REPLACEMENT 9.33% CONVERTIBLE DEBENTURE DUE MARCH 22, 2011
EXHIBIT 10.14
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.
THE HOLDER, AND ANY ASSIGNEE BY ACCEPTANCE OF THIS DEBENTURE, ACKNOWLEDGE AND AGREE THAT, BY REASON
OF THE PROVISIONS OF SECTION 4(A) OF THIS DEBENTURE, 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.
Original Issue Date: March 22, 2006
Replacement Date: August 24, 2007
Original Conversion Price (subject to adjustment herein): $3.9702
Replacement Date: August 24, 2007
Original Conversion Price (subject to adjustment herein): $3.9702
$2,343,033.56
REPLACEMENT 9.33% CONVERTIBLE DEBENTURE
DUE MARCH 22, 2011
DUE MARCH 22, 2011
THIS REPLACEMENT CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly
issued 9.33% Replacement Convertible Debentures of 180 Connect Inc. (formerly known as Ad.Venture
Partners, Inc.), a Delaware corporation, having its principal place of business at 0000 X.
Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the “Company”), designated as its 9.33%
Replacement Convertible Debenture, due March 22, 2011 (this replacement debenture, the
“Debenture” and collectively with the other such series of replacement debentures, the
“Debentures”). This Debenture replaces that certain convertible debenture of 180 Connect
Inc., a corporation incorporated under the laws of Canada (“180 Connect CN”), pursuant to
the Arrangement completed on August 24, 2007, whereby the Company assumed the obligations of 180
Connect CN under the originally issued convertible debenture.
FOR VALUE RECEIVED, the Company promises to pay to Radcliffe SPC, Ltd. for and on behalf of
the Class A Convertible Crossover Segregated Portfolio or its registered assigns (the
“Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of
$2,343,033.56 by March 22, 2011, or such earlier date as this Debenture is 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. The Debentures shall be superior in right of payment and otherwise
rank superior to all other Indebtedness (as defined herein) of the Company, except for Permitted
Indebtedness (as defined herein). 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 shall have
the meanings set forth 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(e).
“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there is commenced
against the Company or any Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Significant Subsidiary thereof
is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case
or proceeding is entered; (d) the Company or any Significant Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e) the Company or any
Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the
Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or (g) the Company or any
Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing.
“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 (other than by means of conversion or exercise of the
Debentures and the Securities issued together with the Debentures), 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
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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
all or substantially all of its assets 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, or (iv) a replacement at one time or within a
two 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 in clauses (i) through (iv) above.
“Conversion Date” shall have the meaning set forth in Section 4(a).
“Conversion Price” shall have the meaning set forth in Section 4(b).
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon
conversion of this Debenture in accordance with the terms hereof.
“Debenture Register” shall have the meaning set forth in Section 2(b).
“Effectiveness Period” shall have the meaning set forth 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 Notices of Conversion of the Holder, if any, (ii) the Company shall have paid all
liquidated damages and other amounts owing to the Holder in respect of this Debenture, (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 pursuant to the terms of the Registration Rights Agreement) or the legend
may be removed from the applicable Security pursuant to Section 4.1 of the Purchase Agreement, (iv)
the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the
Transaction Documents are listed for trading on such 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 no existing Event of Default or no existing 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 to the Holder would not violate the limitations set forth in
Section 4(c) herein, (viii) there has been no public announcement of a pending or proposed
Fundamental Transaction or Change of Control Transaction that has not been consummated and (ix) the
Holder is not in possession of any information that constitutes, or may constitute, material
non-public information.
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“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.
“Forced Conversion” shall have the meaning set forth in Section 6(d).
“Forced Conversion Date” shall have the meaning set forth in Section 6(d).
“Forced Conversion Notice” shall have the meaning set forth in Section 6(d).
“Forced Conversion Notice Date” shall have the meaning set forth in Section 6(d).
“Fundamental Transaction” shall have the meaning set forth in Section 5(e).
“Interest Payment Date” shall have the meaning set forth in Section 2(a).
“Late Fees” shall have the meaning set forth in Section 2(c).
“Mandatory Default Amount” means the sum of (i) the greater of (A) 120% of the
outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, or (B)
the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon,
divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded (if
demand or notice is required to create an Event of Default) or otherwise due or (b) paid in full,
whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default
Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP,
and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this
Debenture.
“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 Amount” means the sum of (i) 100% 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 Date” shall have the meaning set forth in Section 6(a).
“Original Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number of instruments which may
be issued to evidence such Debentures.
“Permitted Indebtedness” means (a) the Indebtedness existing on the Original Issue
Date and set forth on Schedule 3.1(ff) attached to the Purchase Agreement, (b) lease obligations
and
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purchase money indebtedness of up to $7,000,000, in the aggregate, incurred in connection with the
acquisition of capital assets and lease obligations with respect to newly acquired or leased assets
(provided, however, such amount may be increased in proportion to payments of existing lease
obligations and purchase money indebtedness made by the Company or any of its Subsidiaries to
Wheels LT, Lease Plan U.S.A. Inc. or ULTEA, Inc., but in no event may the Company and its
Subsidiaries incur or suffer to exist lease obligations and purchase money indebtedness in excess
of $40,000,000 in the aggregate (inclusive of amounts presently outstanding)) and (c) up to
$40,000,000 of non-equity linked Indebtedness in the aggregate (after the payment of expenses)
incurred by the Company for the purposes of extinguishing all of the obligations of the Company and
any of its Subsidiaries under the Credit Agreement dated April 14, 2002 (the “Credit
Agreement”) between General Electric Capital Corporation (“GE Capital”) and 180 Connect
Inc., a Nevada corporation, as amended, and the Affiliate Guaranty dated May 2, 2005 granted by the
Company in respect of Indebtedness under the Credit Agreement, provided that such Indebtedness is
on terms and conditions substantially similar to, or no less favorable to the Company than, the
terms and conditions of the Credit Agreement and provided that the lender under any such facility
is a U.S. or Canadian nationally recognized and regulated commercial lender whose primary business
is not investing in securities.
“Permitted Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves (in the good faith judgment of the management
of the Company) have been established in accordance with GAAP; and (b) Liens imposed by law which
were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s
and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary
course of the Company’s business, and which (x) do not individually or in the aggregate materially
detract from the value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries or (y) are being
contested in good faith by appropriate proceedings, which proceedings have the effect of preventing
for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien,
(c) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder in favor
of GE Capital, (d) Liens incurred in connection with Permitted Indebtedness under clause (b)
thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries
other than the assets so acquired or leased or (e) Liens incurred in connection with Permitted
Indebtedness under clause (c) thereunder.
“Purchase Agreement” means the Securities Purchase Agreement among the Company and the
original Holders, dated as of March 21, 2006, as amended, modified or supplemented from time to
time in accordance with its terms.
“Share Delivery Date” shall have the meaning set forth in Section 4(d).
“Threshold Period” shall have the meaning set forth in Section 6(d).
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Section 2. Interest.
a) Payment of Interest in Cash. The Company shall pay interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this Debenture at the
rate of 9.33% per annum, payable quarterly, in arrears, on January 1, April 1, July 1 and
October 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.
Notwithstanding the foregoing, the per annum rate of interest hereunder shall be reduced by
1.33% beginning on the month following the date that the Holder receives an opinion from
counsel to the Company, in form and substance reasonably satisfactory to the Holder, that
distributions (including interest payments) under this Debenture are no longer subject to
mandatory tax withholding under the Canadian Tax Act.
b) Interest Calculations. Interest shall be calculated on the basis of a
360-day year of twelve 30-day months 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, liquidated damages and other amounts which may become due hereunder, has been
made. Solely for purposes of the Interest Act (Canada), the yearly rate of interest to
which interest calculated for a period of less than one year on the basis of 360 days
consisting of twelve 30-day periods is equivalent is such rate of interest multiplied by a
fraction of which (i) the numerator is the product of (A) the actual number of days in the
year commencing on the first day of such period, multiplied by (B) the sum of (y) the
product of 30 multiplied by the number of complete months elapsed in such period and (z) the
actual of number of days elapsed in any incomplete month in such period; and (ii) the
denominator is the product of (a) 360 multiplied by (b) the actual number of days in such
period. Interest shall cease to accrue with respect to any principal amount converted,
provided that the Company actually 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 this Debenture (the “Debenture Register”).
c) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the
maximum rate permitted by applicable law (“Late Fees”) which shall accrue daily from
the date such interest is due hereunder through and including the date of payment in full.
d) Prepayment. Except as otherwise set forth in this Debenture, the Company
may not prepay any portion of the principal amount of this Debenture without the prior
written consent of the Holder.
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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 payable 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 US and Canadian federal, provincial and state securities laws and
regulations.
c) Reliance on Debenture Register. Prior to due presentment for transfer to
the Company 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.
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, in whole or in
part, into shares of Common Stock at the option of the Holder, at any time and from time to
time (subject to the conversion limitations set forth in Section 4(c) hereof). The Holder
shall effect conversions by delivering to the Company a Notice of Conversion, the form of
which is attached hereto as Annex A (a “Notice of Conversion”), specifying
therein the principal amount of this Debenture to be converted and the date on which such
conversion shall 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 deemed delivered hereunder. To effect conversions hereunder, the Holder
shall not be required to physically surrender this Debenture to the Company unless the
entire principal amount of this Debenture has been so converted plus all accrued and unpaid
interest thereon has been paid. 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(s) converted and the date of such conversion(s). The Company may deliver an
objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of
Conversion. 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.
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b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $3.9702 (subject to adjustment herein) (the “Conversion Price”).
c) Conversion Limitations.
i. Holder’s Restriction on Conversion. The Company shall not effect
any conversion of this Debenture, and a Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving effect to the
conversion set forth on the applicable Notice of Conversion, such Holder (together
with such Holder’s Affiliates, and any other person or entity acting as a group
together with such Holder or any of such Holder’s Affiliates) would beneficially own
in excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned
by such Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which are
issuable upon (A) conversion of the remaining unconverted principal amount of this
Debenture beneficially owned by such Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any
other Debentures or the Warrants) beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 4(c)(i), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To
the extent that the limitation contained in this Section 4(c)(i) applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by such Holder together with any Affiliates) and of which principal
amount of this Debenture is convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such
Holder’s determination of whether this Debenture may be converted (in relation to
other securities owned by such Holder together with any Affiliates) and which
principal amount of this Debenture is convertible, in each case subject to such
aggregate percentage limitations. To ensure compliance with this restriction, each
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. In addition, a determination as to any
group status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 4(c)(i), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of
Common Stock as stated in the most recent of the following: (x) the Company’s most
recent interim financial statements filed on XXXXX; (y) a more recent public
announcement by the Company; or (z) a more recent notice by the
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Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to such 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
such Holder or its Affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be
4.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon conversion of
this Debenture held by the Holder. The Beneficial Ownership Limitation provisions
of this Section 4(c)(ii) may be waived by such Holder, at the election of such
Holder, upon not less than 61 days’ prior notice to the Company, to change the
Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock upon conversion of this Debenture held by the Holder and the provisions of
this Section 4(c)(i) shall continue to apply. Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation,
the Beneficial Ownership Limitation may not be further waived by such Holder. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(c)(i) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect to
such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Debenture.
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 each Conversion Date (the “Share Delivery Date”), the
Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the Effective
Date and as otherwise set forth in Section 4.1(c) of the Purchase Agreement, shall
be free of restrictive legends and trading restrictions (other than those which may
then be required by the Purchase Agreement) representing the number of shares of
Common Stock being acquired upon the conversion of this Debenture and (B) a bank
check in the amount of accrued and unpaid interest. On or after the Effective Date
or such other date that Conversion Shares may be issued without a
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legend pursuant to Section 4.1(c) of the Purchase Agreement, the Company shall
use its best efforts to deliver any certificate or certificates required to be
delivered by the Company under this Section 4 electronically through the Depository
Trust Company 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 the Conversion Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or before
its receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Debenture
delivered to the Company and the Holder shall promptly return the Common Stock
certificates, if any, representing the principal amount of this Debenture tendered
for conversion to the Company.
iv. Obligation Absolute; Partial Liquidated Damages. 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 (other than a written waiver or
written consent of the Holder with respect to the Company’s obligations to issue and
deliver the specific Conversion Shares at issue), 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, that 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 the 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
to Holder, 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 outstanding principal amount of
this Debenture, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. 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
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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 on the fifth Trading Day after such liquidated damages begin
to accrue) for each Trading Day after such third Trading Day until such certificates
are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages
or declare an Event of Default pursuant to Section 8 hereof 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 hereunder, 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. 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 by the Share Delivery Date pursuant to Section 4(d)(ii), and if after
such Share Delivery Date the Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which the Holder was
entitled to receive upon the conversion relating to such Share Delivery Date (a
“Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition
to any other remedies available to or elected by the Holder) the amount by which (x)
the Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell order giving rise
to such purchase obligation was executed (including any brokerage commissions) and
(B) at the option of the Holder, either reissue (if surrendered) this Debenture in a
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 if the Company had 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 this Debenture with respect to which the actual sale price of the Conversion
Shares (including any brokerage commissions) 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 and, upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit a Holder’s right to pursue any other remedies available
to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s failure
to timely deliver certificates representing shares of Common Stock upon conversion
of this Debenture as required pursuant to the terms hereof.
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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 for the sole purpose of issuance upon conversion
of this Debenture 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 aggregate number of shares of the
Common Stock as shall (subject to the terms and conditions 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 this
Debenture. The Company covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable and, if a Registration Statement is then effective under the
Securities Act, shall be registered for public sale in the US 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
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, a whole share of Common Stock.
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 certificates, 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 this Debenture 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 makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any Common
Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon conversion of this Debenture or upon exercise of the
Warrants); (B) subdivides outstanding shares of Common Stock into a larger number of shares;
(C) combines (including by way of a reverse stock split) outstanding shares of Common Stock
into a smaller number of shares; or (D) issues, in the event of a reclassification of shares
of the Common Stock, any
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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 any treasury shares of the Company) 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) [RESERVED]
c) Subsequent Rights Offerings. If the Company, at any time while the
Debenture is outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common
Stock at a price per share that is lower than the VWAP on the record date referenced below,
then the Conversion Price shall be multiplied by a fraction of which the denominator shall
be the number of shares of the Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of shares of the
Common Stock outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so offered
(assuming delivery to the Company in full of all consideration payable upon exercise of such
rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such rights,
options or warrants.
d) Pro Rata Distributions. If the Company, at any time while this Debenture is
outstanding, distributes to all holders of Common Stock (and not to the Holders) evidences
of its indebtedness or assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security (other than the Common Stock, which shall be subject
to Section 5(b)), 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 1 outstanding share of the Common Stock as determined by the Board of
Directors of the Company in good faith. In either case the adjustments shall be described
in a statement delivered to the Holder describing the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to 1 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.
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e) 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 transaction 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 been, immediately prior to
such Fundamental Transaction, the holder of 1 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 1 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 Section 5(e) and
insuring that this Debenture (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
f) 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 any treasury
shares of the Company) issued and outstanding.
g) Notice to the Holder.
i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall promptly
mail to each Holder a notice setting forth the Conversion Price after
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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 Purchase 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 Purchase Agreement).
ii. Notice to Allow Conversion by Xxxxxx. If (A) the Company shall
declare a dividend (or any other distribution in whatever form) 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 of 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 or (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 this Debenture, and
shall cause to be delivered to the Holder at its last address as it 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 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 deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required to
be specified in such notice. The Holder is entitled to convert this Debenture
during the 20-day period commencing on the date of such notice through the effective
date of the event triggering such notice.
Section 6. Redemption and Forced Conversion.
a) Optional Redemption at Election of the Holder. Subject to the provisions of
this Section 6, at any time after the 3 year anniversary of the Original Issue Date, the
Holder may deliver a notice to the Company (an “Optional Redemption Notice” and the
date such notice is deemed delivered hereunder, the “Optional Redemption Notice
Date”) of its election to cause the Company redeem some or all of the then outstanding
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Debentures for cash in an amount equal to the Optional Redemption Amount on the 10th
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 payable in full on the Optional Redemption Date. The Company covenants
and agrees that it will honor all Notices of Conversion tendered from the time of delivery
of the Optional Redemption Notice through the date all amounts owing thereon are due and
paid in full.
b) [RESERVED]
c) Redemption Procedure. The payment of cash pursuant to an Optional
Redemption shall be made on the Optional Redemption Date. If any portion of the payment
pursuant to an Optional Redemption shall not be paid by the Company by the applicable due
date, interest shall accrue thereon until such amount is paid in full at an interest rate
equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.
Notwithstanding anything herein contained to the contrary, if any portion of an Optional
Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to
the Company given at any time thereafter, to invalidate ab initio such
redemption. 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 the delivery of a Notice of Conversion to the Company.
d) Forced Conversion. Notwithstanding anything herein to the contrary, if
after the Effective Date, the VWAPs for each of any 20 consecutive Trading Days, which
period shall have commenced only after the Effective Date, (such period the “Threshold
Period”) exceeds $9.9252 (subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common Stock that
occur after the Original Issue Date) (the “50% Threshold Price”) or $11.7298
(subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the
Original Issue Date) (the “Threshold Price”), the Company may, within 2 Trading Days
after the end of any such Threshold Period, deliver a written notice to the Holder (a
“Forced Conversion Notice” and the date such notice is delivered to the Holder, the
“Forced Conversion Notice Date”) to cause the Holder to convert (i) up to 50% of the
then outstanding principal amount of Debentures in the case such VWAPs exceed the 50%
Threshold Price for each Trading Day in the applicable Threshold Period or (ii) all or a
part of the then outstanding principal amount of Debentures in the case such VWAPs exceed
the Threshold Price for each Trading Day in the applicable Threshold Period pursuant to
Section 4, it being agreed that the “Conversion Date” for purposes of Section 4 shall be
deemed to occur on the third Trading Day following the Forced Conversion Notice Date (such
third Trading Day, the “Forced Conversion Date”). The Company may not deliver a
Forced Conversion Notice, and any Forced Conversion Notice delivered by the Company shall
not be effective, unless all of the Equity Conditions are met on each Trading Day occurring
during the applicable Threshold Period through and including the later of the Forced
Conversion Date and the Trading Day on the date such
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Conversion Shares pursuant to such conversion are delivered to the Holder. Any Forced
Conversion shall be applied ratably to all Holders based on their initial purchases of
Debentures pursuant to the Purchase Agreement, provided that any voluntary conversions by a
Holder shall be applied against such Holder’s pro-rata allocation, thereby decreasing the
aggregate amount forcibly converted hereunder if only a portion of this Debenture is
forcibly converted. Notwithstanding the foregoing, a Forced Conversion shall be subject to
all of the provisions of Section 4, including, without limitation, the provision requiring
payment of liquidated damages, and no Holder shall be subject to a Forced Conversion
hereunder if such Forced Conversion would violate the limitations on conversions set forth
in Section 4(c).
Section 7. Negative Covenants. As long as any portion of this Debenture
remains outstanding, the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
a) other than 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 its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom;
b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any
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;
c) amend its charter documents, including without limitation, the certificate of
amalgamation, articles of amalgamation and bylaws, in any manner that materially and
adversely affects 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 (a) as expressly permitted or required under the Transaction Documents and (b) as
to repurchases of Common Stock or Common Stock Equivalents of departing employees, officers
and directors of the Company, provided that such repurchases shall not exceed an aggregate
of $100,000 for all officers and directors during the term of this Debenture;
e) engage in any transactions with any officer, director, employee or any affiliate of
the Company, including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner, in each
case in excess of $10,000 other than (i) for payment of salary, directors’ fees or
consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock appreciation rights and
performance share units under any long term share compensation
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plan of the Company and any stock option agreements under any stock option plan of the
Company;
f) enter into any agreement with respect to any of the foregoing; or
g) pay cash dividends or distributions on any equity securities of the Company.
Section 8. Events of Default.
a) “Event of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event 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, liquidated damages and any other amounts owing to a Holder on 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 Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures (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 (ix) below) which failure is not cured, if possible to
cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure
sent by the Holder or by any other Holder and (B) 10 Trading Days after the Company
has become or should have become aware of such failure;
iii. the Company shall fail to observe or perform any material covenant or
material agreement contained in, or a default or event of default (subject to any
grace or cure period provided in the applicable agreement, document or instrument)
other than set forth in Sections 8(a)(i), (ii) and (xi) hereof shall occur under (A)
any of the Transaction Documents (subject to the additional days set forth in
Section 8(a)(xi) with respect to the Registration Rights Agreement) or (B) any other
material agreement, lease, document or instrument to which the Company or any
Subsidiary is obligated (and not covered by clause (vi) below) which failure,
default or event of default, solely in the case clause (B) above could have, or
could reasonably be expected to result in, a Material Adverse Effect;
iv. any material representation or warranty made in this Debenture, any other
Transaction Documents, any written statement pursuant hereto or thereto or any other
report, financial statement or certificate made or delivered to
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the Holder or any other Holder shall be untrue or incorrect in any material
respect as of the date when made or deemed made;
v. the Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;
vi. the Company or any Subsidiary shall default on 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 that (a) involves an obligation greater
than $150,000, whether such indebtedness now exists or shall hereafter be created,
and (b) results in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;
vii. the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or quotation
for trading thereon within 5 Trading Days;
viii. the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or in excess of 40%
of its assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);
ix. the Company shall fail for any reason to deliver certificates to a Holder
prior to the fifth Trading Day after a Conversion Date or any Forced Conversion Date
pursuant to Section 4(d) or the Company shall provide at any time notice to the
Holder, including by way of public announcement, of the Company’s intention to not
honor requests for conversions of any Debentures in accordance with the terms
hereof;
x. any monetary judgment, writ or similar final process shall be entered or
filed against the Company, any Subsidiary or any of their respective property or
other assets for more than $150,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days; or
xi. a Registration Statement shall not have been declared effective by the
Commission on or prior to the 210th calendar day after its Filing Date
(as defined in the Registration Rights Agreement).
b) Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash
- 19 -
at the Mandatory Default Amount. Commencing 5 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 an interest rate equal to the lesser of 18% per annum or the
maximum rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, 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 acceleration may be rescinded and annulled by Xxxxxx at any time
prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture
until such time, if any, as the Holder receives full payment pursuant to this Section 8(b).
No such rescission or annulment shall affect any subsequent Event of Default or impair any
right consequent thereon. Notwithstanding anything herein to the contrary, the Holder shall
be required to elect to accelerate hereunder in respect any Event of Default that occurs
solely as a result of a Fundamental Transaction within 30 days of the consummation of the
applicable Fundamental Transaction.
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: Xxxxx Xxxxxxxxx, Chief Executive Officer or
such other facsimile number or address as the Company may specify for such purpose by notice
to the Holder delivered in accordance with this Section 9. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address of such Xxxxxx appearing
on the books of the Company, or if no such facsimile 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
number specified in this Section 9 prior to 5:30 p.m. (New York City time), (ii) the date
immediately following the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section 9 between 5:30 p.m. (New
York City time) and 11:59 p.m. (New York City time) on any 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 Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and accrued interest, as
- 20 -
applicable, 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 now or hereafter
issued under the terms set forth herein.
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 in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it.
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 conflict of laws thereof. Each party agrees that all legal proceedings
concerning the interpretation, 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 such New York Courts, 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 other manner permitted by applicable
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 in the investigation, preparation and
prosecution of such action or proceeding.
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
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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 by the Company or the Holder 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 the applicable law governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law. 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 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.
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.
i) Assumption. Any successor to the Company or any surviving entity in a
Fundamental Transaction shall (i) assume, contemporaneous with or prior to such Fundamental
Transaction, all of the obligations of the Company under this Debenture and the other
Transaction Documents pursuant to written agreements in form and substance satisfactory to
the Holder as to the assumption of this Debenture and the other Transaction Documents (such
approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder, if
requested by such 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 amount and
the interest rate of this Debenture and having similar ranking to this Debenture, which
shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or
delayed). The provisions of this Section 9(i) shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.
*********************
- 22 -
IN WITNESS WHEREOF, the Company has caused this Replacement Convertible Debenture to be duly
executed by a duly authorized officer as of this 24th day of August, 2007.
| 180 CONNECT INC. |
||||
| By: | /s/ Xxxxx Xxxxxxxxx | |||
| Name: | Xxxxx Xxxxxxxxx | |||
| Title: | Chief Executive Officer | |||
Replacement Convertible Debenture Signature Page
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the 9.33% Convertible Debenture of
180 Connect Inc., a Delaware corporation (the “Company”), due on March 22, 2011, into
shares of common stock, no par value 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 Debenture to be Converted:
Conversion Price:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
A-1
Schedule 1
CONVERSION SCHEDULE
The 9.33% Convertible Debentures due on March 22, 2011, in the aggregate principal amount of
$ issued by 180 Connect Inc. This Conversion Schedule reflects conversions made under
Section 4 of the above referenced Debenture.
Dated:
| Aggregate | ||||||
| Principal | ||||||
| Amount | ||||||
| Remaining | ||||||
| Subsequent to | ||||||
| Conversion | ||||||
| Date of Conversion | (or original | |||||
| (or for first entry, | Amount of | Principal | ||||
| Original Issue Date) | Conversion | Amount) | Company Attest | |||
