EXHIBIT 4.18
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: FEBRUARY 17, 2004
$6,000,000
No. 1
MILLENNIUM CELL INC.
CONVERTIBLE DEBENTURE
DUE ON AUGUST 17, 2005
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 Convertible Debentures,
due on August 17, 2005 (subject to extension as herein provided) in the
aggregate principal amount of Six Million Dollars ($6,000,000) (collectively,
the "DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to the order of
MAINFIELD ENTERPRISES, INC. or its registered assigns (the "HOLDER") the
principal sum of Six Million Dollars ($6,000,000) and any additional sums due
pursuant to the terms hereof on August 17, 2005, or such earlier date as the
Debentures are required or permitted to be repaid hereunder ("MATURITY DATE"),
provided, that such Maturity Date may be extended by mutual consent of the
Company and the Holder on up to six occasions by 30 days, 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 5(c), indicating the Company's intent to adjust
the Conversion Price pursuant to Section 5(c).
"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.
"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 Original Issue Date 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 Original Issue Date (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 Original Issue
Date), (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 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
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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(or any successor thereto), the
closing sales price per share of the Common Stock for such date (or the
nearest preceding date) on the OTC Bulletin Board(or any successor thereto);
(c) if the Common Stock is not then listed or quoted on an Eligible Market
or the OTC Bulletin Board (or any successor thereto) 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 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 5(b).
"COMPANY CONVERSION NOTICE" means a written notice in the form attached
hereto as Exhibit B.
"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 5(c) (solely with respect
to conversions pursuant to Section 5(c)) and 5(j)).
"DELIVERY DATE" means the date an Adjustment Notice is delivered to the
Holder pursuant to Section 5(c).
"ELIGIBLE MARKET" means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq or the Nasdaq Small Cap Market.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EQUITY CONDITIONS" means 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 the issuance of stock or
Underlying Shares at issue; (ii) such shares of Common Stock issuable in
respect of the event for which the Equity Conditions must be satisfied 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; (iv) such issuance would be permitted in
full without violating Section 5(d)(i), Section 5(d)(ii) or 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 or any other "Debenture" (as such term is
defined in the Purchase Agreement), 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;
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(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;
(viii) during the Effectiveness Period (as defined in the
Registration Rights Agreement) relating to the First Registration Statement,
the effectiveness of the First 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 First 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 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 (including without limitation, any
Debenture (as defined in the Purchase Agreement)) 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;
(xii) the occurrence of an Event of Default (as defined in the
Debentures) under any Debenture or the occurrence of any event that, with
the passage of time and without being cured, would constitute an Event of
Default (as defined in the Debentures) under any Debenture; or
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(xiii) the ratio of the Company's Unsecured Cash and
Cash-Equivalents balances to Unsecured Indebtedness shall be less than .80
to 1.
"FIRST REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.
"HOLDER CONVERSION DATE" means the date a Holder Conversion Notice
together with the Conversion Schedule is delivered to the Company pursuant
to Section 5(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 7, 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 equal $3.30 (subject to equitable
adjustment for stock splits, recombinations and similar events).
"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 5 consecutive
Trading Days immediately following the Delivery Date.
"INTEREST RATE" means 6%.
"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 $300,000, provided, that any
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" means for any Debentures: (I) with
respect to an Event of Default under clauses (i)-(xii) hereof, 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; and (II) with respect
to an Event
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of Default under clause (xiii) hereof, shall equal the sum of: (i) 125% of
the principal amount of Debentures to be prepaid, plus 125% of all accrued
and unpaid interest thereon and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"NASDAQ" means the Nasdaq National Market.
"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 January 16, 2004, to which the Company and the original Holder 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 January 16, 2004, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time
to time in accordance with its terms.
"REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.
"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
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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.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Purchase Agreement.
"UNSECURED CASH AND CASH EQUIVALENTS" shall have the meaning set forth
in the Purchase Agreement.
"UNSECURED INDEBTEDNESS" 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.
2. 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 2) 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. Subject to
the conditions and limitations set forth below, the Company will pay interest
under this Debenture either (i) in cash, or (ii) by delivering by the third
Trading Day following the Interest Payment Date, a number of freely tradable
shares of Common Stock equal to the quotient obtained by dividing the amount of
such interest by the arithmetic average of the VWAP for the five Trading Days
immediately preceding (but not including) the Interest Payment Date. To pay the
interest payable on an Interest Payment Date in freely tradable shares of Common
Stock, the Company must deliver written notice to the Holder indicating its
election to make such stock 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 pay such interest in cash. All interest payable on
any Interest Payment Date must be paid in the same manner.
(b) Notwithstanding the foregoing, the Company may not pay
interest in shares of Common Stock 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. If the
Company is required but fails to pay interest in cash on any
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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.
3. 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.
4. 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.
5. Conversion
(a) At the option of the Holder. The principal amount of this
Debenture then outstanding is convertible into shares of Common Stock at the
Conversion Price (subject to limitations set forth in Section 5(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 5(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 5(d)) equal the outstanding
principal amount of this Debenture to be converted 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 5(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 5(b) and Section 5(d), at any time after the first year
anniversary of the Original Issue Date, the Company may require a conversion of
principal amount of this Debenture, at the Conversion Price and on the Company
Conversion Date, of all or a portion of the outstanding
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principal amount of this Debenture if: (i) the Closing Price for each of 20
consecutive Trading Days is equal to or greater than 135% of the Initial
Conversion Price and (ii) all of the Equity Conditions are satisfied as of the
Company Conversion Date with respect to all of 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 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 5(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 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 5(d)(i) and/or Section 5(d)(ii), 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 5(d)(i) and/or
Section 5(d)(ii), 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 exceed the amount permitted
under Section 5(d)(i) and/or Section 5(d)(ii). Notwithstanding anything herein
to the contrary, the Company shall not be entitled to deliver a Company
Conversion Notice prior to the 10th Business Day following the delivery of a
Company Conversion Notice pursuant to this or any other Debenture or prior to
the 10th Business Day following any Mandatory Conversion Date under Section
5(a).
(c) Company's option to adjust Conversion Price and force
conversion. Subject to the conditions set forth in this Section 5(c) and Section
5(d), at any time and from time to time after the Original Issue Date, 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) 93% of the Index Price.
Subject to the terms hereof (including, without limitation, Section 5(d)(i) and
(ii)), 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 all of 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 hereunder or
within 10 Trading Days of a Company Conversion Date under Section 5(b). If a
conversion of the Mandatory Convertible Amount would result in the issuance to
the Holder of Underlying Shares
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in excess of the amount permitted pursuant to Section 5(d)(i) and/or Section
5(d)(ii), 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 5(d)(i) and/or Section 5(d)(ii), to be converted
on the applicable Adjustment Date and (y) cancel the Adjustment Notice and
conversion as to the portion of the Mandatory Convertible Amount the conversion
of which would exceed the amount permitted pursuant to Section 5(d)(i) and/or
Section 5(d)(ii).
(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. 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. This restriction may not be waived.
(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 at a conversion price which
is less than the closing bid price of the Common Stock on the Trading Day
immediately preceding the Execution Date (as defined in the Purchase Agreement).
The "ISSUABLE MAXIMUM" means a number of shares equal to 6,922,594 (which equals
19.99% of the Common Stock outstanding on the date of execution of the Purchase
Agreement less the Initial Shares issued at Closing). 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 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 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 Holder shall have the right to require the Company to use
its best efforts to 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. The Company and the Holder
-11-
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.
(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 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 5(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 5(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 5(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
-12-
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 5(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 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
-13-
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 5(j)(iii) in respect of:
(A) Any grant of an option or warrant for Common Stock
or issuance of any shares of Common Stock upon the exercise or exchange (but
only if such exchange does not, directly or indirectly, result in a reduction of
the exercise price therefor on a per share basis) 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
-14-
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) 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);
(H) Any adjustment to the Conversion Price pursuant to
Section 5(c);
(I) The issuance of any warrants or debentures or any
shares of Common Stock issued upon: (x) the exercise of warrants issued by the
Company pursuant to the June 19, 2002 Securities Purchase Agreement (the "JUNE
PURCHASE AGREEMENT"), (y) the exercise of any warrants issued by the Company
pursuant to the October 31, 2002 Securities Purchase Agreement (the "OCTOBER
PURCHASE AGREEMENT"), and (z) the conversion of debentures issued pursuant to
the October Purchase Agreement.
(iv) Calculations. All calculations under this Section 5(j)
shall be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. The number of 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
-15-
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 5(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 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.
-16-
(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.
(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 5(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.
-17-
(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 5(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 5(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.
6. 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 6 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 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.
-18-
7. Prepayment at the Option of the Holder.
(i) At any time following the Original Issue 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 (as indicated in such Holder Prepayment
Notice) for an amount in cash, equal to the Holder Prepayment Price which shall
be due and payable on the 20th Trading Day following the Holder Notice Date.
Notwithstanding anything herein to the contrary, the Holder shall only be
entitled to deliver a Holder Prepayment Notice pursuant to the terms hereof if
the average of the Closing Prices is less than: (x) $1.00 (subject to equitable
adjustment for stock splits, recombinations and similar events) during any 30
consecutive Trading Day period, (y) $.75 (subject to equitable adjustment for
stock splits, recombinations and similar events) during any 15 consecutive
Trading Day period and (z) $.50 (subject to equitable adjustment for stock
splits, recombinations and similar events) during any 5 consecutive Trading Day
period.
(ii) If any portion of the Holder Prepayment Price due pursuant to
the terms hereof remains unpaid after the 20th Trading Day following the Holder
Notice 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 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. 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.
8. Ranking. This Debenture ranks pari passu with all other Debentures
now or hereafter issued pursuant to the Transaction Documents. Except as set
forth in Schedule 3.1(x) to the Purchase Agreement, 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. Except as set
forth in Schedule 3.1(x) to the Purchase Agreement, the Company will not, and
will not permit any 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.
9. 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.
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(b) Subject to Section 9(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.
(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.
-20-
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: /s/ Xxxxxxx X. Xxxx
-------------------
Name: Xxxxxxx X. Xxxx
Title: President, CEO & Acting CFO
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EXHIBIT A
DEBENTURES DUE AUGUST 17, 2005
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 2(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 5(d)(i) of
the Debenture.
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EXHIBIT B
DEBENTURES DUE AUGUST 17, 2005
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:
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Date to Effect Conversion
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Principal amount of Debenture owned prior to conversion
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Principal amount of Debenture to be Converted
(including _______________ of interest added under Section 2(b)
of the Debenture)
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Principal amount of Debenture remaining after Conversion
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Number of shares of Common Stock to be Issued
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Applicable Conversion Price
--------------------------------------------------
Name of Holder
By:
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Name:
Title:
MILLENNIUM CELL INC.
By:
----------------------------------------------
Name:
Title:
-2-
SCHEDULE 1
CONVERSION SCHEDULE
Debentures due August 17, 2005 in the aggregate principal amount of $6,000,000
issued by Millennium Cell Inc. This Conversion Schedule reflects conversions
made under the above referenced Debentures.
Dated:
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Date of Amount of Aggregate Principal Applicable
Conversion Conversion Amount Remaining Conversion
Subsequent to Price
Conversion
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-3-
