Exhibit 4.13
NEITHER THIS DEBENTURE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
DEBENTURE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO THE
PROVISIONS OF REGULATION S, 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. HEDGING TRANSACTIONS INVOLVING
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS DEBENTURE
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THIS
DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS DEBENTURE MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
Original Issue Date:
November 8, 2002
$2,400,000
No. 1
MILLENNIUM CELL INC.
SECURED CONVERTIBLE DEBENTURE
DUE ON THE THREE YEAR ANNIVERSARY OF THE ORIGINAL ISSUE DATE
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of Millennium Cell Inc., a corporation organized under the laws of
the state of Delaware (the "Company"), designated as its Secured Convertible
Debentures, Series B, due on the three year anniversary of the Original Issue
Date (as defined herein) in the aggregate principal amount of Two Million Four
Hundred Thousand Dollars ($2,400,000) (collectively, the " Debentures").
FOR VALUE RECEIVED, the Company promises to pay to the order of
XXXXXXX POWER SYSTEMS INC. or its registered assigns (the "Holder") the
principal sum of TWO MILLION FOUR HUNDRED THOUSAND DOLLARS ($2,400,000) and any
additional sums due pursuant to the terms hereof on the three year anniversary
of the Original Issue Date, or such earlier date as the Debentures are required
or permitted to be repaid hereunder ("Maturity Date"), and to pay the accrued
and unpaid Premium thereon (as hereinafter defined) to the Holder in accordance
with the provisions hereof. This Debenture shall not bear interest. This
Debenture is subject to the following additional provisions.
1. Definitions. As used in this Debenture, the following terms shall have the
meanings set forth in this Section 1:
"Bankruptcy Event" means any of the following events: (a) the
Company or any subsidiary thereof commences a case or other proceeding
under any bankruptcy, reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or Liquidation or similar
law of any jurisdiction relating to the Company or any subsidiary
thereof; (b) there is commenced against the Company or any subsidiary
thereof any such case or proceeding that is not dismissed within 60
days after commencement; (c) the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the
Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property
that is not discharged or stayed within 60 days; (e) the Company or
any subsidiary thereof makes a general assignment for the benefit of
creditors; (f) the Company or any subsidiary thereof fails to pay, or
states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Company or any subsidiary
thereof calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or (h) the
Company or any subsidiary thereof, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in any
of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York or the State of New Jersey are
authorized or required by law or other governmental action to close.
"Change of Control" means the occurrence of any of: (i) an
acquisition after the 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 33% of the voting securities of the
Company, (ii) a replacement at one time or over time of more than
one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the
board of directors on the 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),
(iii) the merger of the Company with or into another entity that is not
wholly-owned by the Company, consolidation or sale of 50% or more of
the assets of the Company in one or a series of related transactions,
or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii) or (iii).
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Closing Price" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an Eligible Market, the closing sales price per
share of the Common Stock for such date (or the nearest preceding date)
on the primary Eligible Market on which the Common Stock is then listed
or quoted; (b) if the Common Stock is not then listed or quoted on an
Eligible Market and if prices for the Common Stock are then quoted on
the OTC Bulletin Board (or successor thereto), the closing sales price
per share of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board (or successor thereto); (c) if the
Common Stock is not then listed or quoted on an Eligible Market or the
OTC Bulletin Board (or successor thereto) and if prices for the Common
Stock are then reported in the "Pink Sheets" published by the National
Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent sales
price per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.001 par
value, and stock of any other class into which such shares may be
reclassified or changed.
"Common Stock Equivalents" means any securities of the Company
or any of its subsidiaries, or any right or option to acquire such
securities, which would entitle the holder thereof to acquire Common
Stock, including without limitation, any debt, preferred stock or
other instrument that is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.
"Company Conversion Date" means if (i) the Company Conversion Date
occurs on or prior to the second (2nd) anniversary of the Original
Issue Date, the second (2nd) Business Day immediately following the
date the Registration Statement (as defined in the Registration Rights
Agreement) filed pursuant to the Registration Rights Agreement in
connection with the delivery of a Company Conversion Notice (together
with the Conversion Schedule) has been declared effective by the
Commission and is not subject to any actual or threatened stop order
or suspension and (ii) if the Company Conversion Date occurs after the
second anniversary of the Original Issue Date, the second (2nd)
Business Day immediately following the date of delivery a Company
Conversion Notice (together with the Conversion Schedule) is delivered
to the Holder pursuant to Section 6(b).
"Company Conversion Notice" means a written notice in the form
attached hereto as Exhibit B.
"Conversion Date" means either a Holder Conversion Date or a
Company Conversion Date.
"Conversion Notice" means either a Holder Conversion Notice or
a Company Conversion Notice.
"Conversion Price" means (i) in the event of a Company
Conversion Notice, the lesser of the Initial Conversion Price (subject
to adjustment from time to time pursuant to Section 6(j)) and the VWAP
for the five consecutive Trading Days immediately prior to the
Effective Date, as calculated on the Company Conversion Date, and (ii)
in the event of a Holder Conversion Notice, the Initial Conversion
Price (subject to adjustment from time to time pursuant to Section
6(j)) .
"Conversion Schedule" shall have the meaning set forth in
Section 6(a).
"Current Market Price" means, on any calculation date, the
lesser of the VWAP for (i) the immediately preceding Trading Day, (ii)
the immediately preceding 30 consecutive Trading days, or (iii) any
five consecutive Trading Days during the immediately preceding 30
consecutive Trading Days.
"Effective Date" means the date that the Registration
Statement required by the Registration Rights Agreement is first
declared effective by the Commission.
"Eligible Market" means any of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ or the NASDAQ Small Cap Market.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Equity Conditions" means, with respect to a specified
issuance of Common Stock, that each of the following conditions is
satisfied: (i) the number of authorized but unissued and otherwise
unreserved shares of Common Stock is sufficient for such issuance;
(ii)such shares of Common Stock are registered for resale by the
Holder pursuant to an effective registration statement, and the
prospectus thereunder is available for use by the Holder to sell such
shares or all such shares may be sold without volume restrictions
pursuant to Rule 144(k) under the Securities Act; (iii) the Common
Stock is listed or quoted (and is not suspended from trading) on an
Eligible Market and such shares of Common Stock are approved for
listing on such Eligible Market upon issuance; (iv) such issuance
would be permitted in full without violating the rules or regulations
of the Eligible Market on which such shares are listed or quoted;
(v) no Event of Default nor any event that with the passage of time
and without being cured would constitute a Event of Default has
occurred and not been cured, and (vi) no public announcement of a
pending or proposed Change of Control transaction has occurred that
has not been consummated.
"Event of Default" means the occurrence of
any one of the following events (whatever the reason and whether it
shall be voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):
(i) any default in the payment of principal, Premium or liquidated damages
in respect of any Debentures, (whether by acceleration or otherwise)
within five Business Days of when the same becomes due and payable;
(ii) a Bankruptcy Event;
(iii) the Common Stock is not listed or quoted, or is suspended from
trading, on an Eligible Market for an aggregate of twelve Trading Days
(which need not be consecutive Trading Days), provided, that voluntary
suspensions of the Common Stock from an Eligible Market by the Company
for less than one hour at a time to disseminate material information
shall not be included within such number of Trading Days;
(iv) the Company shall fail for any reason to deliver certificates
representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the fifth Business Day
after the Conversion Date or the Company shall provide notice to any
Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversion of Debentures in
accordance with the terms hereof;
(v) the Company shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder;
(vi) the Company shall fail for any reason to pay in full the amount of
cash due pursuant to a Buy-In (as defined in Section 6(i)) within
seven days after notice therefor is delivered hereunder or shall fail
to pay any liquidated damages due pursuant to the Transaction
Documents within seven days of the date of the request for such
payment; (vii)the occurrence of a Change of Control;
(viii) the Company defaults in the timely performance of any other obligation
under the Transaction Documents and such default continues uncured for
a period of five Trading Days after the date on which notice of such
default is first given to the Company by the Holder (it being
understood that no prior notice need be given in the case of a default
that cannot reasonably be cured within five Trading Days);
(ix) the Company or any its subsidiaries defaults in any of its obligations
under any other debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or
evidenced, any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company or any of its
subsidiaries in an amount exceeding $500,000, whether such indebtedness
now exists or is hereafter created, and such default results in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable; or
(x) either: (A) the Letter of Credit (as defined in Section 2(a)) shall be
revoked, withdrawn, terminated or disaffirmed by the Bank (as defined
in Section 2(a)) or (B) the Holder shall have received notification
from the Bank pursuant to the Letter of Credit that the Letter of
Credit shall not be renewed and: (x) 45 days shall have elapsed since
the delivery of such notification, (y) such non-renewal shall not have
been withdrawn by the Bank prior to such 45th day and (z) the Company
shall not have delivered a substitute letter of credit in form and
substance satisfactory to the Holder in its sole and absolute
discretion.
(xi) the Company shall be required by the Rules of the NASDAQ to obtain the
vote of shareholders due to an integration by the NASDAQ of the
transactions contemplated by the Transaction Documents with the
transaction by the Company entered into pursuant to October Purchase
Agreement.
"Event of Default Notice" shall have the meaning set forth in
Section 7.
"Holder Conversion Date" means (i) if the Holder Conversion Date
occurs on or prior to the second (2nd) anniversary of the Original
Issue Date, the second (2nd) Business Day immediately following the
date the Registration Statement (as defined in the Registration Rights
Agreement) filed pursuant to the Registration Rights Agreement in
connection with the delivery of a Holder Conversion Notice (together
with the Conversion Schedule) has been declared effective by the
Commission and is not subject to any actual or threatened stop order
or suspension and (ii) if the Holder Conversion Date occurs after the
second anniversary of the Original Issue Date, the second (2nd)
Business Day immediately following the date of delivery a Holder
Conversion Notice (together with the Conversion Schedule) pursuant to
Section 6(a).
"Holder Conversion Notice" means a written notice in the form
attached hereto as Exhibit A.
"Initial Conversion Price" means $4.25.
"Liquidation" means for any Person, any liquidation,
dissolution or winding-up of such Person, whether voluntary or
involuntary, by operation of law or otherwise.
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of: (i) 105% of the principal amount of Debentures to be
prepaid and, if applicable, the Reinstated Principal and accrued and
unpaid Premium to the date of payment and (ii) all other amounts,
costs, expenses and liquidated damages due in respect of such
Debentures.
"NASDAQ" means the NASDAQ National Market.
"October Purchase Agreement" means the Securities Purchase
Agreement, dated as of October 31, 2002, to which the Company and the
investors named therein are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
Original Issue Date" means the date of the first issuance of any
Debentures, regardless of the number of transfers of any particular
Debenture and regardless of the number of certificates which may be
issued to evidence such Debentures.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Premium" shall have the meaning set forth in Section 3(a).
"Premium Payment Date" shall have the meaning set forth in
Section 3(a).
"Premium Rate" means a rate equal to the rate of interest paid
from time to time on money market accounts held at Wachovia Bank,
National Association.
"Prepayment Price" for any Debentures which shall be subject to
prepayment pursuant to Section 8 shall equal the sum of: (i) 100% of
the principal amount of Debentures to be prepaid, plus the accrued and
unpaid Premium thereon to the date of payment, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such
Debentures.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened in
writing concerning the interpretation, enforcement or defense of any
transaction contemplated by any Transaction Document (whether brought
against a party hereto or such party's affiliates, directors,
officers, employees or agents).
"Purchase Agreement" means the Securities Purchase 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 Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, 2002, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Reinstated Principal" means the principal amount of Secured
Debentures converted during the ten Trading Days preceding the
delivery of an Event of Default Notice, for which the Company issued
or was obligated to issue Underlying Shares to the Holder.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means: (a) a day on which the shares of Common
Stock are traded on an Eligible Market, or (b) if the shares of Common
Stock are not listed on an Eligible Market, a day on which the shares
of Common Stock are traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the shares of Common Stock are
not quoted on the OTC Bulletin Board, a day on which the shares of
Common Stock are quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices);
provided, that in the event that the shares of Common Stock are not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean a Business Day.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means, collectively, the shares of Common
Stock issuable upon conversion of Debentures in accordance with the
terms hereof, including any shares issuable in satisfaction of the
Premium.
"VWAP" means on any particular Trading Day or for any
particular period, the volume weighted average trading price per share
of Common Stock on such date or for such period on an Eligible Market
as reported by Bloomberg L.P., or any successor performing similar
functions.
2. Letter of Credit.
(a) This Debenture is the debenture referred to in an irrevocable letter of
credit issued by Wachovia Bank, National Association (the "Bank") in favor of
the Holder in an original amount of $2,400,000, a copy of which is annexed
hereto as Annex A (the "Letter of Credit"), that will be secured by the
proceeds from the sale of the Debentures to the Purchaser. The Company hereby
acknowledges that the Holder and any subsequent Holder shall be entitled to the
benefits of the Letter of Credit and covenants and agrees that it will not
impair the Holder's rights under the Letter of Credit and (except to the extent
provided in Section 2(b)) shall maintain the Letter of Credit in full force and
effect.
(b) The Holder agrees that the face amount of the Letter of Credit shall be
reduced from time to time pursuant to the terms set forth below:
(i) subsequent to each Conversion Date, the face amount of the Letter of
Credit shall be reduced on the date on which the Holder receives the Underlying
Shares it is entitled to receive subsequent to such Conversion Date pursuant to
Section 6(e), by an amount equal to the principal amount of Debentures
converted on such Conversion Date, less any Premium accrued and payable up to
such date; and
(ii) the face amount of the Letter of Credit shall be reduced by an amount
equal to the Prepayment Price paid by the Company pursuant to the delivery of a
Company Prepayment Notice or Holder Prepayment Notice, as set forth in Section
8, upon receipt by the Holder of such payment.
(c) The Holder shall, within five Trading Days of the occurrence of any of the
events set forth in Section 2(b), provide the Bank with Exhibit C attached to
the Letter of Credit indicating the occurrence of such event.
(d) Upon the failure of the Company to timely pay to the Holder any amount
which is then due and payable to the Holder under this Debenture, whether
pursuant to Section 7, Section 8 or any other applicable Section herein, the
Holder shall be entitled to draw on the Letter of Credit to the extent of any
such payment or payments so due to the Holder.
(e) Any amounts received by the Holder pursuant to a draw on the Letter of
Credit shall be applied against all unsatisfied obligations of the Company
under this Debenture.
3. Premium. The Company shall pay a premium to the Holder (the "Premium") on
the aggregate unconverted and then outstanding principal amount of this
Debenture (including any Premium added to such principal in accordance with
this Section 3) at an annual rate equal to the Premium Rate. The Premium shall
be calculated on the basis of a 360 day year, shall accrue daily commencing on
the Closing Date and shall be compounded annually. The Premium shall be payable
upon the payment of this Debenture, whether at maturity or upon redemption or
conversion of this Debenture, in accordance with the terms hereof (the "Premium
Payment Date"). At any time that this Debenture is converted pursuant to
Section 6 hereof, the Company or the Holder may, at its option, add the amount
of Premium accrued up to the Conversion Date with respect to the principal
amount being converted (the "Premium Amount") to such converted amount, and ,
if so elected, such Premium Amount shall be payable in shares of Common Stock
at the time of such conversion.
4. Registration of Debentures. The Company shall register the Debentures upon
records to be maintained by the Company for that purpose (the "Debenture
Register") in the name of each record holder thereof from time to time. The
Company may deem and treat the registered Holder as the absolute owner hereof
for the purpose of any conversion hereof, and for all other purposes, absent
actual notice to the contrary.
5. Registration of Transfers and Exchanges. The Company shall register the
transfer of any portion of this Debenture in the Debenture Register upon
surrender of this Debenture to the Company at its address for notice set forth
herein. Upon any such registration or transfer, a new debenture, in
substantially the form of this Debenture (any such new debenture, a "New
Debenture"), evidencing the portion of this Debenture so transferred shall be
issued to the transferee and a New Debenture evidencing the remaining portion
of this Debenture not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Debenture by the transferee
thereof shall be deemed the acceptance by such transferee of all of the rights
and obligations of a holder of a Debenture. This Debenture is exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge or other fee will be imposed in connection with any such registration of
transfer or exchange. Transfers of this Debenture and the Underlying Shares
issuable on conversion thereof hereby are governed by Section 4.1 of the
Purchase Agreement.
6. Conversion. (a) At the option of the Holder. All or any portion of the
principal amount of this Debenture then outstanding shall be convertible into
shares of Common Stock at the Conversion Price (subject to limitations set
forth in Section 6(d)), at the option of the Holder, at any time and from time
to time from and after the Original Issue Date. Holders shall effect
conversions under this Section 6(a) by delivering to the Company a Holder
Conversion Notice together with a schedule in the form of Schedule 1 attached
hereto (the "Conversion Schedule"); provided, however, that each Holder
Conversion Notice shall relate to not less than $1 million principal amount of
Debentures. The number of Underlying Shares issuable upon any conversion
hereunder shall (subject to limitations set forth in Section 6(d)) equal the
outstanding principal amount of this Debenture to be converted plus any Premium
Amount, divided by the Conversion Price. If the Holder is converting less than
all of the principal amount represented by this Debenture, or if a conversion
hereunder may not be effected in full due to the application of Section
6(d)(i), the Company shall honor such conversion to the extent permissible
hereunder and shall promptly deliver to the Holder a Conversion Schedule
indicating the principal amount which has not been converted.
(b) At the option of the Company. Subject to the conditions set forth in this
Section 6(b) and Section 6(d), the Company may at any time from and after the
Original Issuance Date require a conversion at the Conversion Price on the
Company Conversion Date, of all but not less than all of the outstanding
principal amount of this Debenture (including any Premium Amount) if: (i) the
VWAP for each day during any five (5) consecutive Trading Days is equal to or
greater than 120% of the Initial Conversion Price and (ii) all of the Equity
Conditions are satisfied as of the Company Conversion Date with respect to the
Underlying Shares potentially issuable in connection with such proposed
conversion. The Company shall exercise its right to require conversion
hereunder by delivering to the Holder a Company Conversion Notice together
with a Conversion Schedule upon the satisfaction of the condition set forth in
clause (i) of the immediately preceding sentence. The number of Underlying
Shares issuable upon any conversion hereunder shall (subject to limitations set
forth in Section 6(d)) equal the outstanding principal amount of this Debenture
to be converted (including any Premium Amount) divided by the Conversion Price.
The conversion subject to a Company Conversion Notice, once given, shall be
irrevocable as to the Company. If the conversion of a principal amount of
Debentures indicated in a Company Conversion Notice would result in the
issuance to the Holder of Underlying Shares in excess of the amount permitted
pursuant to Section 6(d)(i), the Holder shall notify the Company of this fact
and theCompany shall: (x) honor the conversion for the maximum principal
amount of Debentures (plus any Premium Amount) permitted, pursuant to Section
6(d)(i), to be converted on such Company Conversion Date and (y) cancel the
Company Conversion Notice with respect to the portion of the principal amount
of Debentures the conversion of which would violate Section 6(d)(i).
(c) Intentionally Left Blank
(d) Certain Conversion Restrictions.
(i) Notwithstanding anything to the contrary contained herein, the number
of shares of Common Stock that may be acquired by a Holder upon any conversion
of Debentures (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such conversion (or other issuance), the
total number of shares of Common Stock then beneficially owned by such Holder
and its affiliates and any other Persons whose beneficial ownership of Common
Stock would be aggregated with such Holder's for purposes of Section 13(d) of
the Exchange Act, does not exceed 9.999% of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such conversion). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of a
Holder Conversion Notice hereunder will constitute a representation by the
applicable Holder that it has evaluated the limitation set forth in this
paragraph and determined that issuance of the full number of Underlying Shares
issuable in respect of such Conversion Notice does not violate the restriction
contained in this paragraph. This provision shall not restrict the number of
shares of Common Stock which a Holder may receive or beneficially own in order
to determine the amount of securities or other consideration that such Holder
may receive in the event of a merger, sale or other business combination or
reclassification involving the Company as contemplated herein.
(ii) If the Company has not previously obtained Shareholder Approval (as
defined below), then the Company may not issue Underlying Shares in excess of
the Issuable Maximum upon conversions of the Debentures. The "Issuable Maximum"
means a number of shares of Common Stock equal to 5,802,595 less: any number of
shares of Common Stock previously issued upon conversion of the Debentures.
Each Holder shall be entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing: (x) the principal amount of Debentures issued
and sold to such Holder on the Original Issue Date by (y) the aggregate
principal amount of Debentures issued and sold by the Company on the Original
Issue Date. If any Holder shall no longer hold Debentures, then such Holder's
remaining portion of the Issuable Maximum shall be allocated pro-rata among the
remaining Holders. If on any Conversion Date: (A) the aggregate number of
shares of Common Stock that would then be issuable upon conversion in full of
all then outstanding principal amount of Debentures would exceed the Issuable
Maximum, and (B) the Company shall not have previously obtained the vote of
shareholders, as may be required by the applicable rules and regulations of the
NASDAQ (or any successor entity) applicable to approve the issuance of shares
of Common Stock in excess of the Issuable Maximum pursuant to the terms hereof
(the "Shareholder Approval"), then, the Company shall issue to the converting
Holder a number of shares of Common Stock equal to such Holder's pro-rata
portion (which shall be calculated pursuant to the terms hereof) of the
Issuable Maximum and, with respect to the remainder of the principal amount of
Debentures then held by such Holder for which a conversion would result in an
issuance of shares of Common Stock in excess of such Holder's pro-rata portion
(which shall be calculated pursuant to the terms hereof) of the Issuable
Maximum (the "Excess Principal Amount"), the applicable Holder shall have the
right to require the Company to either: (1) obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the 90th day after such request, or (2) pay cash, in an amount equal to
the Excess Principal Amount (plus the amount of accrued and unpaid Premium
thereon and otherwise not previously paid or converted). If a Holder shall have
elected the first option pursuant to the immediately preceding sentence and the
Company shall have failed to obtain the Shareholder Approval on or prior to the
90th day after such request, then within three (3) days of such 90th day, the
Company shall pay cash to such Holder in an amount equal to the Excess rincipal
Amount (plus the amount of accrued and unpaid Premium thereon and otherwise not
previously paid or converted). Notwithstanding anything herein to the contrary,
if on any date other than a Conversion Date: (A) the aggregate number of shares
of Common Stock that would then be issuable upon conversion in full of all then
outstanding principal amount of Debentures would exceed the Issuable Maximum,
and (B) the Company shall not have previously obtained the Shareholder
Approval, then, the Company shall, upon request, notify the Holders of such
excess and each Holder shall be entitled to require the Company to pay to it in
cash an amount equal to the principal amount of Debentures (plus the amount of
accrued and unpaid Premium thereon) then held by such Holder for hich a
potential conversion on such date would result in an issuance of shares of
Common Stock in excess of such Holder's pro-rata portion (which shall be
calculated pursuant to the terms hereof) of the Issuable Maximum. The
outstanding principal amount of Debentures and the amount of accrued and unpaid
Premium thereon, shall be reduced upon the Holder's receipt of the Excess
Principal Amount (plus accrued and unpaid Premium thereon) pursuant to the
terms hereof. The Company and the Holder understand and agree that shares of
Common Stock issued to and then held by the Holder as a result of conversions
of Debentures shall not be entitled to cast votes on any resolution to obtain
Shareholder Approval pursuant hereto.
(e) Mechanics of Conversion. On each Conversion Date, the Company shall issue
or cause to be issued and cause to be delivered to or upon the written order of
the Holder and in such name or names as the Holder may designate a certificate
for the Underlying Shares. The Holder, or any Person so designated by the
Holder to receive Underlying Shares, shall be deemed to have become the holder
of record of such Underlying Shares as of the Conversion Date. If the Company's
transfer agent is eligible to participate in the Depositary Trust Corporation
DWAC system and no legends are required to be included on the certificates
representing Underlying Shares pursuant to the Purchase Agreement, the Company
shall, upon request of the Holder, use its best efforts to deliver Underlying
Shares hereunder electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions.
(f) To effect conversions hereunder, the Holder shall not be required to
physically surrender this Debenture unless the aggregate principal amount
represented by such Debenture is being converted, in which event, the Holder
shall deliver such Debenture promptly to the Company (it being understood that
such delivery is not a condition precedent to the Company's obligations to
deliver Underlying Shares upon such conversion). Conversions hereunder shall
have the effect of lowering the outstanding principal amount represented by
such Debenture in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the Conversion Schedule which will be
maintained by the Company and the Holder and be binding on both parties absent
manifest error.
(g) The Company's obligations to issue and deliver Underlying Shares upon
conversion of this Debenture in accordance with the terms hereof (including,
without limitation, Section 6(d)) are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or a
any violation or alleged violation of law by the Holder or any other Person,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such
Underlying Shares.
(h) If by the third Trading Day after a Conversion Date the Company fails to
deliver such Underlying Shares in such amounts and in the manner required
pursuant to Section 6(e), then the Holder will have the right to rescind such
conversion.
(i) If by the third Trading Day after a Conversion Date the Company fails to
deliver such Underlying Shares in such amounts and in the manner required
pursuant to Section 6(e), and if after such third Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by such Holder of the Underlying Shares
which the Holder anticipated receiving upon such conversion (a "Buy-In"), then
the Company shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the shares
of Common Stock so purchased exceeds (y) the amount obtained by multiplying
(1) the aggregate number of Underlying Shares that the Company was required to
deliver to the Holder in connection with the conversion at issue by (2) the
Closing Price at the time of the obligation giving rise to such purchase
obligation and (B) at the option of the Holder, either reinstate the principal
amount of Debentures and equivalent number of Underlying Shares for which such
conversion was not timely honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company timely complied
with its conversion and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of Debentures with a market
price on the date of conversion totaling $10,000, under clause (A) of the
immediately preceding sentence, the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In.
(j) Adjustments to Conversion Price. The Conversion Price in effect on any
Conversion Date shall be subject to adjustments in accordance with this Section
6(j):
(i) Stock Dividends and Splits. If the Company, at any time while any
Debentures are outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.
(ii) Additional Distributions. If the Company, at any time while any
Debentures are outstanding, shall distribute to all holders of Common Stock
(and not to Holders) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such case the
Conversion Price at which the principal amount of Debentures shall thereafter be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Closing Price determined as of the record date mentioned
above, and of which the numerator shall be such Closing Price on such record
date less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided to the
Holders of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(iii) Antidilution. If the Company, at any time while this Debenture is
outstanding, shall issue additional shares of Common Stock or Common Stock
Equivalents for a consideration per share more than ten percent (10%) below the
Current Market Price at the time of such issuance, the Conversion Price shall
be adjusted by multiplying the Conversion Price then in effect by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
prior to such issuance plus the number of shares of Common Stock which the
aggregate of the initial purchase or exercise price for such Common Stock
(plus, if applicable, the aggregate consideration received from the issuance of
the Common Stock Equivalents) would purchase at the Current Market Price and
the denominator shall be the number of shares of Common Stock outstanding
immediately after such issuance (or, if applicable, the number of shares of
Common Stock outstanding prior to such issuance plus the maximum number of
shares deliverable upon conversion or in exchange for or upon exercise of any
Common Stock Equivalents at the initial conversion, exchange or exercise rate).
Notwithstanding the foregoing, no adjustment will be made pursuant to this
Section in respect of: (A) any grant of an option or warrant for Common Stock
or issuance of any shares of Common Stock upon the exercise of any options or
warrants to employees, officers and directors of or consultants to the Company
pursuant to any plan or incentive or consulting arrangement approved by the
Company's board of directors; and (B) any Common Stock Equivalents or rights or
agreements to purchase Common Stock Equivalents outstanding on the date hereof
as specified in Schedule 3.1(f) to the Purchase Agreement, including the
adjustment of the conversion price of the debentures (but not as to any
amendments or other modifications to the number of Common Stock issuable
thereunder, the terms set forth therein, or the exercise price set forth
therein).
(iv) Calculations. All calculations under this Section 6(j) shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be. The
number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.
(v) Notice of Adjustments. Whenever the Conversion Price is adjusted
pursuant to the terms hereof, the Company shall promptly mail to each Holder a
notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(k) Fundamental Transactions. If, at any time while this Debenture is
outstanding: (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted
to tender or exchange their shares for other securities, cash or property, or
(iv) the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in any
such case, a "Fundamental Transaction"), then the Holder shall have the right
thereafter to receive, upon conversion of the outstanding principal amount of
this Debenture, the same amount and kind of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Underlying Shares then issuable upon conversion in
full of the outstanding principal amount (plus accrued and unpaid Premium) of
this Debenture (the "Alternate Consideration"). For purposes of any such
exercise, the determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in
such Fundamental Transaction, and the Company shall apportion the Conversion
Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of the outstanding principal amount of this
Debenture following such Fundamental Transaction. At the Holder's option and
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall, either (i) issue to the Holder a new debenture substantially
in the form of this Debenture and consistent with the foregoing provisions and
evidencing the Holder's right to purchase the Alternate Consideration at the
Conversion Price upon conversion thereof, or (ii) purchase the Debenture from
the Holder for a purchase price, payable in cash within five Trading Days after
such request (or, if later, on the effective date of the Fundamental
Transaction), equal to the Black Scholes value of the remaining unconverted
portion of the outstanding principal amount of this Debenture (together with
the amount of accrued and unpaid Premium thereon) on the date of the
Fundamental Transaction as well as assumptions reasonably mutually acceptable
to the Company and the Holder, provided that for purposes of such calculation,
the market price of the Common Stock shall be the closing bid price of the
Common Stock on the Trading Day immediately preceding the public announcement
of the Fundamental Transaction and the volatility factor shall be determined by
reference to the 12 month average industry volatility measures. The terms of
any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (k) and insuring that the Debenture (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
(l) Reclassifications; Share Exchanges. In case of any reclassification of
the Common Stock, or any compulsory share exchange pursuant to which the
Common Stock is converted into other securities, cash or property (other than
compulsory share exchanges which constitute Fundamental Transactions), the
Holders of the Debentures then outstanding shall have the right thereafter
to convert such Debentures only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the
Holders shall be entitled upon such event to receive such amount of securities,
cash or property as a holder of the number of shares of Common Stock of the
Company into which such Debentures could have been converted immediately
prior to such reclassification or share exchange. This provision shall
similarly apply to successive reclassifications or share exchanges.
(m) Notice of Corporate Events. If (a) the Company shall
declare a dividend (or any other distribution) on the Common Stock, (b) the
Company shall declare a special nonrecurring cash dividend on or a redemption
of the Common Stock, (c) the Company shall authorize the granting to all
holders of Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights, (d) the approval of any
stockholders of the Company shall be required in connection with any Change of
Control transaction or Fundamental Transaction, (e) the entering into an
agreement to effectuate a Change of Control transaction or Fundamental
Transaction, or (f) the Company shall authorize the Liquidation of the Company;
then the Company shall file a press release or Current Report on Form 8-K to
disclose such occurrence, and the Company shall notify 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, stating in such notice (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which any such
Change of Control transaction or Fundamental Transaction is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for
securities, cash or other property deliverable upon any such Change of Control
transaction or Fundamental Transaction. Holders are entitled to convert any
principal amount of this Debenture (including the Premium accrued thereon)
during the 20-day period commencing the date of such notice to the effective
date of the event triggering such notice.
(n) The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock solely for the purpose
of issuance upon conversion of Debentures, each as herein provided, free
from preemptive rights or any other actual contingent purchase rights of
persons other than the Holders, not less than such number of shares of
Common Stock as shall be issuable upon the conversion of all outstanding
principal amount of Debentures (plus accrued Premium as if the Debentures
were not converted until the Maturity Date). The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
and validly authorized and issued and fully paid and nonassessable.
(o) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Price on the applicable
Conversion Date. If any fraction of an Underlying Share would, except for the
provisions of this Section 6(o), be issuable upon a conversion hereunder, the
Company shall pay an amount in cash equal to the Conversion Price multiplied by
such fraction.
(p) The issuance of certificates for Common Stock on conversion
of principal amount (plus accrued Premium) of this Debenture shall be made
without charge to the Holders thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax
that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder of such Debentures so converted.
(q) Any and all notices or other communications or deliveries to be provided by
the Holders, including, without limitation, any Conversion Notice, shall
be in writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the attention of the
Chief Financial Officer of the Company addressed to 0 Xxxxxxxxxx Xxx Xxxx,
Xxxxxxxxx, Xxx Xxxxxx, Facsimile No.: (000) 000-0000, or to such other
address or facsimile number as shall be specified in writing by the Company
for such purpose. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight
courier service, addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section 6(q) prior to
6:30 p.m. (New York City time)(with confirmation of transmission),
(ii) the date after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number
specified in this Section 6(q) later than 6:30 p.m. (New York City time) on any
date and earlier than 11:59 p.m. (New York City time) on such date (with
confirmation of transmission), (iii) upon receipt, if sent by a nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given.
7. Prepayments Upon Events of Default. Upon the occurrence of an Event of
Default, each Holder shall have the right (in addition to all other
rights it may have hereunder or under applicable law) exercisable at
the sole option of such Holder, and by delivery of a written notice to the
Company (an "Event of Default Notice"), to require the Company to prepay
all or a portion of the Debentures then held by such Holder and, at the
option of the Holder, all or a portion of the Reinstated Principal,
for an amount, in cash, equal to the Mandatory Prepayment Amount.
The Mandatory Prepayment Amount shall be due and payable within five Trading
Days of the date of the Event of Default Notice. For purposes of this Section
7, principal amount of Debentures shall remain outstanding until such date as
the Holder shall have received Underlying Shares upon a conversion (or
attempted conversion) thereof that meets the requirements hereof.
Notwithstanding anything herein to the contrary, upon the occurrence of a
Bankruptcy Event, all outstanding principal and the amount of accrued and
unpaid Premium on this Debenture shall immediately become due and payable in
full in cash, without any further action by the Holder, and the Company shall
immediately be obligated to pay the Mandatory Prepayment Amount pursuant to
this paragraph as if the Holder had delivered a Event of Default Notice
immediately prior to the occurrence of any such Event of Default. The Holder
need not provide and the Company hereby waives any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Xxxxxx at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.
8. Other Prepayments
(a) Prepayment at the Option of the Company.
(i) At any time following the Original Issue Date and prior to the
Maturity Date, upon delivery of a written notice to the Holder (a
"Company Prepayment Notice" and the date such notice is delivered
by the Company, the "Company Notice Date"), the Company shall be entitled to
prepay all but not less than all of the principal amount of Debentures then
outstanding (plus accrued and unpaid Premium thereon) for an amount in cash
equal to the Prepayment Price. The Holder may convert any portion of the
outstanding principal amount of the Debenture (plus accrued and unpaid Premium
thereon) subject to a Company Prepayment Notice at any time prior to the date
that the Prepayment Price is due and paid in full by delivering a Holder
Conversion Notice pursuant to Section 6(a) hereof. Any such principal amount of
Debentures (plus Premium) so converted shall be prepaid in accordance with this
Section 8(a) in the event that the Registration Statement relating thereto is
not declared effective on or prior to 120 days after such Registration
Statement has been or is required to have been filed pursuant to the
Registration Rights Agreement. Once delivered, the Company shall not be
entitled to rescind a Company Prepayment Notice.
(ii) The Prepayment Price shall be due on the 20th Business Day
immediately following the Company Notice Date. Any such prepayment shall be
free of any claim of subordination. If any portion of the Prepayment
Price shall not be timely paid by the Company, interest shall accrue thereon
at the rate of 12% per annum (or the maximum rate permitted by applicable law,
whichever is less) until the Prepayment Price plus all such interest is paid in
full, which payment shall constitute liquidated damages and not a penalty.
In addition, if any portion of the Prepayment Price remains unpaid after such
date, the Holder subject to such prepayment may elect by written notice to the
Company to invalidate ab initio such Company Prepayment Notice with
respect to the unpaid amount, notwithstanding anything herein contained to
the contrary. If the Holder makes such an election, this Debenture shall be
reinstated with respect to such unpaid amount and the Company shall no
longer have any prepayment rights under this Section 8.
(b) Prepayment at the Option of the Holder.
(i) In the event that the Registration Statement is not declared
effective by the Commission on or prior to 120 days after such Registration
Statement has been or is required to have been filed pursuant to the
Registration Rights Agreement, the Holder shall have the right, exercisable
at the sole option of the Holder, and by delivery of a written notice
(a "Holder Prepayment Notice" and the date such notice is delivered by the
Holder, the "Holder Notice Date") to the Company, to require the Company
to prepay all or a portion of the Debentures then held by the Holder (plus
accrued and unpaid Premium thereon) for an amount in cash equal to the
Prepayment Price which shall be due and payable on the 3rd Trading Day
following the delivery of the Prepayment Notice by the Holder.
(ii) If any portion of the Prepayment Price due pursuant to the
terms hereof remains unpaid after such date, the Holder may elect by written
notice to the Company to invalidate ab initio such Holder Prepayment Notice
with respect to the unpaid amount, notwithstanding anything herein contained to
the contrary. If the Holder makes such an election, this Debenture shall be
reinstated with respect to such unpaid amount. For purposes of this Section 8,
principal amount of Debentures shall remain outstanding, and Premium shall
continue to accrue thereon, until such date as the Holder shall have received
either payment in full pursuant to this Section 8 or Underlying Shares upon a
conversion (or attempted conversion) thereof that meets the requirements
hereof. The Holder may convert any portion of the outstanding principal amount
of the Debentures (plus accrued and unpaid Premium thereon) subject to a
prepayment hereunder at any time prior to the date that the Prepayment Price is
due and paid in full.
9. Ranking. This Debenture ranks pari passu with all other Debentures now or
hereafter issued pursuant to the Transaction Documents. No indebtedness of the
Company is senior to this Debenture in right of payment, whether with respect
to Premium, damages or upon liquidation or dissolution or otherwise. Other
than in connection with the Company's reimbursement obligation to the Bank
pursuant to the Letter of Credit, and any letters of credit issued
pursuant to the October Purchase Agreement, the Company will not, and will not
permit any subsidiary to, directly or indirectly, enter into, create, incur,
assume or suffer to exist indebtedness of any kind, on or with respect to any
of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom, that is senior in any respect to
the Company's obligations under the Debentures.
10. Miscellaneous.
(a) This Debenture shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This
Xxxxxxxxx may be amended only in writing signed by the Company and the Holder
and their successors and assigns.
(b) Subject to Section 10(a) above, nothing in this Debenture shall be
construed to give to any Person other than the Company and the Holder any
legal or equitable right, remedy or cause under this Debenture. This Debenture
shall inure to the sole and exclusive benefit of the Company and the Holder.
(c) All questions concerning the construction, validity, enforcement and
interpretation of this Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all Proceedings shall be commenced exclusively in the state
and federal courts sitting in the City of New York, Borough of Manhattan (the
"New York Courts"). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for any Proceeding, and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any New York Court or that
a New York Court is an inconvenient forum for such Proceeding. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal Proceeding. If
either party shall commence a Proceeding, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorney's fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
(d) The headings herein are for convenience only, do not constitute a part
of this Debenture and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Debenture shall be
invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Debenture shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to
agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefore, and upon so agreeing, shall incorporate
such substitute provision in this Debenture.
(f) No provision of this Debenture may be waived or amended except
in a written instrument signed, in the case of an amendment, by the Company and
the Holder or, or, in the case of a waiver, by the Holder. No waiver of any
default with respect to any provision, condition or requirement of this
Debenture shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
(g) If it shall be found that any interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall be reduced to the maximum permitted rate of interest under such law.
(h) Except pursuant to Sections 7 and 8 hereunder, the outstanding principal
amount and Premium under this Debenture may not be prepaid by the Company
without the prior written consent of the Holder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
MILLENNIUM CELL INC.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
---------------------------
Name: Xxxxxx X. Xxxxxxxx, Xx.
Title: Vice President-Chief Financial Officer
EXHIBIT A HOLDER CONVERSION NOTICE (To be Executed by the Registered
Holder in order to convert Debentures) The undersigned hereby elects to convert
the principal amount of Debenture (plus accrued Premium thereon) indicated
below into shares of Common Stock of Millennium Cell Inc., in accordance with
the terms of the Debenture. If shares are to be issued in the name of a Person
other than undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and opinions
as reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any. All terms used in this notice shall have the meanings set forth in the
Debenture.
Conversion calculations:
------------------------------------------------
Principal amount of Debenture Owned prior to conversion
------------------------------------------------
Principal amount of Debenture to be Converted
including ______ of the Premium added under Sections 3 and 6 of
the Debenture)
---------------------------------------------------
Principal amount of Debenture remaining after Conversion
-------------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------------
Conversion Price
--------------------------------------------------
Name of Holder
By:___________________________________________
Name:
Title:
[] By the
delivery of this Conversion Notice the Holder represents and warrants to the
Company that its ownership of the Common Stock does not exceed the restrictions
set forth in Section 6(d) of the Debenture.
EXHIBIT B COMPANY CONVERSION
NOTICE (To be executed by the Company in order to convert the Debenture) The
undersigned, in the name and on behalf of Millennium Cell Inc., hereby elects
to cause ________________ to convert the principal amount of Debenture (plus
accrued Premium thereon) indicated below, into shares of Common Stock of
Millennium Cell Inc., in accordance with the terms of the Debenture. If shares
are to be issued in the name of a Person other than __________________,
________________ will pay all transfer taxes payable with respect thereto and
shall deliver to the Company such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to
_______________ for any conversion, except for such transfer taxes, if any. All
terms used in this notice shall have the meanings set forth in the Debenture.
Conversion calculations:
------------------------------------------------
Principal amount of Debenture owned prior to conversion
------------------------------------------------
Principal amount of Debenture to be Converted
(including __________ of Premium pursuant to Section 3 and 6 of
the Debenture)
---------------------------------------------------
Principal amount of Debenture remaining after Conversion
-------------------------------------------------
Number of shares of Common Stock to be Issued
__________________________________________________
Conversion Price
--------------------------------------------------
Name of Holder
MILLENNIUM CELL INC.
By:________________________________________
Name:
Title:
Schedule 1 CONVERSION SCHEDULE Secured Convertible Debentures, Series B,
due on the three year anniversary of the Original Issue Date in the aggregate
principal amount of $2,400,000 issued by Millennium Cell Inc. This Conversion
Schedule reflects conversions made under the above referenced Debentures.
Dated:
Date of Conversion Principal Amount Aggregate Principal Conversion Price Premium Accrued and
Converted Amount Remaining Converted
Subsequent to Conversion
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ANNEX A
OUR CREDIT NO. ISSUE DATE EXPIRY DATE LETTER OF CREDIT AMOUNT
------------- ---------- ----------- -----------------------
XXX 11/08/ 2002 11/08/2003 USD $2,400,000
BENEFICIARY APPLICANT
------------------- -------------
Xxxxxxx Power Systems Inc. MILLENNIUM CELL INC.
0000 Xxxxxxxx Xxxxxxx 0 XXXXXXXXXX XXX XXXX
Xxxxxxx, Xxxxxxx Xxxxxxxx XXXXXXXXX, XX 00000
Xxxxxx, V51 519
DEAR BENEFICIARY:
WE HEREBY ESTABLISH OUR CLEAN STANDBY LETTER OF CREDIT IN YOUR FAVOR, AS
BENEFICIARY, WHICH IS AVAILABLE BY PAYMENT AGAINST THE FOLLOWING DOCUMENTS:
1)A DOCUMENT TITLED ON ITS FACE "SIGHT DRAFT" IN ACCORDANCE WITH EXHIBIT A,
ATTACHED HERETO AND APPROPRIATELY COMPLETED.
2)AN ORIGINAL OF A "CERTIFICATE OF DRAW", IN THE FORM OF EXHIBIT B, ATTACHED
HERETO, APPROPRIATELY COMPLETED AND SIGNED BY AN AUTHORIZED OFFICER OF THE
BENEFICIARY.
3)THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY, FOR OUR
ENDORSEMENT. (IF YOUR DEMAND REPRESENTS A PARTIAL DRAWING HEREUNDER, WE
WILL ENDORSE THE ORIGINAL CREDIT AND RETURN SAME TO YOU FOR POSSIBLE FUTURE
CLAIMS. IF, HOWEVER, YOUR DEMAND REPRESENTS A FULL DRAWING OR IF SUCH
DRAWING IS PRESENTED ON THE DAY OF THE RELEVANT EXPIRATION DATE HEREOF, WE
WILL HOLD THE ORIGINAL FOR OUR FILES AND REMOVE SAME FROM CIRCULATION.)
THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND SUCH
UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED OR AMPLIFIED BY REFERENCE
TO ANY DOCUMENT OR INSTRUMENT REFERRED TO HEREIN OR IN WHICH THIS LETTER OF
CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES AND ANY SUCH
REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY DOCUMENT OR
INSTRUMENT.
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED
AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM THE PRESENT OR ANY
FUTURE EXPIRY DATE UNLESS AT LEAST 60 DAYS (SIXTY DAYS) PRIOR TO SUCH
EXPIRATION DATE, WE NOTIFY YOU IN WRITING BY CERTIFIED MAIL OR EXPRESS COURIER
THAT WE ELECT NOT TO RENEW THIS LETTER OF CREDIT FOR ANY SUCH ADDITIONAL ONE
YEAR PERIOD. HOWEVER, THIS STANDBY LETTER OF CREDIT SHALL NOT BE EXTENDED
BEYOND 11/22/2005 WHICH WILL BE CONSIDERED THE FINAL EXPIRATION DATE. WE ENGAGE
WITH YOU THAT ALL DOCUMENTS PRESENTED IN COMPLIANCE WITH THE TERMS OF THIS
LETTER OF CREDIT WILL BE DULY HONORED BY US IF DELIVERED TO WACHOVIA BANK,
NATIONAL ASSOCIATION, ATTN: LETTER OF CREDIT DEPARTMENT, MAIL CODE NC 0000, 000
XXXXXX XXXXXX, XXXXXXX-XXXXX, XXXXX XXXXXXXX 00000, PRIOR TO 3 P.M. ON OR
BEFORE THE EXPIRATION DATE HEREOF.
SEE CONTINUATION
ATTACHED TO AND FORMING PART OF STANDBY CREDIT NO. XXX PAGE TWO
UPON RECEIPT BY THE UNDERSIGNED OF A CERTIFICATE IN THE FORM OF EXHIBIT C
ATTACHED HERETO SIGNED BY AN AUTHORIZED OFFICER OF BENEFICIARY, STATING THAT
THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE DEBENTURE HAS BEEN REDUCED BY
EITHER PAYMENT OR CONVERSION INTO CAPITAL STOCK AND SETTING FORTH THE AMOUNT OF
SUCH REDUCTION, AND ACCOMPANIED BY THE ORIGINAL COPY OF THIS STANDBY LETTER OF
CREDIT, WE WILL ENDORSE THIS STANDBY LETTER OF CREDIT TO REFLECT A REDUCTION OF
THE UNDRAWN FACE AMOUNT THEREOF BY AN AMOUNT EQUAL TO THE AMOUNT OF SUCH
REDUCTION AS SET FORTH IN SUCH CERTIFICATE, AND WILL RETURN SUCH STANDBY LETTER
OF CREDIT TO BENEFICIARY. IT IS A CONDITION OF THIS LETTER OF CREDIT THAT
DOCUMENTS MAY ALSO BE PRESENTED AT THE COUNTERS OF OUR NEW YORK BRANCH LOCATED
AT 00 XXXX XXXXX, XXX XXXX, XX 00000 FOR FURTHER DELIVERY TO WACHOVIA BANK,
NATIONAL ASSOCIATION, ATTN: LETTER OF CREDIT DEPARTMENT, MAIL CODE NC 0000, 000
XXXXXX XXXXXX, XXXXXXX-XXXXX, XXXXX XXXXXXXX 00000. NOTE: IN THE EVENT THAT THE
BENEFICIARY ELECTS TO PRESENT DOCUMENTS AT THE
COUNTER OF OUR NEW YORK BRANCH, THE BENEFICIARY MUST IMMEDIATELY INSTRUCT THE
BRANCH MANAGER [insert name] TO CONTACT ONE OF THE FOLLOWING PERSONS IN THE
STANDBY LETTER OF CREDIT DEPARTMENT:
1) XXXXX XXXXXX, SUPERVISOR (000) 000-0000
2) XXXXXX XXXXXX, MANAGER (000) 000-0000
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED HEREIN THIS LETTER OF CREDIT IS
SUBJECT TO THE "INTERNATIONAL STANDBY PRACTICES 98 (15P 98), PUBLICATION NO.
590." ALL INQUIRIES REGARDING THIS CREDIT SHOULD BE DIRECTED TO US AT OUR PHONE
NUMBER 0-000-000-0000.
----------------------------------------
AUTHORIZED SIGNATURE
EXHIBIT A
SIGHT DRAFT
$__________________ [CITY], [STATE]
[MONTH] __, 200_
AT SIGHT, PAY TO THE ORDER OF [PURCHASER] THE SUM OF [AMOUNT IN WORDS]
DOLLARS ($__________). -----------
XXXXX RECEIVED, AND CHARGE TO THE ACCOUNT OF MILLENNIUM CELL INC.
DRAWN UNDER WACHOVIA BANK, NATIONAL ASSOCIATION STANDBY LETTER OF
CREDIT NO. XXX, DATED ______, 2002, ISSUED BY WACHOVIA BANK, NATIONAL
ASSOCIATION IN FAVOR OF [PURCHASER] FOR THE ACCOUNT OF MILLENNIUM CELL INC.
[PURCHASER]
BY:____________________
NAME:
TITLE:
PLEASE REMIT PROCEEDS TO OUR ACCOUNT AT:
EXHIBIT B
CERTIFICATE OF DRAW
THE UNDERSIGNED HEREBY CERTIFIES TO WACHOVIA BANK, NATIONAL ASSOCIATION
(THE "BANK") WITH REFERENCE TO THE STANDBY LETTER OF CREDIT NO. XXX (THE
"LETTER OF CREDIT") ISSUED BY THE BANK IN FAVOR OF [PURCHASER],THAT:
1. I AM THE __________ OF [PURCHASER] AND AM AUTHORIZED TO
-----------
EXECUTE AND DELIVER THIS CERTIFICATE TO THE BANK ON BEHALF OF [PURCHASER]
----------
2. PURSUANT TO SECTION 2(d) OF THE SECURED CONVERTIBLE DEBENTURE DATED _______
___, 2002, MADE BY MILLENNIUM CELL INC. PAYABLE TO THE ORDER OF
[PURCHASER] IN THE ORIGINAL PRINCIPAL AMOUNT OF $2,400,000 (THE
"DEBENTURE"), [PURCHASER] IS ENTITLED TO $_____________ UNDER THE LETTER OF
CREDIT.
3. THE AMOUNT OF THE LETTER OF CREDIT DISBURSEMENT DEMANDED HEREBY IS
$--------------.
IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND THIS __ DAY OF _____ 200__.
[PURCHASER]
BY:___________________________
NAME:
TITLE:
EXHIBIT C
CERTIFICATE OF REDUCTION
THE UNDERSIGNED HEREBY CERTIFIES TO WACHOVIA BANK, NATIONAL ASSOCIATION
(THE "BANK") WITH REFERENCE TO THE STANDBY LETTER OF CREDIT NO. XXX (THE
"LETTER OF CREDIT") ISSUED BY THE BANK IN FAVOR OF [NAME OF BENEFICIARY], THAT:
1. I AM THE ____________ OF [PURCHASER] AND AM AUTHORIZED TO
------------
EXECUTE AND DELIVER THIS CERTIFICATE TO THE BANK ON BEHALF OF [PURCHASER]
-----------
2. THE UNDRAWN FACE AMOUNT OF THE LETTER OF CREDIT AS OF THE DATE HEREOF
EQUALS $__________.
3. THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT UNDER THE SECURED CONVERTIBLE
DEBENTURE DATED ________ __, 2002 MADE BY MILLENNIUM CELL INC. PAYABLE TO
THE ORDER OF [PURCHASER] IN THE ORIGINAL PRINCIPAL AMOUNT OF $2,400,000
(THE "DEBENTURE") HAS BEEN REDUCED BY [PAYMENT IN THE AMOUNT OF $______ BY
MILLENNIUM CELL INC.] [VIRTUE OF THE CONVERSION OF $_________ OF SUCH
PRINCIPAL AMOUNT OUTSTANDING ON THE DEBENTURE INTO SHARES OF CAPITAL STOCK
OF MILLENNIUM CELL INC.] ON ______, 200_.
4. WE CONSENT TO A REDUCTION IN THE UNDRAWN FACE AMOUNT OF THE LETTER OF
CREDIT TO $ _________________, REPRESENTING THE PRINCIPAL AMOUNT REDUCTION
SET FORTH IN PARAGRAPH 3 ABOVE, [LESS $_________, THE AMOUNT OF PREMIUM
OWING UNDER THE DEBENTURE], AS OF [INSERT DATE SET FORTH IN PARAGRAPH 3
ABOVE].
5. THE ORIGINAL COPY OF THE LETTER OF CREDIT IS ATTACHED HERETO.
IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND THIS __ DAY OF _____ 200__.
[PURCHASER]
BY:________________________
NAME:
TITLE:
[APPLICANT]
BY:________________________
NAME:
TITLE:
