Exhibit 4.1
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: September 28, 2004
$4,000,000
No. 2
MILLENNIUM CELL INC.
CONVERTIBLE DEBENTURE
DUE ON MARCH 28, 2006
THIS DEBENTURE (the "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 (the "Debentures"). This Debenture is due on March 28, 2006 (subject
to extension as herein provided) in the aggregate principal amount of Four
Million Dollars ($4,000,000).
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 Four Million Dollars ($4,000,000) and any additional sums due
pursuant to the terms hereof on March 28, 2006, or such earlier date as this
Debenture is 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 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 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)).
"Conversion Schedule" shall have the meaning set forth in Section 5(a).
"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, Inc., the
American Stock Exchange LLC, or the National Market or the SmallCap Market of
Nasdaq.
"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):
(a) any default in the payment of principal or liquidated damages in
respect of this Debenture or any other Debentures, as and when the same becomes
due and payable (whether by acceleration or otherwise), or any default in the
payment of interest in respect of any Debentures, within five Business Days of
when the same becomes due and payable;
(b) a Bankruptcy Event;
(c) 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;
(d) 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;
(e) 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;
(f) 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;
(g) the occurrence of a Change of Control;
(h) during the Effectiveness Period (as defined in the Registration Rights
Agreement) relating to the Second Registration Statement, the effectiveness of
the Second 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 Second Registration Statement, in either case, for
more than seven consecutive Trading Days or an aggregate of 20 Trading Days
(which need not be consecutive Trading Days);
(i) the Company defaults in the timely performance of any other material
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);
(j) 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 10
days from the Event Date (as defined in the Registration Rights Agreement)
relating thereto;
(k) the Company or any Subsidiary materially 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;
(l) the occurrence of an Event of Default (as defined in the Debentures)
under any other 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 other Debenture; or
(m) the ratio of the Company's Unsecured Cash and Cash-Equivalents balances
to Unsecured Indebtedness shall be less than .80 to 1.
"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 $1.55 (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 five 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, with respect to
each Adjustment Date, such amount may be increased up to $2,500,000 by mutual
consent of the Holder and the Company reached prior to the applicable Adjustment
Date.
"Mandatory Prepayment Amount" means for any Debentures: (I) with respect to
an Event of Default under clauses (i)-(xii) of the definition of such term
herein, shall be equal to 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 of Default under
clause (xiii) of the definition of such term herein, shall be equal to 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 National Association of Securities Dealers, Inc.
Automated Quotation System.
"Original Issue Date" means the date of the issuance of this Debenture,
regardless of the number of transfers of this Debenture and regardless of the
number of certificates which may be issued to evidence this Debenture.
"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, entered into
and dated 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,
made and entered into 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 this Debenture
converted during the 10 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.
"Second Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement."
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" shall have the meaning set forth in the Purchase Agreement.
"Trading Day" means: (a) a day on which the shares of Common Stock are
traded on an Eligible Market, or (b) if the shares of Common Stock are not
listed on an Eligible Market, a day on which the shares of Common Stock are
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or
(c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a
day on which the shares of Common Stock are quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
that in the event that the shares of Common Stock are not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business
Day.
"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.
2.1 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.
2.2 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 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
5.1 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.
5.2 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 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)) be equal to 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).
5.3 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 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).
5.4 Certain Conversion Restrictions.
(a) 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.
(b) 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 9,490,682 less 69,069. 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 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.
5.5 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.
5.6 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.
5.7 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.
5.8 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.
5.9 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 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.
5.10 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):
(a) 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.
(b) Additional Distributions. If the Company, at any time
while any Debentures are outstanding, shall distribute to all
holders of Common Stock (and not to Holders) evidences of its
indebtedness or assets or rights or warrants to subscribe for or
purchase any security, then in each such case the Conversion
Price at which the principal amount of Debentures shall
thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the
Closing Price determined as of the record date mentioned above,
and of which the numerator shall be such Closing Price on such
record date less the then fair market value at such record date
of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith. In either
case the adjustments shall be described in a statement provided
to the Holders of the portion of assets or evidences of
indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(c) 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:
(i) 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;
(ii) 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);
(iii) Any Common Stock or Common Stock Equivalents issued
for consideration other than cash pursuant to a merger,
consolidation, acquisition or other similar business combination;
(iv) Any issuances of Common Stock or Common Stock
Equivalents to a Person which is or will be, itself or through
its subsidiaries, an operating company in a business related to
or complementary with the business of the Company and in which
the Company receives reasonably material benefits in addition to
the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is
investing in securities;
(v) 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;
(vi) 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;
(vii) 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);
(viii)Any adjustment to the Conversion Price pursuant to
Section 5(c);
(ix) 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.
(d) 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.
(e) 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.
5.11 Fundamental Transactions. If, at any time while this Debenture is
outstanding: (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then the Holder shall have the right thereafter to
receive, upon conversion of the outstanding principal amount of this Debenture,
the same amount and kind of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder of the
number of Underlying Shares then issuable upon conversion in full of the
outstanding principal amount of this Debenture (the "Alternate Consideration").
For purposes of any such exercise, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one share of
Common Stock in such Fundamental Transaction, and the Company shall apportion
the Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of the outstanding principal amount of this
Debenture following such Fundamental Transaction. At the Holder's option and
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall, either (i) issue to the Holder a new debenture substantially
in the form of this Debenture and consistent with the foregoing provisions
(omitting Section 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.
5.12 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.
5.13 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.
5.14 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.
5.15 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.
5.16 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.
5.17 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 Acting 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.
7. Prepayment at the Option of the Holder.
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 five consecutive Trading
Day period.
(a) 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.
9.1 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.
9.2 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.
9.3 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.
9.4 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.
9.5 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.
9.6 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.
9.7 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.
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/ Xxxx X. Xxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: VP - Finance and Acting CFO
EXHIBIT A
Debentures Due March 28, 2006
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 (the "Shares") of Millennium Cell
Inc. (the "Company"), 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. As a condition to this conversion, the
undersigned hereby represents and warrants to the Company that the
representations and warranties of Section 3.2 of the Purchase Agreement are true
and correct as of the date hereof as if they had been made on such date with
respect to the Shares. The undersigned further acknowledges that the transfer of
the Shares to be issued upon exercise of this Debenture is subject to the terms
and conditions contained in Section 4.1 of the Purchase Agreement.
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.
EXHIBIT B
Debentures Due March 28, 2006
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 (the "Shares") of Millennium Cell Inc. (the "Company"), 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.
In connection with this conversion, the undersigned hereby represents and
warrants to the Company that the representations and warranties of Section 3.2
of the Purchase Agreement are true and correct as of the date hereof as if they
had been made on such date with respect to the Shares. The undersigned further
acknowledges that the transfer of the Shares to be issued upon exercise of this
Debenture is subject to the terms and conditions contained in Section 4.1 of the
Purchase Agreement.
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
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Name of Holder
By:_______________________________________________
Name:
Title:
MILLENNIUM CELL INC.
By:_______________________________________________
Name:
Title:
[ ] By the acceptance 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.
Schedule 1
CONVERSION SCHEDULE
Debentures due March 28, 2006, in the aggregate principal amount of $4,000,000
issued by Millennium Cell Inc. This Conversion Schedule reflects conversions
made under the above referenced Debentures.
Dated:
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Date of Conversion Amount of Conversion Aggregate Principal Applicable Conversion Price
Amount Remaining
Subsequent to
Conversion
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