convertible debentures issued
to the
Holder in connection with the Securities Purchase Agreement (“Securities
Purchase Agreement”)
between the Obligor and the Holder dated August 1, 2006.
(b) During
the time that any portion of this Debenture is outstanding, if any Event
of
Default has occurred, the full principal amount of this Debenture, together
with
interest and other amounts owing in respect thereof, to the date of acceleration
shall become at the Holder's election, immediately due and payable in
cash,
provided
however,
the
Holder may request (but shall have no obligation to request) payment
of such
amounts in Common Stock of the Obligor. In addition to any other remedies,
the
Holder shall have the right (but not the obligation) to convert this
Debenture
at any time after (x) an Event of Default or (y) the Maturity Date at
the
Conversion Price then in-effect. The Holder need not provide and the
Obligor
hereby waives any presentment, demand, protest or other notice of any
kind, and
the Holder may immediately and without expiration of any grace period
enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded
and
annulled by 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. Upon an Event of Default, notwithstanding any other
provision of this Debenture or any Transaction Document, the Holder shall
have
no obligation to comply with or adhere to any limitations, if any, on
the
conversion of this Debenture or the sale of the Underlying Shares.
Section
3. Conversion.
(a) Conversion
at Option of Holder.
(i) This
Debenture shall be convertible into shares of Common Stock at the option
of the
Holder, in whole or in part at any time and from time to time, after
the
Original Issue Date (as defined in Section
5)
(subject to the limitations on conversion set forth in Section
3(b)
hereof).
The number of shares of Common Stock issuable upon a conversion hereunder
equals
the quotient obtained by dividing (x) the outstanding amount of this
Debenture
to be converted by (y) the Conversion Price (as defined in Section
3(c)(i)).
The
Obligor shall deliver Common Stock certificates to the Holder prior to
the Fifth
(5th)
Trading
Day after a Conversion Date.
4
(ii) Notwithstanding
anything to the contrary contained herein, if on any Conversion Date:
(1) the
number of shares of Common Stock at the time authorized, unissued and
unreserved
for all purposes, or held as treasury stock, is insufficient to pay principal
and interest hereunder in shares of Common Stock; (2) the Common Stock
is not
listed or quoted for trading on the OTC or on a Subsequent Market; or
(3) the
Obligor has failed to timely satisfy its conversion, then, at the option
of the
Holder, the Obligor, in lieu of delivering shares of Common Stock pursuant
to
Section
3(a)(i),
shall
deliver, within three (3) Trading Days of each applicable Conversion
Date, an
amount in cash equal to the product of the outstanding principal amount
to be
converted plus any interest due therein divided by the Conversion Price,
chosen
by the Holder, and multiplied by the highest closing price of the stock
from
date of the conversion notice till the date that such cash payment is
made.
Further,
if the Obligor shall not have delivered any cash due in respect of conversion
of
this Debenture or as payment of interest thereon by the fifth (5th)
Trading
Day after the Conversion Date, the Holder may, by notice to the Obligor,
require
the Obligor to issue shares of Common Stock pursuant to Section
3(c),
except
that for such purpose the Conversion Price applicable thereto shall be
the
lesser of the Conversion Price on the Conversion Date and the Conversion
Price
on the date of such Holder demand. Any such shares will be subject to
the
provisions of this Section.
(iii) The
Holder shall effect conversions by delivering to the Obligor a completed
notice
in the form attached hereto as Exhibit A (a “Conversion
Notice”).
The
date on which a Conversion Notice is delivered is the “Conversion
Date.”
Unless
the Holder is converting the entire principal amount outstanding under
this
Debenture, the Holder is not required to physically surrender this Debenture
to
the Obligor in order to effect conversions. Conversions hereunder shall
have the
effect of lowering the outstanding principal amount of this Debenture
plus all
accrued and unpaid interest thereon in an amount equal to the applicable
conversion. The Holder and the Obligor shall maintain records showing
the
principal amount converted and the date of such conversions. In the event
of any
dispute or discrepancy, the records of the Holder shall be controlling
and
determinative in the absence of manifest error.
(b) Certain
Conversion Restrictions.
(i) A
Holder
may not convert this Debenture or receive shares of Common Stock as payment
of
interest hereunder to the extent such conversion or receipt of such interest
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of
the
Exchange Act and the rules promulgated thereunder) in excess of 4.99%
of the
then issued and outstanding shares of Common Stock, including shares
issuable
upon conversion of, and payment of interest on, this Debenture held by
such
Holder after application of this Section. Since the Holder will not be
obligated
to report to the Obligor the number of shares of Common Stock it may
hold at the
time of a conversion hereunder, unless the conversion at issue would
result in
the issuance of shares of Common Stock in excess of 4.99% of the then
outstanding shares of Common Stock without regard to any other shares
which may
be beneficially owned by the Holder or an affiliate thereof, the Holder
shall
have the authority and obligation to determine whether the restriction
contained
in this Section will limit any particular conversion hereunder and to
the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of
this
Debenture is convertible shall be the responsibility and obligation of
the
Holder. If the Holder has delivered a Conversion Notice for a principal
amount
of this Debenture that, without regard to any other shares that the Holder
or
its affiliates may beneficially own, would result in the issuance in
excess of
the permitted amount hereunder, the Obligor shall notify the Holder of
this fact
and shall honor the conversion for the maximum principal amount permitted
to be
converted on such Conversion Date in accordance with the periods described
in
Section
3(a)(i)
and, at
the option of the Holder, either retain any principal amount tendered
for
conversion in excess of the permitted amount hereunder for future conversions
or
return such excess principal amount to the Holder. The provisions of
this
Section may be waived by a Holder (but only as to itself and not to any
other
Holder) upon not less than 65 days prior notice to the Obligor. Other
Holders
shall be unaffected by any such waiver.
5
(c) Conversion
Price and Adjustments to Conversion Price.
(i) The
conversion price in effect on any Conversion Date shall be, at the sole
option
of the Holder, equal to either (a) $0.06 (the “Fixed
Conversion Price”)
or (b)
ninety five percent (95%) of the lowest Volume Weighted Average Price
of the
Common Stock during the thirty (30) trading days immediately preceding
the
Conversion Date as quoted by Bloomberg, LP (the “Market
Conversion Price”).
The
Fixed Conversion Price and the Market Conversion Price are collectively
referred
to as the “Conversion
Price.”
The
Conversion Price may be adjusted pursuant to the other terms of this
Debenture.
(ii) If
the
Obligor, at any time while this Debenture is outstanding, shall (a) 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, (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 Obligor, then the Fixed Conversion Price shall 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 stockholders
entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If
the
Obligor, at any time while this Debenture is outstanding, shall issue
rights,
options or warrants to all holders of Common Stock (and not to the Holder)
entitling them to subscribe for or purchase shares of Common Stock at
a price
per share less than the Fixed Conversion Price, then the Fixed Conversion
Price
shall be multiplied by a fraction, of which the denominator shall be
the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on
the date of issuance of such rights or warrants (plus the number of additional
shares of Common Stock offered for subscription or purchase), and of
which the
numerator shall be the number of shares of the Common Stock (excluding
treasury
shares, if any) outstanding on the date of issuance of such rights or
warrants,
plus the number of shares which the aggregate offering price of the total
number
of shares so offered would purchase at the Fixed Conversion Price. Such
adjustment shall be made whenever such rights or warrants are issued,
and shall
become effective immediately after the record date for the determination
of
stockholders entitled to receive such rights, options or warrants. However,
upon
the expiration of any such right, option or warrant to purchase shares
of the
Common Stock the issuance of which resulted in an adjustment in the Fixed
Conversion Price pursuant to this Section, if any such right, option
or warrant
shall expire and shall not have been exercised, the Fixed Conversion
Price shall
immediately upon such expiration be recomputed and effective immediately
upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Fixed Conversion Price made pursuant
to
the provisions of this Section after the issuance of such rights or warrants)
had the adjustment of the Fixed Conversion Price made upon the issuance
of such
rights, options or warrants been made on the basis of offering for subscription
or purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights, options or warrants actually
exercised.
6
(iv) If
the
Obligor or any subsidiary thereof, as applicable, at any time while this
Debenture is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into
or
exchangeable for shares of Common Stock (“Common
Stock Equivalents”)
entitling any Person to acquire shares of Common Stock, at a price per
share
less than the Fixed 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 per
share
which is issued in connection with such issuance, be entitled to receive
shares
of Common Stock at a price per share which is less than the Fixed Conversion
Price, such issuance shall be deemed to have occurred for less than the
Fixed
Conversion Price), then, at the sole option of the Holder, the Fixed
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 Obligor shall notify the Holder
in
writing, no later than one (1) business 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 adjustment under this Section
shall
be made as a result of issuances and exercises of options to purchase
shares of
Common Stock issued for compensatory purposes pursuant to any of the
Obligor's
stock option or stock purchase plans.
(v) If
the
Obligor, at any time while this Debenture is outstanding, shall distribute
to
all holders of Common Stock (and not to the Holder) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase
any
security, then in each such case the Fixed Conversion Price at which
this
Debenture shall thereafter be convertible shall be determined by multiplying
the
Fixed 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 Bid Price determined
as
of the record date mentioned above, and of which the numerator shall
be such
Closing Bid 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 the 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 Holder
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.
7
(vi) In
case
of any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is converted into other securities,
cash or
property, the Holder shall have the right thereafter to, at its option,
(A)
convert the then outstanding principal amount, together with all accrued
but
unpaid interest and any other amounts then owing hereunder in respect
of this
Debenture into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common Stock following
such reclassification or share exchange, and the Holder of this Debenture
shall
be entitled upon such event to receive such amount of securities, cash
or
property as the shares of the Common Stock of the Obligor into which
the then
outstanding principal amount, together with all accrued but unpaid interest
and
any other amounts then owing hereunder in respect of this Debenture could
have
been converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Debenture, plus all interest and other amounts
due and
payable thereon. The entire prepayment price shall be paid in cash. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(vii) The
Obligor shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock issuable upon
conversion
of all outstanding amounts under this Debenture; and within three (3)
Business
Days following the receipt by the Obligor of a Holder's notice that such
minimum
number of Underlying Shares is not so reserved, the Obligor shall promptly
reserve a sufficient number of shares of Common Stock to comply with
such
requirement.
(viii) All
calculations under this Section
3
shall be
rounded to the nearest $0.0001 or whole share.
(ix) Whenever
the Conversion Price is adjusted pursuant to Section
3
hereof,
the Obligor shall promptly mail to the Holder a notice setting forth
the
Conversion Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment.
(x) If
(A)
the Obligor shall declare a dividend (or any other distribution) on the
Common
Stock; (B) the Obligor shall declare a special nonrecurring cash dividend
on or
a redemption of the Common Stock; (C) the Obligor shall authorize the
granting
to all holders of the Common Stock rights or warrants to subscribe for
or
purchase any shares of capital stock of any class or of any rights; (D)
the
approval of any stockholders of the Obligor shall be required in connection
with
any reclassification of the Common Stock, any consolidation or merger
to which
the Obligor is a party, any sale or transfer of all or substantially
all of the
assets of the Obligor, of any compulsory share exchange whereby the Common
Stock
is converted into other securities, cash or property; or (E) the Obligor
shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of
the affairs of the Obligor; then, in each case, the Obligor shall cause
to be
filed at each office or agency maintained for the purpose of conversion
of this
Debenture, and shall cause to be mailed to the Holder at its last address
as it
shall appear upon the stock books of the Obligor, at least twenty (20)
calendar
days prior to the applicable record or effective date hereinafter specified,
a
notice stating (x) the date on which a record is to be taken for the
purpose of
such dividend, distribution, redemption, rights or warrants, or if a
record is
not to be taken, the date as of which the holders of the Common Stock
of record
to be entitled to such dividend, distributions, redemption, rights or
warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to
become
effective or close, and the date as of which it is expected that holders
of the
Common Stock of record shall be entitled to exchange their shares of
the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided, that the failure to mail such notice or any defect therein
or in the
mailing thereof shall not affect the validity of the corporate action
required
to be specified in such notice. The Holder is entitled to convert this
Debenture
during the 20-day calendar period commencing the date of such notice
to the
effective date of the event triggering such notice.
8
(xi) In
case
of any (1) merger or consolidation of the Obligor or any subsidiary of
the
Obligor with or into another Person, or (2) sale by the Obligor or any
subsidiary of the Obligor of more than one-half of the assets of the
Obligor in
one or a series of related transactions, a Holder shall have the right
to (A)
exercise any rights under Section
2(b),
(B)
convert the aggregate amount of this Debenture then outstanding into
the shares
of stock and other securities, cash and property receivable upon or deemed
to be
held by holders of Common Stock following such merger, consolidation
or sale,
and such Holder shall be entitled upon such event or series of related
events to
receive such amount of securities, cash and property as the shares of
Common
Stock into which such aggregate principal amount of this Debenture could
have
been converted immediately prior to such merger, consolidation or sales
would
have been entitled, or (C) in the case of a merger or consolidation,
require the
surviving entity to issue to the Holder a convertible Debenture with
a principal
amount equal to the aggregate principal amount of this Debenture then
held by
such Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible Debenture shall have terms
identical (including with respect to conversion) to the terms of this
Debenture,
and shall be entitled to all of the rights and privileges of the Holder
of this
Debenture set forth herein and the agreements pursuant to which this
Debentures
were issued. In the case of clause (C), the conversion price applicable
for the
newly issued shares of convertible preferred stock or convertible Debentures
shall be based upon the amount of securities, cash and property that
each share
of Common Stock would receive in such transaction and the Conversion
Price in
effect immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale or consolidation shall
include
such terms so as to continue to give the Holder the right to receive
the
securities, cash and property set forth in this Section upon any conversion
or
redemption following such event. This provision shall similarly apply
to
successive such events.
(d) Other
Provisions.
(i) The
Obligor covenants that it will at all times reserve and keep available
out of
its authorized and unissued shares of Common Stock solely for the purpose
of
issuance upon conversion of this Debenture and payment of interest on
this
Debenture, each as herein provided, free from preemptive rights or any
other
actual contingent purchase rights of persons other than the Holder, not
less
than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Obligor as to reservation of such shares
set
forth in this Debenture) be issuable (taking into account the adjustments
and
restrictions of Sections
2(b) and 3(c))
upon
the conversion of the outstanding principal amount of this Debenture
and payment
of interest hereunder. The Obligor covenants that all shares of Common
Stock
that shall be so issuable shall, upon issue, be duly and validly authorized,
issued and fully paid, nonassessable and, if the Underlying Shares Registration
Statement has been declared effective under the Securities Act, registered
for
public sale in accordance with such Underlying Shares Registration
Statement.
9
(ii) Upon
a
conversion hereunder the Obligor shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but
may if
otherwise permitted, make a cash payment in respect of any final fraction
of a
share based on the Closing Bid Price at such time. If the Obligor elects
not, or
is unable, to make such a cash payment, the Holder shall be entitled
to receive,
in lieu of the final fraction of a share, one whole share of Common
Stock.
(iii) The
issuance of certificates for shares of the Common Stock on conversion
of this
Debenture shall be made without charge to the Holder thereof for any
documentary
stamp or similar taxes that may be payable in respect of the issue or
delivery
of such certificate, provided that the Obligor shall not be required
to pay any
tax that may be payable in respect of any transfer involved in the issuance
and
delivery of any such certificate upon conversion in a name other than
that of
the Holder of such Debenture so converted and the Obligor shall not be
required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Obligor the amount
of
such tax or shall have established to the satisfaction of the Obligor
that such
tax has been paid.
(iv) Nothing
herein shall limit a Holder's right to pursue actual damages or declare
an Event
of Default pursuant to Section
2
herein
for the Obligor 's failure to deliver certificates representing shares
of Common
Stock upon conversion within the period specified herein and such Holder
shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief, in each case without the need to post a bond or provide
other
security. The exercise of any such rights shall not prohibit the Holder
from
seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
(v) In
addition to any other rights available to the Holder, if the Obligor
fails to
deliver to the Holder such certificate or certificates pursuant to Section
3(a)(i) by
the
fifth (5th)
Trading
Day after the Conversion Date, and if after such fifth (5th)
Trading
Day the Holder purchases (in an open market transaction or otherwise)
Common
Stock to deliver in satisfaction of a sale by such Holder of the Underlying
Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”),
then
the Obligor shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the
Common
Stock so purchased exceeds (y) the product of (1) the aggregate number
of shares
of Common Stock that such Holder anticipated receiving from the conversion
at
issue multiplied by (2) the market price of the Common Stock at the time
of the
sale giving rise to such purchase obligation and (B) at the option of
the
Holder, either reissue a Debenture in the principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder
the number
of shares of Common Stock that would have been issued had the Obligor
timely
complied with its delivery requirements under Section
3(a)(i).
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 respect to which the market price of the Underlying Shares on the
date of
conversion was a total of $10,000 under clause (A) of the immediately
preceding
sentence, the Obligor shall be required to pay the Holder $1,000. The
Holder
shall provide the Obligor written notice indicating the amounts payable
to the
Holder in respect of the Buy-In.
10
Section
4. Notices.
Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms hereof must be in writing and will be deemed to
have been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when
sent by facsimile (provided confirmation of transmission is mechanically
or
electronically generated and kept on file by the sending party); or (iii)
one
(1) trading day after deposit with a nationally recognized overnight
delivery
service, in each case properly addressed to the party to receive the
same. The
addresses and facsimile numbers for such communications shall be:
|
If
to the Company, to:
|
||
|
0000
Xxxxxxxxxx Xxxxxx
|
||
|
Miami
Beach, FL 33319
|
||
|
Attention: Xxxxxxx
Xxxxxxxxx
|
||
|
Telephone: (000)
000-0000
|
||
|
Facsimile: (000)
000-0000
|
||
|
With
a copy to:
|
||
|
If
to the Holder:
|
YA
Global Investments, L.P.
|
|
|
000
Xxxxxx Xxxxxx, Xxxxx 0000
|
||
|
Jersey
City, NJ 07303
|
||
|
Attention: Xxxx
Xxxxxx
|
||
|
Telephone: (000)
000-0000
|
||
|
With
a copy to:
|
Xxxxx
Xxxxxxxx, Esq.
|
|
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
||
|
Jersey
City, NJ 07302
|
||
|
Telephone: (000)
000-0000
|
||
|
Facsimile: (000)
000-0000
|
or
at
such other address and/or facsimile number and/or to the attention of
such other
person as the recipient party has specified by written notice given to
each
other party three (3) business days prior to the effectiveness of such
change.
Written confirmation of receipt (i) given by the recipient of such notice,
consent, waiver or other communication, (ii) mechanically or electronically
generated by the sender's facsimile machine containing the time, date,
recipient
facsimile number and an image of the first page of such transmission
or (iii)
provided by a nationally recognized overnight delivery service, shall
be
rebuttable evidence of personal service, receipt by facsimile or receipt
from a
nationally recognized overnight delivery service in accordance with clause
(i),
(ii) or (iii) above, respectively.
11
Section
5. Definitions.
For the
purposes hereof, the following terms shall have the following
meanings:
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal
legal
holiday in the United States or a day on which banking institutions are
authorized or required by law or other government action to close.
“Change
of Control Transaction”
means
the occurrence of (a) an acquisition after the date hereof by an individual
or
legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Obligor, by contract or otherwise)
of in
excess of fifty percent (50%) of the voting securities of the Obligor
(except
that the acquisition of voting securities by the Holder shall not constitute
a
Change of Control Transaction for purposes hereof), (b) a replacement
at one
time or over time of more than one-half of the members of the board of
directors
of the Obligor which is not approved by a majority of those individuals
who are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the
members
of the board of directors who are members on the date hereof), (c) the
merger,
consolidation or sale of fifty percent (50%) or more of the assets of
the
Obligor or any subsidiary of the Obligor in one or a series of related
transactions with or into another entity, or (d) the execution by the
Obligor of
an agreement to which the Obligor is a party or by which it is bound,
providing
for any of the events set forth above in (a), (b) or (c).
“Closing
Bid Price”
means
the price per share in the last reported trade of the Common Stock on
the OTC or
on the exchange which the Common Stock is then listed as quoted by Bloomberg,
LP.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock, no par value, of the Obligor and stock of any other
class into
which such shares may hereafter be changed or reclassified.
“Conversion
Date”
shall
mean the date upon which the Holder gives the Obligor notice of their
intention
to effectuate a conversion of this Debenture into shares of the Company’s Common
Stock as outlined herein.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
12
“Original
Issue Date”
shall
mean the date of the first issuance of this Debenture regardless of the
number
of transfers and regardless of the number of instruments, which may be
issued to
evidence such Debenture.
“Person”
means
a
corporation, an association, a partnership, organization, a business,
an
individual, a government or political subdivision thereof or a governmental
agency.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Trading
Day”
means
a
day on which the shares of Common Stock are quoted on the OTC or quoted
or
traded on such Subsequent Market on which the shares of Common Stock
are then
quoted or listed; provided, that in the event that the shares of Common
Stock
are not listed or quoted, then Trading Day shall mean a Business
Day.
“Transaction
Documents”
means
the Purchase Agreement and the Securities Purchase Agreement, or any
other
agreement delivered in connection therewith, including, without limitation,
the
Pledge Agreement, the Security Agreement, the Irrevocable Transfer Agent
Instructions, the Warrants and the Registration Rights Agreement.
“Underlying
Shares”
means
the shares of Common Stock issuable upon conversion of this Debenture
or as
payment of interest in accordance with the terms hereof.
“Underlying
Shares Registration Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Underlying
Shares and naming the Holder as a “selling stockholder” thereunder.
“Volume
Weighted Average Price”
means
the volume weighted
average price per share of the Company’s Common Stock on the OTC or on the
exchange which the Common Stock is then listed as quoted by Bloomberg,
LP.
Section
6. Except
as
expressly provided herein, no provision of this Debenture shall alter
or impair
the obligations of the Obligor, which are absolute and unconditional,
to pay the
principal of, interest and other charges (if any) on, this Debenture
at the
time, place, and rate, and in the coin or currency, herein prescribed.
This
Debenture is a direct obligation of the Obligor. This Debenture ranks
pari passu
with all other Debentures now or hereafter issued under the terms set
forth
herein. As long as this Debenture is outstanding, the Obligor shall not
and
shall cause their subsidiaries not to, without the consent of the Holder,
(i)
amend its certificate of incorporation, bylaws or other charter documents
so as
to adversely affect any rights of the Holder; (ii) repay, repurchase
or offer to
repay, repurchase or otherwise acquire shares of its Common Stock or
other
equity securities other than as to the Underlying Shares to the extent
permitted
or required under the Transaction Documents; or (iii) enter into any
agreement
with respect to any of the foregoing.
Section
7. This
Debenture shall not entitle the Holder to any of the rights of a stockholder
of
the Obligor, including without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to
attend,
meetings of stockholders or any other proceedings of the Obligor, unless
and to
the extent converted into shares of Common Stock in accordance with the
terms
hereof.
13
Section
8. If
this
Debenture is mutilated, lost, stolen or destroyed, the Obligor shall
execute and
deliver, in exchange and substitution for and upon cancellation of the
mutilated
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Debenture, a new Debenture for the principal amount of this Debenture
so
mutilated, lost, stolen or destroyed but only upon receipt of evidence
of such
loss, theft or destruction of such Debenture, and of the ownership hereof,
and
indemnity, if requested, all reasonably satisfactory to the
Obligor.
Section
9. No
indebtedness of the Obligor is senior to this Debenture in right of payment,
whether with respect to interest, damages or upon liquidation or dissolution
or
otherwise. Without the Holder’s consent, the Obligor will not and will not
permit any of their subsidiaries to, directly or indirectly, enter into,
create,
incur, assume or suffer to exist any 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 there from that is senior in
any
respect to the obligations of the Obligor under this Debenture.
Section
10. This
Debenture shall be governed by and construed in accordance with the laws
of the
State of New Jersey, without giving effect to conflicts of laws thereof.
Each of
the parties consents to the jurisdiction of the Superior Courts of the
State of
New Jersey sitting in Xxxxxx County, New Jersey and the U.S. District
Court for
the District of New Jersey sitting in Newark, New Jersey in connection
with any
dispute arising under this Debenture and hereby waives, to the maximum
extent
permitted by law, any objection, including any objection based on forum non conveniens
to the
bringing of any such proceeding in such jurisdictions.
Section
11. If
the
Obligor fails to strictly comply with the terms of this Debenture, then
the
Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
including, without limitation, attorneys’ fees and expenses incurred by the
Holder in any action in connection with this Debenture, including, without
limitation, those incurred: (i) during any workout, attempted workout,
and/or in
connection with the rendering of legal advice as to the Holder’s rights,
remedies and obligations, (ii) collecting any sums which become due to
the
Holder, (iii) defending or prosecuting any proceeding or any counterclaim
to any
proceeding or appeal; or (iv) the protection, preservation or enforcement
of any
rights or remedies of the Holder.
Section
12. Any
waiver by the Holder of a breach of any provision of this Debenture shall
not
operate as or be construed to be a waiver of any other breach of such
provision
or of any breach of any other provision of this Debenture. The failure
of the
Holder to insist upon strict adherence to any term of this Debenture
on one or
more occasions shall not be considered a waiver or deprive that party
of the
right thereafter to insist upon strict adherence to that term or any
other term
of this Debenture. Any waiver must be in writing.
Section
13. If
any
provision of this Debenture is invalid, illegal or unenforceable, the
balance of
this Debenture shall remain in effect, and if any provision is inapplicable
to
any person or circumstance, it shall nevertheless remain applicable to
all other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically
be
lowered to equal the maximum permitted rate of interest. The Obligor
covenants
(to the extent that it may lawfully do so) that it shall not at any time
insist
upon, plead, or in any manner whatsoever claim or take the benefit or
advantage
of, any stay, extension or usury law or other law which would prohibit
or
forgive the Obligor from paying all or any portion of the principal of
or
interest on this Debenture as contemplated herein, wherever enacted,
now or at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Obligor (to the extent it may
lawfully do
so) hereby expressly waives all benefits or advantage of any such law,
and
covenants that it will not, by resort to any such law, hinder, delay
or impeded
the execution of any power herein granted to the Holder, but will suffer
and
permit the execution of every such as though no such law has been
enacted.
14
Section
14. Whenever
any payment or other obligation hereunder shall be due on a day other
than a
Business Day, such payment shall be made on the next succeeding Business
Day.
Section
15. THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR
THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
[REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]
15
IN
WITNESS WHEREOF,
the
Obligor has caused this Secured Convertible Debenture to be duly executed
by a
duly authorized officer as of the date set forth above.
| |
|
|
| By: | ||
|
Name: Xxxxxxx
Xxxxxxxxx
|
||
|
Title: Chief
Executive Officer
|
||
16
EXHIBIT
“A”
NOTICE
OF CONVERSION
(To
be executed by the Holder in order to convert the
Debenture)
|
TO:
|
The
undersigned hereby irrevocably elects to convert $____________________
of
the
principal amount of the above Debenture into Shares of Common Stock of
Delek
Resources, Inc., according to the conditions stated therein, as of the
Conversion Date written below.
|
Conversion
Date:
|
||
|
Applicable
Conversion Price:
|
||
|
Signature:
|
||
|
Name:
|
||
|
Address:
|
||
|
Amount
to be converted:
|
$
|
|
|
Amount
of Debenture unconverted:
|
$
|
|
|
Conversion
Price per share:
|
$
|
|
|
Number
of shares of Common Stock to be issued:
|
||
|
Please
issue the shares of Common Stock in the following name and
to the
following address:
|
||
|
Issue
to:
|
||
|
Authorized
Signature:
|
||
|
Name:
|
||
|
Title:
|
||
|
Phone
Number:
|
||
|
Broker
DTC Participant Code:
|
||
|
Account
Number:
|
