EXHIBIT 99.7
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: __________ ___, 2005
Original Conversion Price (subject to adjustment herein): $____1
$_______________
FORM OF VARIABLE RATE SECURED CONVERTIBLE DEBENTURE
THIS SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized
and issued Variable Rate Secured Convertible Debentures of Able Energy, Inc., a
Delaware corporation, having a principal place of business at
_____________________________ (the "COMPANY"), All American Plazas, Inc., a
__________________ corporation, having a principal place of business at
_____________________________ ("ALL AMERICAN"), Yosemite Development Corp., a
Delaware corporation, having a principal place of business at ________________
("YOSEMITE") and Mountainside Development, LLC, a Delaware limited liability
company, having a principal place of business at ____________ ("MOUNTAINSIDE"
and the Company, All American, Yosemite and Mountainside, collectively, the
"BORROWERS" and Yosemite and Mountainside, collectively, the "SUBSIDIARY
BORROWERS") designated as its Variable Rate Secured Convertible Debenture, due
April __, 2007 (the "DEBENTURE(S)").
FOR VALUE RECEIVED, the Borrowers, jointly and severally, promise to pay
to ________________________ or its registered assigns (the "HOLDER"), or shall
have paid pursuant to the terms hereunder, the principal sum of $_______________
by April __, 2007, or such earlier date as the Debentures are required or
permitted to be repaid as provided hereunder (the "MATURITY DATE"), and to pay
interest to the Holder on the aggregate unconverted and then
-----------------------------
1 The lesser of (i) [the effective per share purchase price of the
acquisition of All American] and (ii) $3.00, subject further to adjustment
herein.
1
outstanding principal amount of this Debenture in accordance with the provisions
hereof. This Debenture is subject to the following additional provisions:
SECTION 1. DEFINITIONS. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Securities
Agreement, and (b) the following terms shall have the following meanings:
"ALTERNATE CONSIDERATION" shall have the meaning set forth in
Section 5(d).
"BASE CONVERSION PRICE" shall have the meaning set forth in
Section 5(b).
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday in the United States or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"BUY-IN" shall have the meaning set forth in Section 4(d)(v).
"CHANGE OF CONTROL TRANSACTION" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 40% of the voting securities
of the Company, or (ii) the Company merges into or consolidates with any
other Person, or any Person merges into or consolidates with the Company
and, after giving effect to such transaction, the stockholders of the
Company immediately prior to such transaction own less than 60% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers its assets, as an
entirety or substantially as an entirety, to another Person and the
stockholders of the Company immediately prior to such transaction own
less than 60% of the aggregate voting power of the acquiring entity
immediately after the transaction, (iv) a replacement at one time or
within a three year period of more than one-half of the members of the
Company's board of directors which is not approved by a majority of
those individuals who are members of the board of directors on the date
hereof (or by those individuals who are serving as members of the board
of directors on any date whose nomination to the board of directors was
approved by a majority of the members of the board of directors who are
members on the date hereof), or (v) 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) or (iv).
"COMMON STOCK" means the common stock, par value $0.001 per
share, of the Company and stock of any other class of securities into
which such securities may hereafter have been reclassified or changed
into.
"CONVERSION DATE" shall have the meaning set forth in Section
4(a).
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"CONVERSION PRICE" shall have the meaning set forth in Section
4(b).
"CONVERSION SHARES" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance
with the terms.
"DEBENTURE REGISTER" shall have the meaning set forth in Section
2(c).
"DILUTIVE ISSUANCE" shall have the meaning set forth in Section
5(b).
"DILUTIVE ISSUANCE NOTICE" shall have the meaning set forth in
Section 5(b).
"EFFECTIVENESS PERIOD" shall have the meaning given to such term
in the Registration Rights Agreement.
"EQUITY CONDITIONS" shall mean, during the period in question,
(i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notice of
Conversions of the Holder, if any, (ii) all liquidated damages and other
amounts owing to the Holder in respect of the Debentures shall have been
paid; (iii) there is an effective Registration Statement pursuant to
which the Holder is permitted to utilize the prospectus thereunder to
resell all of the shares issuable pursuant to the Transaction Documents
(and the Company believes, in good faith, that such effectiveness will
continue uninterrupted for the foreseeable future), (iv) the Common
Stock is trading on the Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed for trading on a
Trading Market (and the Company believes, in good faith, that trading of
the Common Stock on a Trading Market will continue uninterrupted for the
foreseeable future), (v) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is then existing no Event of Default or event
which, with the passage of time or the giving of notice, would
constitute an Event of Default, (vii) the issuance of the shares in
question (or, in the case of a redemption, the shares issuable upon
conversion in full of the redemption amount) to the Holder would not
violate the limitations set forth in Section 4(c)(i) and (viii) no
public announcement of a pending or proposed Fundamental Transaction,
Change of Control Transaction or acquisition transaction has occurred
that has not been consummated.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"FUNDAMENTAL TRANSACTION" shall have the meaning set forth in
Section 5(d).
"INTEREST CONVERSION RATE" means the lesser of (a) the
Conversion Price and (b) the 90% of the lesser of (i) the average of the
20 VWAPs immediately prior to the applicable Interest Payment Date or
(ii) the average of the 20 VWAPs immediately prior
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to the date the applicable interest payment shares are issued and
delivered if after the Interest Payment Date.
"INTEREST PAYMENT DATE" shall have the meaning set forth in
Section 2(a).
"INTEREST PERIOD" means, initially, the period beginning on and
including the Original Issue Date and ending on and including June 30,
2005 and each successive period as follows: the period beginning on and
including July 1 and ending on and including September 30; the period
beginning on and including October 1 and ending on and including
December 31; the period beginning on and including January 1 and ending
on and including March 31; and the period beginning on and including
April 1 and ending on and including June 30.
"LATE FEES" shall have the meaning set forth in Section 2(d).
"LIBOR" means, for each Interest Period (i) the three-month
London Interbank Offered Rate for deposits in U.S. dollars, as shown on
such the Trading Day immediately prior to the beginning of such Interest
Period in The Wall Street Journal (Eastern Edition) under the caption
"Money Rates - London Interbank Offered Rates (LIBOR)"; or (ii) if The
Wall Street Journal does not publish such rate, the offered one-month
rate for deposits in U.S. dollars which appears on the Reuters Screen
LIBO Page as of 10:00 a.m., New York time, the Trading Day immediately
prior to the beginning of such Interest Period, provided that if at
least two rates appear on the Reuters Screen LIBO Page on any such
Trading Day, the "LIBOR" for such day shall be the arithmetic mean of
such rates.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the
sum of (i) the greater of: (A) 125% of the principal amount of
Debentures to be prepaid, or (B) the principal amount of Debentures to
be prepaid, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or otherwise due or (y) the date
the Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the VWAP on (x) the date the Mandatory Prepayment Amount
is demanded or otherwise due or (y) the date the Mandatory Prepayment
Amount is paid in full, whichever is greater, and (ii) all accrued and
unpaid interest hereon amounts, costs, expenses and liquidated damages
due in respect of such Debentures.
"NEW YORK COURTS" shall have the meaning set forth in Section
9(d).
"NOTICE OF CONVERSION" shall have the meaning set forth in
Section 4(a).
"OPTIONAL REDEMPTION" shall have the meaning set forth in
Section 6(a).
"OPTIONAL REDEMPTION AMOUNT" shall mean the sum of (i) 125% of
the principal amount of the Debenture then outstanding, (ii) accrued but
unpaid interest and (iii) all liquidated damages and other amounts due
in respect of the Debenture.
"OPTIONAL REDEMPTION NOTICE" shall have the meaning set forth in
Section 6(a).
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"OPTIONAL REDEMPTION NOTICE DATE" shall have the meaning set
forth in Section 6(a).
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance
of the Debentures regardless of the number of transfers of any Debenture
and regardless of the number of instruments which may be issued to
evidence such Debenture.
"PERMITTED INDEBTEDNESS" shall mean [INSERT DESCRIPTION OF
SENOIR DEBT ON PA PROPERTY].
"PERMITTED LIENS" shall mean [INSERT DESCRIPTION OF SENIOR LIEN
ON PA PROPERTY].
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of the Securities Agreement, 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" means a registration statement meeting
the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Conversion Shares and
naming the Holder as a "selling stockholder" thereunder.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SECURITIES AGREEMENT" means the Securities Assumption,
Amendment and Issuance Agreement, dated as of _______ ___, 2005, to
which the Company and the original Holder are parties, as amended,
modified or supplemented from time to time in accordance with its terms.
"SUBSIDIARY" shall have the meaning given to such term in the
Securities Agreement.
"TRADING DAY" means a day on which the Common Stock is traded on
a Trading Market.
"TRADING MARKET" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange or the Nasdaq National Market.
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"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Securities Agreement.
"VWAP" 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 a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common
Stock is not then listed or quoted on a Trading Market and if prices for
the Common Stock are then quoted on the OTC Bulletin Board, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is
not then listed or quoted on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the "Pink Sheets" published by the
Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (c) 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 Holders and reasonably
acceptable to the Company.
SECTION 2. INTEREST.
a) PAYMENT OF INTEREST IN CASH OR KIND. The Borrowers shall
pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Debenture at the rate per annum
equal to LIBOR for the applicable Interest Period plus 4.0% or such
lesser rate as shall be the highest rate permitted by applicable law,
payable quarterly on April 1, July 1, October 1 and January 1, beginning
on the first such date after the Original Issue Date, on each Conversion
Date (as to that principal amount then being converted), on each
Optional Redemption Date (as to that principal amount then being
redeemed) and on the Maturity Date (except that, if any such date is not
a Business Day, then such payment shall be due on the next succeeding
Business Day) (each such date, an "INTEREST PAYMENT DATE"), in cash or
shares of Common Stock at the Interest Conversion Rate, or a combination
thereof; PROVIDED, HOWEVER, payment in shares of Common Stock may only
occur if during the 20 Trading Days immediately prior to the applicable
Interest Payment Date and through and including the date such shares of
Common Stock are issued to the Holder all of the Equity Conditions have
been met and the Company shall have given the Holder notice in
accordance with the notice requirements set forth below.
b) COMPANY'S ELECTION TO PAY INTEREST IN KIND. Subject to
the terms and conditions herein, the decision whether to pay interest
hereunder in shares of Common Stock or cash shall be at the discretion
of the Company. Not less than 20 Trading Days prior to each Interest
Payment Date, the Company shall provide the Holder with written notice
of its election to pay interest hereunder either in cash or shares of
Common Stock (the Company may indicate in such notice that the election
contained in such notice shall continue for later periods until
revised). Within 20 Trading Days prior to an Interest
6
Payment Date, the Company's election (whether specific to an Interest
Payment Date or continuous) shall be irrevocable as to such Interest
Payment Date. Subject to the aforementioned conditions, failure to
timely provide such written notice shall be deemed an election by the
Borrowers to pay the interest on such Interest Payment Date in cash.
c) INTEREST CALCULATIONS. Interest shall be calculated on
the basis of a 360-day year and shall accrue daily commencing on the
Original Issue Date until payment in full of the principal sum, together
with all accrued and unpaid interest and other amounts which may become
due hereunder, has been made. Payment of interest in shares of Common
Stock shall otherwise occur pursuant to Section 4(d)(ii) and only for
purposes of the payment of interest in shares, the Interest Payment Date
shall be deemed the Conversion Date. Interest shall cease to accrue with
respect to any principal amount converted, provided that the Company in
fact delivers the Conversion Shares within the time period required by
Section 4(d)(ii). Interest hereunder will be paid to the Person in whose
name this Debenture is registered on the records of the Company
regarding registration and transfers of Debentures (the "DEBENTURE
REGISTER"). Except as otherwise provided herein, if at any time the
Company pays interest partially in cash and partially in shares of
Common Stock, then such payment shall be distributed ratably among the
Holders based upon the principal amount of Debentures held by each
Holder.
d) LATE FEE. All overdue accrued and unpaid interest to be
paid hereunder shall entail a late fee at the rate of 18% per annum (or
such lower maximum amount of interest permitted to be charged under
applicable law) ("LATE FEES") which will accrue daily, from the date
such interest is due hereunder through and including the date of
payment. Notwithstanding anything to the contrary contained herein, if
on any Interest Payment Date the Company has elected to pay interest in
Common Stock and is not able to pay accrued interest in the form of
Common Stock because it does not then satisfy the conditions for payment
in the form of Common Stock set forth above, then, at the option of the
Holder, the Borrowers, in lieu of delivering either shares of Common
Stock pursuant to this Section 2 or paying the regularly scheduled cash
interest payment, shall deliver, within three Trading Days of each
applicable Interest Payment Date, an amount in cash equal to the product
of the number of shares of Common Stock otherwise deliverable to the
Holder in connection with the payment of interest due on such Interest
Payment Date and the average VWAP during the period commencing on the
Interest Payment Date and ending on the Trading Day prior to the date
such payment is made.
e) PREPAYMENT. Except as otherwise set forth in this
Debenture, including without limitation, Section 6, the Borrowers may
not prepay any portion of the principal amount of this Debenture without
the prior written consent of the Holder.
SECTION 3. REGISTRATION OF TRANSFERS AND EXCHANGES.
a) DIFFERENT DENOMINATIONS. This Debenture is exchangeable
for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration of transfer
or exchange.
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b) INVESTMENT REPRESENTATIONS. This Debenture has been
issued subject to certain investment representations of the original
Holder set forth in the Securities Agreement and may be transferred or
exchanged only in compliance with the Securities Agreement and
applicable federal and state securities laws and regulations.
c) RELIANCE ON DEBENTURE REGISTER. Prior to due presentment
to the Borrowers for transfer of this Debenture, the Borrowers and any
agent of the Borrowers may treat the Person in whose name this Debenture
is duly registered on the Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other
purposes, whether or not this Debenture is overdue, and neither the
Borrowers nor any such agent shall be affected by notice to the
contrary.
SECTION 4. CONVERSION.
a) VOLUNTARY CONVERSION. At any time after the Original
Issue Date until this Debenture is no longer outstanding, this Debenture
shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time (subject
to the limitations on conversion set forth in Section 4(c) hereof). The
Holder shall effect conversions by delivering to the Company the form of
Notice of Conversion attached hereto as ANNEX A (a "NOTICE OF
CONVERSION"), specifying therein the principal amount of Debentures to
be converted and the date on which such conversion is to be effected (a
"CONVERSION DATE"). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of
Conversion is provided hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender Debentures to the
Company unless the entire principal amount of this Debenture plus all
accrued and unpaid interest thereon has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal
amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing
the principal amount converted and the date of such conversions. The
Company shall deliver any objection to any Notice of Conversion within 1
Business Day of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any
assignee, by acceptance of this Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a
portion of this Debenture, the unpaid and unconverted principal amount
of this Debenture may be less than the amount stated on the face hereof.
b) CONVERSION PRICE. The conversion price in effect on any
Conversion Date shall be equal to $____2 (subject to adjustment
herein)(the "CONVERSION PRICE").
c) CONVERSION LIMITATIONS.
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2 The lesser of (i) [the per share purchase price of the Able Energy
Transaction/All-American Transaction] and (ii) $3.00, subject further to
adjustments for reverse and forward stock splits and the like of the Common
Stock after the date of the All-American Purchase Agreement.
8
i. RESERVED.
ii. HOLDER'S RESTRICTION ON CONVERSION. The Company
shall not effect any conversion of this Debenture, and the
Holder shall not have the right to convert any portion of this
Debenture, pursuant to Section 4(a) or otherwise, to the extent
that after giving effect to such conversion, the Holder
(together with the Holder's affiliates), as set forth on the
applicable Notice of Conversion, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such conversion.
For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its affiliates
shall include the number of shares of Common Stock issuable upon
conversion of this Debenture with respect to which the
determination of such sentence is being made, but shall exclude
the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted portion of
this Debenture beneficially owned by the Holder or any of its
affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company
(including, without limitation, any other Debentures or the
Warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned
by the Holder or any of its affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 4(c)(ii),
beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this section applies, the determination
of whether this Debenture is convertible (in relation to other
securities owned by the Holder) and of which a portion of this
Debenture is convertible shall be in the sole discretion of such
Holder. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers
a Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the
accuracy of such determination. For purposes of this Section
4(c)(ii), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (x) the Company's most
recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other
notice by the Company or the Company's Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon the
written or oral request of the Holder, the Company shall within
two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including this Debenture, by the
Holder or its affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. The
provisions of this Section 4(c) may be waived by the Holder, at
the election of the Holder, upon not less than 61 days' prior
notice to the Company, and the provisions of this Section 4(c)
shall continue to apply until such 61st day (or such later date,
as determined by the Holder, as may be specified in such notice
of waiver).
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d) MECHANICS OF CONVERSION
i. CONVERSION SHARES ISSUABLE UPON CONVERSION OF
PRINCIPAL AMOUNT. The number of shares of Common Stock issuable
upon a conversion hereunder shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of
this Debenture to be converted by (y) the Conversion Price. i.
ii. DELIVERY OF CERTIFICATE UPON CONVERSION. Not
later than three Trading Days after any Conversion Date, the
Company will deliver or cause to be delivered to the Holder (A)
a certificate or certificates representing the Conversion Shares
which shall be free of restrictive legends and trading
restrictions (other than those required by the Securities
Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of Debentures (including, if
so timely elected by the Company, shares of Common Stock
representing the payment of accrued interest) and (B) a bank
check in the amount of accrued and unpaid interest (if the
Company is required to pay accrued interest in cash). The
Company shall, if available and if allowed under applicable
securities laws, use its best efforts to deliver any certificate
or certificates required to be delivered by the Company under
this Section electronically through the Depository Trust
Corporation or another established clearing corporation
performing similar functions.
iii. FAILURE TO DELIVER CERTIFICATES. If in the case
of any Notice of Conversion such certificate or certificates are
not delivered to or as directed by the applicable Holder by the
third Trading Day after a Conversion Date, the Holder shall be
entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing
the principal amount of Debentures tendered for conversion.
iv. OBLIGATION ABSOLUTE; PARTIAL LIQUIDATED DAMAGES.
If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(d)(ii) by
the fifth Trading Day after the Conversion Date, the Borrowers
shall pay to such Holder, in cash, as liquidated damages and not
as a penalty, for each $1000 of principal amount being
converted, $10 per Trading Day (increasing to $20 per Trading
Day after 5 Trading Days after such damages begin to accrue) for
each Trading Day after such third Trading Day until such
certificates are delivered. The Company's obligations to issue
and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof 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
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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 Conversion Shares; PROVIDED, HOWEVER,
such delivery shall not operate as a waiver by the Company of
any such action the Company may have against the Holder. In the
event a Holder of this Debenture shall elect to convert any or
all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or any
one associated or affiliated with the Holder has been engaged in
any violation of law, agreement or for any other reason, unless,
an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of this Debenture shall have
been sought and obtained and the Company posts a surety bond for
the benefit of the Holder in the amount of 150% of the principal
amount of this Debenture outstanding, which is subject to the
injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder to the extent
it obtains judgment. In the absence of an injunction precluding
the same, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion. Nothing
herein shall limit a Xxxxxx's right to pursue actual damages or
declare an Event of Default pursuant to Section 8 herein for the
Company's failure to deliver Conversion Shares within the period
specified herein and such Holder shall have the right to pursue
all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to
any other Section hereof or under applicable law.
Notwithstanding anything herein to the contrary, as to any
delays in performance caused solely and directly by a Force
Majeure, the Trading Days during which such delay is occurring
shall be tolled hereunder with respect to liquidated damages,
provided that the Company has used, and continues to use, best
efforts to perform its obligations notwithstanding such Force
Majeure.
v. COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY
DELIVER CERTIFICATES UPON CONVERSION. In addition to any other
rights available to the Holder, if the Company fails for any
reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder
is required by its brokerage firm to purchase (in an open market
transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares
which the Holder anticipated receiving upon such conversion (a
"BUY-IN"), then the Borrowers shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by
the Holder) the amount by which (x) the Holder's total purchase
price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue multiplied by (2) the
actual sale price of the Common Stock at the time of
11
the sale (including brokerage commissions, if any) giving rise
to such purchase obligation and (B) at the option of the Holder,
either reissue Debentures in principal amount equal to the
principal amount of the attempted conversion or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery
requirements under Section 4(d)(ii). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of
Debentures with respect to which the actual sale price of the
Conversion Shares at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation was
a total of $10,000 under clause (A) of the immediately preceding
sentence, the Borrowers shall be required to pay the Holder
$1,000. The Holder shall provide the Borrowers written notice
indicating the amounts payable to the Holder in respect of the
Buy-In. Notwithstanding anything contained herein to the
contrary, if a Holder requires the Borrowers to make payment in
respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Borrowers timely pays in full
such payment, the Borrowers shall not be required to pay such
Holder liquidated damages under Section 4(d)(iv) in respect of
the certificates resulting in such Buy-In.
vi. RESERVATION OF SHARES ISSUABLE UPON CONVERSION.
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 the
Debentures and payment of interest on the Debenture, each as
herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (and
the other Holders of the Debentures), not less than such number
of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such
shares set forth in the Securities Agreement) be issuable
(taking into account the adjustments and restrictions of Section
5) upon the conversion of the outstanding principal amount of
the Debentures and payment of interest hereunder. The Company
covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly and validly authorized,
issued and fully paid, nonassessable and, if the Registration
Statement is then effective under the Securities Act, registered
for public sale in accordance with such Registration Statement.
vii. FRACTIONAL SHARES. Upon a conversion hereunder
the Company shall not be required to issue stock certificates
representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the VWAP at such time. If the
Company elects not, or is unable, to make such a cash payment,
the Holder shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
12
viii. TRANSFER TAXES. The issuance of certificates for
shares of the Common Stock on conversion of this Debenture shall
be made without charge to the Holder hereof 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 and the Company
shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that
such tax has been paid.
SECTION 5. CERTAIN ADJUSTMENTS.
a) STOCK DIVIDENDS AND STOCK SPLITS. If the Company, at any
time while this Debenture is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include
any shares of Common Stock issued by the Company pursuant to this
Debenture, including as interest thereon), (B) subdivides outstanding
shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issues by reclassification
of shares of the Common Stock any shares of capital stock of the
Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding 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 this Section shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) SUBSEQUENT EQUITY SALES. If the Company or any
Subsidiary thereof, as applicable, at any time while this Debenture is
outstanding, shall sell, grant any option to purchase or offer, sell or
grant any right to reprice its securities, or otherwise dispose of or
issue any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less
than the then Conversion Price (such lower price, the "BASE CONVERSION
PRICE" and such issuances collectively, a "DILUTIVE ISSUANCE"), as
adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or
rights per share which is issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price per
share which is less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price on such date
of the Dilutive
13
Issuance), then the Conversion Price shall be reduced to equal the Base
Conversion Price. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the
foregoing, no adjustment will be made under this Section 5(b) in respect
of an Exempt Issuance. The Company shall notify the Holder in writing,
no later than the Business Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this section, indicating
therein the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms (such notice
the "DILUTIVE ISSUANCE NOTICE"). For purposes of clarification, whether
or not the Company provides a Dilutive Issuance Notice pursuant to this
Section 5(b), upon the occurrence of any Dilutive Issuance, after the
date of such Dilutive Issuance the Holder is entitled to receive a
number of Conversion Shares based upon the Base Conversion Price
regardless of whether the Holder accurately refers to the Base
Conversion Price in the Notice of Conversion.
c) PRO RATA DISTRIBUTIONS. If the Company, at any time
while Debentures are outstanding, shall distribute to all holders of
Common Stock (and not to Holders) evidences of its indebtedness or
assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security, then in each such case the
Conversion Price shall be adjusted by multiplying such 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 VWAP determined as of the record date
mentioned above, and of which the numerator shall be such VWAP on such
record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by
the Board of Directors in good faith. In either case the adjustments
shall be described in a statement provided to the Holder of the portion
of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned
above.
d) FUNDAMENTAL TRANSACTION. If, at any time while this
Debenture is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the
Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the
Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or
property (in any such case, a "FUNDAMENTAL TRANSACTION"), then upon any
subsequent conversion of this Debenture, the Holder shall have the right
to receive, for each Conversion Share that would have been issuable upon
such conversion immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or property as
it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had
14
been, immediately prior to such Fundamental Transaction, the holder of
one share of Common Stock (the "ALTERNATE CONSIDERATION"). For purposes
of any such conversion, 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 this Debenture following such Fundamental Transaction. To
the extent necessary to effectuate the foregoing provisions, any
successor to a Borrower or surviving entity in such Fundamental
Transaction shall (i) assume in writing all of the obligations of the
Borrower under this Debenture and the other Transaction Documents
pursuant to written agreements in form and substance satisfactory to the
Holder (such approval not to be unreasonably withheld or delayed) prior
to such Fundamental Transaction and (ii) to issue to the Holder a new
debenture of such successor entity evidenced by a written instrument
substantially similar in form and substance to this Debenture,
including, without limitation, having a principal amount and interest
rate equal to the principal amounts and the interest rates of the
Debentures held by the Holder and having similar ranking to the
Debenture, and satisfactory to the Holder (any such approval not to be
unreasonably withheld or delayed). The provisions of this Section shall
apply similarly and equally to successive Fundamental Transactions and
shall be applied without regard to any limitations on the conversion or
redemption of this Debenture.
e) CALCULATIONS. All calculations under this Section 5
shall be made to the nearest cent or the nearest 1/100th of a share, as
the case may be. For purposes of this Section 5, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
f) NOTICE TO HOLDERS.
i. ADJUSTMENT TO CONVERSION PRICE. Whenever the
Conversion Price is adjusted pursuant to any of this Section 5,
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.
If the Company issues a variable rate security, despite the
prohibition thereon in the Securities Agreement, the Company
shall be deemed to have issued Common Stock or Common Stock
Equivalents at the lowest possible conversion or exercise price
at which such securities may be converted or exercised in the
case of a Variable Rate Transaction (as defined in the
Securities Agreement).
15
ii. NOTICE TO ALLOW CONVERSION BY HOLDER. 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 the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Company
is a party, any sale or transfer of all or substantially all of
the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities,
cash or property; (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the
purpose of conversion of the Debentures, and shall cause to be
mailed to the Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 10 calendar
days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become effective
or close, and the date as of which it is expected that holders
of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange; PROVIDED, that the
failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are
entitled to convert Debentures during the 10-day period
commencing the date of such notice to the effective date of the
event triggering such notice.
SECTION 6. OPTIONAL REDEMPTION.
a) OPTIONAL REDEMPTION AT ELECTION OF COMPANY. Subject to
the provisions of this Section 6, at any time after the Original Issue
Date, the Company may deliver a notice to the Holders (an "OPTIONAL
REDEMPTION NOTICE" and the date such notice is deemed delivered
hereunder, the "OPTIONAL REDEMPTION NOTICE DATE") of its irrevocable
election to redeem some or all of the then outstanding Debentures, for
an amount, in cash, equal to the Optional Redemption Amount on the 20th
Trading Day following the Optional Redemption Notice Date (such date,
the "OPTIONAL REDEMPTION DATE" and such redemption, the "OPTIONAL
REDEMPTION"). The Optional Redemption Amount is due in full on the
Optional Redemption Date. The Company may only effect an Optional
Redemption if during the period commencing on the Optional Redemption
Notice Date through to the Optional Redemption Date and through and
including the date such shares
16
of Common Stock are issued to the Holder, each of the Equity Conditions
shall have been met. If any of the Equity Conditions shall cease to be
satisfied at any time during the required period, then the Holder may
elect to nullify the Optional Redemption Notice by notice to the Company
within 3 Trading Days after the first day on which any such Equity
Condition has not been met (provided that if, by a provision of the
Transaction Documents the Company is obligated to notify the Holder of
the non-existence of an Equity Condition, such notice period shall be
extended to the third Trading Day after proper notice from the Company)
in which case the Optional Redemption Notice shall be null and void, AB
INITIO. The Company covenants and agrees that it will honor all Notice
of Conversions tendered from the time of delivery of the Optional
Redemption Notice through the date all amounts owing thereon are due and
paid in full. Notwithstanding anything herein to the contrary, in the
event an Option Redemption is being undertaken in connection with a
financing that would otherwise result in an adjustment to the Conversion
Price pursuant to Section 5(b) and the Company arranges for the direct
redemption of all or part of this Debenture out of the closing of such
Dilutive Issuance, the Conversion Price as to the principal amount of
this Debenture subject to an Optional Redemption shall not be adjusted
as to such Dilutive Issuance on or before the Optional Redemption Date,
provided that in the event the Optional Redemption Amount is not paid in
full on or before the Optional Redemption Date, the Conversion Price
shall be immediately adjusted to the lower price pursuant to Section
5(b).
b) REDEMPTION PROCEDURE. The payment of cash pursuant to an
Optional Redemption shall be made on the Optional Redemption Date. If
any portion of the cash payment for an Optional Redemption, shall not be
paid by the Borrowers by the respective due date, interest shall accrue
thereon at the rate of 18% per annum (or the maximum rate permitted by
applicable law, whichever is less) until the payment of the Optional
Redemption Amount plus all amounts owing thereon is paid in full.
Alternatively, if any portion of the Optional Redemption Amount remains
unpaid after such date, the Holders subject to such redemption may
elect, by written notice to the Company given at any time thereafter, to
invalidate AB -- INITIO such redemption, notwithstanding anything herein
contained to the contrary, and, with respect the ------ failure to honor
the Optional Redemption as applicable, the Company shall have no further
right to exercise such Optional Redemption. Notwithstanding anything to
the contrary in this Section 6, the Company's determination to redeem in
cash or its elections under Section 6(a) shall be applied among the
Holders of Debentures ratably. The Holder may elect to convert the
outstanding principal amount of the Debenture pursuant to Section 4
prior to actual payment in cash for any redemption under this Section 6
by fax delivery of a Notice of Conversion to the Company.
SECTION 7. NEGATIVE COVENANTS. So long as any portion of this
Debenture is outstanding, the Borrowers will not and will not permit any of its
Subsidiaries to directly or indirectly:
a) except for Permitted Indebtedness, enter into, create,
incur, assume, guarantee or suffer to exist any indebtedness for
borrowed money of any kind, including but not limited to, a guarantee,
on or with respect to any of the equity, property or assets
17
of the Subsidiary Borrowers now owned or hereafter acquired or any
interest therein or any income or profits therefrom;
b) except for Permitted Liens, enter into, create, incur,
assume or suffer to exist any liens of any kind, on or with respect to
any of the equity, property or assets of the Subsidiary Borrowers now
owned or hereafter acquired or any interest therein or any income or
profits therefrom;
c) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder;
d) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a DE MINIMIS number of shares of its Common
Stock or Common Stock Equivalents other than as to the Conversion Shares
to the extent permitted or required under the Transaction Documents or
as otherwise permitted by the Transaction Documents;
e) enter into any agreement with respect to any of the
foregoing; or
f) pay cash dividends on any equity securities of the
Borrowers.
SECTION 8. EVENTS OF DEFAULT.
a) "EVENT OF DEFAULT", wherever used herein, means any one
of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal
amount of any Debenture, or (B) interest (including Late Fees)
on, or liquidated damages in respect of, any Debenture, as and
when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or
otherwise) which default, solely in the case of an interest
payment or other default under clause (B) above, is not cured,
within 5 Trading Days;
ii. the Borrowers shall fail to observe or perform
any other covenant or agreement contained in this Debenture
(other than a breach by the Company of its obligations to
deliver shares of Common Stock to the Holder upon conversion
which breach is addressed in clause (xi) below) which failure is
not cured, if possible to cure, within the earlier to occur of
(A) 10 Trading Days after notice of such default sent by the
Holder or by any other Holder and (B) 20 Trading Days after the
Borrowers shall become or should have become aware of such
failure;
iii. a material default or event of default (subject
to any grace or cure period provided for in the applicable
agreement, document or instrument) shall occur under (A) any of
the Transaction Documents other than the Debentures, or
18
(B) any other material agreement, lease, document or instrument
to which the Borrowers or any Subsidiary are bound;
iv. any representation or warranty made herein, in
any other Transaction Documents, in any written statement
pursuant hereto or thereto, or in any other report, financial
statement or certificate made or delivered to the Holder or any
other holder of Debentures shall be untrue or incorrect in any
material respect as of the date when made or deemed made;
v. (i) the Borrowers or any of its Subsidiaries
shall commence, or there shall be commenced against a Borrower
or any such Subsidiary, a case under any applicable bankruptcy
or insolvency laws as now or hereafter in effect or any
successor thereto, or the Borrowers or any Subsidiary commences
any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency
or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrowers or any Subsidiary
thereof or (ii) there is commenced against the Borrowers or any
Subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or
(iii) the Borrowers or any Subsidiary thereof is adjudicated by
a court of competent jurisdiction insolvent or bankrupt; or any
order of relief or other order approving any such case or
proceeding is entered; or (iv) the Borrowers or any Subsidiary
thereof suffers any appointment of any custodian or the like for
it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or (v) the
Borrowers or any Subsidiary thereof makes a general assignment
for the benefit of creditors; or (vi) the Borrowers shall fail
to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or (vii)
the Borrowers or any Subsidiary thereof shall call a meeting of
its creditors with a view to arranging a composition, adjustment
or restructuring of its debts; or (viii) the Borrowers or any
Subsidiary thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of
the foregoing; or (ix) any corporate or other action is taken by
the Borrowers or any Subsidiary thereof for the purpose of
effecting any of the foregoing;
vi. the Borrowers or any Subsidiary shall default in
any of its obligations under 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 Borrowers in an amount exceeding $500,000,
whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
19
vii. the Common Stock shall not be eligible for
quotation on or quoted for trading on a Trading Market and shall
not again be eligible for and quoted or listed for trading
thereon within five Trading Days;
viii. the Company shall be a party to any Change of
Control Transaction or Fundamental Transaction, shall agree to
sell or dispose of all or in excess of 40% of its assets in one
or more transactions (whether or not such sale would constitute
a Change of Control Transaction) or shall redeem or repurchase
more than a de minimis number of its outstanding shares of
Common Stock or other equity securities of the Borrowers (other
than redemptions of Conversion Shares and repurchases of shares
of Common Stock or other equity securities of departing officers
and directors of the Borrowers; provided such repurchases shall
not exceed $200,000, in the aggregate, for all officers and
directors during the term of this Debenture);
ix. a Registration Statement shall not have been
declared effective by the Commission on or prior to the 210th
calendar day after the Closing Date;
x. if, during the Effectiveness Period (as defined
in the Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder shall
not be permitted to resell Registrable Securities (as defined in
the Registration Rights Agreement) under the Registration
Statement, in either case, for more than 10 consecutive Trading
Days or 15 non-consecutive Trading Days during any 12 month
period; PROVIDED, HOWEVER, that in the event that the Company is
negotiating a merger, consolidation, acquisition or sale of all
or substantially all of its assets or a similar transaction and
in the written opinion of counsel to the Company, the
Registration Statement, would be required to be amended to
include information concerning such transactions or the parties
thereto that is not available or may not be publicly disclosed
at the time, the Company shall be permitted an additional 10
consecutive Trading Days during any 12 month period relating to
such an event; or
xi. the Company shall fail for any reason to deliver
certificates to a Holder prior to the third Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(d)
or the Company shall provide notice to the Holder, including by
way of public announcement, at any time, of its intention not to
comply with requests for conversions of any Debentures in
accordance with the terms hereof. i.
b) REMEDIES UPON EVENT OF DEFAULT. If any Event of Default
occurs, the full principal amount of this Debenture, together with
interest and other amounts owing in respect thereof, to the date of
acceleration shall become, at the Holder's election, immediately due and
payable in cash. The aggregate amount payable upon an Event of Default
shall be equal to the Mandatory Prepayment Amount. Commencing 5 days
after the occurrence of any Event of Default that results in the
eventual acceleration of this
20
Debenture, the interest rate on this Debenture shall accrue at the rate
of 18% per annum, or such lower maximum amount of interest permitted to
be charged under applicable law. All Debentures for which the full
Mandatory Prepayment Amount hereunder shall have been paid in accordance
herewith shall promptly be surrendered to or as directed by the Company.
The Holder need not provide and the Borrowers 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 and the
Holder shall have all rights as a Debenture holder until such time, if
any, as the full payment under this Section shall have been received by
it. No such rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
SECTION 9. MISCELLANEOUS.
a) NOTICES. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, facsimile number ______________, ATTN:
______________________________________or such other address or facsimile
number as the Company may specify for such purposes by notice to the
Holders delivered in accordance with this Section. Any and all notices
or other communications or deliveries to be provided by the Borrowers
hereunder shall be in writing and delivered personally, by facsimile,
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 prior to
5:30 p.m. (New York City time), (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 later than
5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New York City time) on such date, (iii) the second Business Day
following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given.
b) ABSOLUTE OBLIGATION. Except as expressly provided
herein, no provision of this Debenture shall alter or impair the
obligation of the Borrowers, which is absolute and unconditional, to pay
the principal of, interest and liquidated damages (if any) on, this
Debenture at the time, place, and rate, and in the coin or currency,
herein prescribed. This Debenture is a direct debt obligation of the
Borrowers. This Debenture ranks PARI PASSU with all other Debentures now
or hereafter issued under the terms set forth herein.
21
c) MORTGAGE AND PLEDGE. This Debenture is a direct debt
obligation of the Borrowers and, pursuant to the Loan Documents and
Pledge Documents (as defined in the All American Securities Agreement),
is secured by the equity, assets and property of the Borrowers.
d) LOST OR MUTILATED DEBENTURE. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the principal amount of this
Debenture so mutilated, lost, stolen or destroyed but only upon receipt
of evidence of such loss, theft or destruction of such Debenture, and of
the ownership hereof, and indemnity, if requested, all reasonably
satisfactory to the Company.
e) GOVERNING LAW. 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 legal
proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be
commenced 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 the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or such New York Courts
are improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or 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 arising
out of or relating to this Debenture or the transactions contemplated
hereby. If either party shall commence an action or proceeding to
enforce any provisions of this Debenture, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
f) WAIVER. Any waiver by the Borrowers or the Holder of a
breach of any provision of this Debenture shall not operate as or be
construed to be a waiver of any
22
other breach of such provision or of any breach of any other provision
of this Debenture. The failure of the Borrowers or the Holder to insist
upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Debenture. Any waiver must be in writing.
g) SEVERABILITY. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of
interest. The Borrowers covenant (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the
Borrowers from paying all or any portion of the principal of or interest
on this Debenture as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Borrowers (to the extent it may
lawfully do so) hereby expressly waive all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law,
hinder, delay or impeded the execution of any power herein granted to
the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
h) NEXT BUSINESS DAY. Whenever any payment or other
obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.
i) HEADINGS. The headings contained 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.
*********************
23
IN WITNESS WHEREOF, the Borrowers has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
ABLE ENERGY, INC.
By:_____________________________________
Name:
Title:
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ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Variable
Rate Convertible Debenture of Able Energy, Inc., a Delaware corporation (the
"COMPANY"), due on April __, 2007 , into shares of common stock, par value
$0.001 per share (the "COMMON STOCK"), of the Company according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than the 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.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts determined in accordance with Section 13(d) of the Exchange
Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection with any
transfer of the aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued on Account
of Conversion at Issue.
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
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SCHEDULE 1
CONVERSION SCHEDULE
The Variable Rate Convertible Debentures due April __, 2007, in the aggregate
principal amount of $____________ issued by Able Energy, Inc., a Delaware
corporation. This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.
Dated:
=============================== ------------------------- ======================= ------------------------------
Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to
(or for first entry, Amount of Conversion
Original Issue Date) Conversion (or original Company Attest
Principal Amount)
------------------------------- ------------------------- ----------------------- ------------------------------
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