EXHIBIT 10.2
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
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
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
Original Issue Date: September 30, 2004
Original Conversion Price (subject to adjustment herein): $0.50
$_________________
7.0% SENIOR SECURED CONVERTIBLE DEBENTURE
DUE SEPTEMBER 30, 2009
THIS DEBENTURE is one of a series of duly authorized and issued 7.0%
Senior Secured Convertible Debentures of Cubic Energy, Inc., a Texas
corporation, having a principal place of business at 0000 Xxxxx Xxxx, Xxxxxx, XX
00000 (the "Company"), designated as its 7.0% Senior Secured Convertible
Debenture, due September 30, 2009 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ on September 30, 2009 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 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 Purchase Agreement,
and (b) the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in
Section 5(d)(iii).
Exhibit 10.2 - Page 1
"Average 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 a Trading Market, the average closing
price of the Common Stock for the ten Trading Days prior to such date
(or the nearest preceding date) on the primary 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 the Trading Market 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 closing bid price per share of
the Common Stock so reported for the ten Trading Days prior to such
date; or (c) in all other cases, the fair market value of a share of
Common Stock as determined by a nationally recognized-independent
appraiser selected in good faith by Purchasers holding a majority of
the principal amount of Shares then outstanding.
"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.
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition 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 50% of the voting securities of the Company,
or (ii) a replacement at one time or within a one-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 (iii) 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 (ii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.05 per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conversion Date" shall have the meaning set forth in Section
4(a) hereof.
"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 hereof.
Exhibit 10.2 - Page 2
"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 Conversion
Notices, if any, (ii) all liquidated damages and other amounts owing 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, if applicable (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 and (vii) all of the
shares issued or issuable pursuant to the Transaction Documents in
full, ignoring for such purposes any conversion or exercise limitation
therein, would not violate the limitations set forth in Sections 4(c)
and (ix) no public announcement of a pending or proposed Fundamental
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.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(d)(iii) hereof.
"Interest Conversion Rate" means 95% of the lesser of (a) the
Average Price immediately prior to the applicable Interest Payment Date
and (b) the Average Price immediately prior to the date the applicable
interest payment shares are issued and delivered if after the Interest
Payment Date.
"Late Fees" shall have the meaning set forth in the second
paragraph to this Debenture.
"Mandatory Prepayment Amount" for any Debentures shall equal
100% of the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon and all other amounts, costs,
expenses and liquidated damages due in respect of such Debentures.
Exhibit 10.2 - Page 3
"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 Liens" means:
(i) Liens created by or otherwise existing, under or in
connection with the Debentures or the other Transaction Documents in
favor of the Holders;
(ii) Purchase money liens securing purchase money indebtedness
(and refinancings thereof) in an amount not to exceed $20,000 [as well
as any purchase money liens in excess of $20,000 with the prior written
consent of Purchasers holding a majority of the outstanding principal
amount of the Debentures, which consent may not be unreasonably
withheld] provided, that (a) any such lien attaches to such property
concurrently with or within 20 days after the acquisition thereof, and
(b) such lien attaches solely to the property so acquired in such
transaction;
(iii) Liens for taxes, assessments, charges or other
governmental levies not yet due or as to which the period of grace (not
to exceed 60 days), if any, related thereto has not expired or which
are being contested in good faith by appropriate proceedings; provided
that adequate reserves with respect thereto are maintained on the books
of the Company or its Subsidiaries, as the case may be, in conformity
with GAAP (or, in the case of Subsidiaries with significant operations
outside of the United States of America, generally accepted accounting
principles in effect from time to time in their respective
jurisdictions of incorporation);
(iv) Carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days or
which are being contested in good faith by appropriate proceedings;
(v) Pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(vi) Deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(vii) Easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract
from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the applicable person;
(viii) Any extension, renewal or replacement (or successive
extensions, renewals or replacements) , in whole or in part, of any
lien referred to in the foregoing clauses; provided that such
Exhibit 10.2 - Page 4
extension, renewal or replacement lien shall be limited to all or a
part of the property which secured the lien so extended, renewed or
replaced (plus improvements on such property);
(ix) Liens existing on the Original Issue Date and set forth
on Schedule 2; and
(x) Liens arising in connection with capitalized leases.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of September 30, 2004, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, 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.
"Security Agreement" means the Security Agreement, dated as of
the Original Issue Date, 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
Purchase 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, the Nasdaq National Market or
the OTC Bulletin Board.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
Exhibit 10.2 - Page 5
Section 2. Interest.
a) Payment of Interest in Cash or Kind. The Company shall pay
interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Debenture at the rate of 7.0% per
annum, payable quarterly on March 31, June 30, September 30 and
December 31, beginning on the first such date after the Original Issue
Date after September 30, 2004 and on each Conversion Date (as to that
principal amount then being converted) 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
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). On the 20th Trading Day prior to the immediately following
Interest Payment Date, the Company's election (whether specific to such
Interest Payment Date or continuous) shall be irrevocable only as to
the immediately following Interest Payment Date. Subject to the
aforementioned conditions, failure to timely provide such written
notice shall be deemed an election by the Company 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 accrued and unpaid principal and interest
shall bear interest at the rate of 18% per annum (or such lower maximum
amount of interest permitted to be charged under applicable law) ("Late
Fee") which will accrue daily, from the date such interest is due
Exhibit 10.2 - Page 6
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 Company,
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 Price.
e) Prepayment. At any time until the second anniversary of the
Original Issue Date, the Company may redeem this Debenture, or any
portion thereof, for 120% of the Mandatory Prepayment Amount, and
beginning on the second anniversary of the Original Issue Date, the
Company may redeem this Debenture, or any portion thereof, for the
Mandatory Prepayment Amount, in either case without the consent of the
Holder; provided, however, that the Company must provide 30 days
advance notice of any such redemption. Once notice of redemption is
given, this Debenture, or the portion thereof specified in the notice
of redemption, shall become due on the date specified in the notice of
redemption. Upon payment by the Company of the Mandatory Prepayment
Amount and premium thereon, if applicable, interest on this Debenture,
or portion thereof specified in the notice of redemption, shall cease
to accrue.
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.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged
only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment to
the Company for transfer of this Debenture, the Company and any agent
of the Company 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
Company nor any such agent shall be affected by notice to the contrary.
Exhibit 10.2 - Page 7
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. 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 $0.50 (subject to adjustment herein)
(the "Conversion Price").
c) Conversion Limitations. Except in connection with a
Fundamental Transaction, 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),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act. To the extent that the limitation contained
Exhibit 10.2 - Page 8
in this section applies, the determination of whether this Debenture is
convertible (in relation to other securities owned by the Holder) and
of which 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), 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-QSB or Form 10-KSB, 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.
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.
ii. Delivery of Certificate Upon Conversion. Not
later than three Trading Days after any Conversion Date, the
Company will deliver 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 Purchase 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).
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 fifth 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.
Exhibit 10.2 - Page 9
iv. 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 third Trading
Day after the Conversion Date, the Company 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
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 anyone 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.
v. 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
Exhibit 10.2 - Page 10
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 Common Stock
required to be 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 per Share of the Common Stock at
the time of 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 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. Notwithstanding anything
contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company 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 Holders, 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 Purchase 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
Exhibit 10.2 - Page 11
if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Average Price 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.
viii. Transfer Taxes. The issuance of certificates
for shares of the Common Stock on conversion of the Debentures
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
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) shall pay a stock
dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (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) subdivide
outstanding shares of Common Stock into a larger number of shares, (C)
combine (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (D) issue by
reclassification of shares of the Common Stock any shares of capital
stock of the 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 before
such event and of which the denominator shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
b) Pro Rata Distributions. If the Company, at any time while
this Debenture is outstanding, shall distribute to all holders of
Common Stock (and not to Holders) evidences of its indebtedness or
assets (other than as described in a notice pursuant to Section
5(d)(ii)) or rights or warrants to subscribe for or purchase any
security, then in each such case the Conversion Price shall be
determined 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 Average Price determined as of the record date
Exhibit 10.2 - Page 12
mentioned above, and of which the numerator shall be such Average Price
on such record date less the then fair market value at such record date
of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the 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) 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 outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding.
d) 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.
ii. Notice to Allow Conversion by Xxxxxx. 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 or enter into a Change of Control Transaction; 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 Debenture
Register, 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 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
Exhibit 10.2 - Page 13
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 20-day period commencing the
date of such notice to the effective date of the event
triggering such notice.
iii. 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, and as a result, the Company is not the surviving
entity in such transaction or (B) 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 absent 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 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 the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new
debenture consistent with the foregoing provisions and
evidencing the Holder's right to convert such debenture into
Alternate Consideration. 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 (d)(iii) and
insuring that this Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
iv. Exempt Issuance. Notwithstanding the foregoing,
no adjustment will be made under this Section 5 in respect of
an Exempt Issuance.
Section 6. Security. This Debenture is entitled to the benefits granted
in the Security Agreement.
Exhibit 10.2 - Page 14
Section 7. Negative Covenants. So long as any portion of this Debenture
is outstanding, the Company will not and will not permit any of its Subsidiaries
to directly or indirectly:
a) enter into, create, incur, assume or suffer to exist any
indebtedness or liens 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 to, or pari
passu with, in any respect, the Company's obligations under the
Debentures, except for Permitted Liens;
b) amend its articles of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder;
c) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of shares of its Common
Stock or other equity securities 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; or
d) enter into any agreement with respect to any of the
foregoing.
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 when due, 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
which default, is not cured, within 3 Trading Days;
ii. the Company shall fail to observe or perform any
other covenant or agreement contained in this Debenture or any
of the other Transaction Documents (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) 5 Trading Days after
notice of such default sent by the Holder or by any other
Holder and (B)10 Trading Days after the Company shall become
aware of such failure.
Exhibit 10.2 - Page 15
iii. a 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 (B) any
other material agreement, lease, document or instrument to
which the Company or any Subsidiary is bound (a "Material
Agreement") if Company or such Subsidiary has received notice
of the intent of another party to such Material Agreement to
exercise its rights and/or remedies under such Material
Agreement in such a fashion that the exercise of such right or
remedy would have a material adverse effect on the business
operations or properties of Company or such Subsidiary;
iv. any representation or warranty made herein, in
any other Transaction Document, 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 Company or any of its Subsidiaries shall
commence, a case under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto,
or the Company 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 Company or any Subsidiary
thereof or (ii) there is commenced against the Company or any
Subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days;
or (iii) the Company 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 Company 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
Company or any Subsidiary thereof makes a general assignment
for the benefit of creditors; or (vi) the Company 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 Company 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 Company 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 Company or any
Subsidiary thereof for the purpose of effecting any of the
foregoing;
vi. the Company 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 Company in an amount exceeding
$50,000, 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;
Exhibit 10.2 - Page 16
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. except as permitted by the Transaction
Documents, the Company shall redeem or repurchase more than
ten percent (10%) of its outstanding shares of Common Stock or
other equity securities of the Company (other than redemptions
of Conversion Shares and repurchases of shares of Common Stock
or other equity securities of departing officers and directors
of the Company; provided such repurchases exceed $100,000, in
the aggregate, for all officers and directors during the term
of this Debenture);
ix. 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 15
consecutive calendar days or 25 non-consecutive calendar 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;
x. an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the reasonable
satisfaction of the Holder prior to the expiration of thirty
days from the Event Date (as defined in the Registration
Rights Agreement) relating thereto (other than an Event
resulting from a failure of a Registration Statement to be
declared effective by the Commission on or prior to the
Effectiveness Date (as defined in the Registration Rights
Agreement), which shall be covered by Section 8(a)(xiii);
xi. the Company shall fail for any reason to deliver
certificates to a Holder 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; or
xii. the Company shall fail for any reason to deliver
the payment in cash pursuant to a Buy-In (as defined herein)
within 5 Trading Days after notice thereof is delivered
hereunder; or
Exhibit 10.2 - Page 17
xiii. 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.
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
Trading Days after the occurrence of any Event of Default that results
in the eventual acceleration of this 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 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 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, or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, facsimile number 000-000-0000, Attn: Xxxxxx X. Xxxxxx III or
such other address or facsimile number as the Company may specify for
such purposes by notice to the Holder delivered in accordance with this
Section. 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 the Holder at the facsimile telephone
number or address of such Holder appearing on the Debenture Register,
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 Business Day following the date of
deposit, if sent by nationally recognized overnight courier service
with next day delivery instructions, or (iv) upon actual receipt by the
party to whom such notice is required to be given.
Exhibit 10.2 - Page 18
b) Absolute Obligation. Except as expressly provided herein,
no provision of this Debenture shall alter or impair the obligation of
the Company, 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 Company. This
Debenture ranks pari passu with all other Debentures issued under the
terms set forth in the Securities Purchase Agreement.
c) 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.
d) 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.
Exhibit 10.2 - Page 19
e) Waiver. Any waiver by the Company 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 other breach of such provision or of any breach
of any other provision of this Debenture. The failure of the Company 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.
f) 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 Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the
Company 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 Company (to the extent it may
lawfully do so) hereby expressly waives all benefits or advantage of
any such law, and covenants that it will not, by resort to any such
law, hinder, delay or impede the execution of any power herein granted
to the Holder, but will suffer and permit the execution of every such
covenant as though no such law has been enacted.
g) 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.
h) 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.
*********************
Exhibit 10.2 - Page 20
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
CUBIC ENERGY, INC.
By:_________________________________
Name: Xxxxxx X. Xxxxxx III
Title: Chief Executive Officer
Exhibit 10.2 - Page 21
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 7.0%
Senior Secured Convertible Debenture of Cubic Energy, Inc., a Texas corporation
(the "Company"), due on September 30, 2009, into shares of common stock, par
value $0.05 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 Company's 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:
