EXHIBIT 10.3
EXHIBIT A
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: April 6, 2005
Original Conversion Price (subject to adjustment herein): $0.30
$_____________
CONVERTIBLE DEBENTURE
DUE APRIL 6, 2008
THIS DEBENTURE is one of a series of duly authorized and issued
Convertible Debentures of Pacific Gold Corp., a Nevada corporation, having a
principal place of business at 000 Xxxxxxxx Xx. Xxxx Xxxxx 000, Xxxxxxx Xxxxxxx,
Xxxxxx X0X 0X0 (the "Company"), designated as its Convertible Debenture, due
April 6, 2008 (the "Debenture(s)").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), or shall have
paid pursuant to the terms hereunder, the principal sum of $_______________ by
April 6, 2008, or such earlier date as the Debentures are required or permitted
to be repaid as provided hereunder (the "Maturity Date"). This Debenture is
subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement,
and (b) the following terms shall have the following meanings:
"Alternate Consideration" shall have the meaning set forth in
Section 5(d).
"Base Conversion Price" shall have the meaning set forth in
Section 5(b).
"Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday in the United States or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Buy-In" shall have the meaning set forth in Section 4(d)(v).
"Change of Control Transaction" means the occurrence after the
date hereof and during the time that this Debenture is outstanding 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,
or (ii) the Company merges into or consolidates with any other Person,
or any Person merges into or consolidates with the Company and, after
giving effect to such transaction, the stockholders of the Company
immediately prior to such transaction own less than 66% of the
aggregate voting power of the Company or the successor entity of such
transaction, or (iii) the Company sells or transfers its assets, as an
entirety or substantially as an entirety, to another Person and the
stockholders of the Company immediately prior to such transaction own
less than 66% of the aggregate voting power of the acquiring entity
immediately after the transaction, (iv) a replacement at one time or
within a three year period of more than one-half of the members of the
Company's board of directors which is not approved by a majority of
those individuals who are members of the board of directors on the date
hereof (or by those individuals who are serving as members of the board
of directors on any date whose nomination to the board of directors was
approved by a majority of the members of the board of directors who are
members on the date hereof or who are approved by members who are
approved by such a majority), or (v) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i) or (iv).
"Common Stock" means the common stock, par value $0.001 per
share, of the Company and stock of any other class of securities into
which such securities may hereafter have been reclassified or changed
into.
"Conversion Date" shall have the meaning set forth in Section
4(a).
"Conversion Price" shall have the meaning set forth in Section
4(b).
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of Debentures.
"Debenture Register" means the records of the Company regarding
registration and transfers of Debentures.
"Dilutive Issuance" shall have the meaning set forth in Section
5(b).
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"Dilutive Issuance Notice" shall have the meaning set forth in
Section 5(b).
"Effectiveness Period" shall have the meaning given to such term
in the Registration Rights Agreement.
"Equity Conditions" shall mean, during the period in question,
(i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notice of
Conversions of the Holder, if any, (ii) all liquidated damages and
other amounts owing to the Holder in respect of the Debentures shall
have been paid; (iii) there is an effective Registration Statement
pursuant to which the Holder is permitted to utilize the prospectus
thereunder to resell all of the shares issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that
such effectiveness will continue uninterrupted for the foreseeable
future), (iv) the Common Stock is trading on the Trading Market and all
of the shares issuable pursuant to the Transaction Documents are listed
for trading on a Trading Market (and the Company believes, in good
faith, that trading of the Common Stock on a Trading Market will
continue uninterrupted for the foreseeable future), (v) there is a
sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the shares issuable
pursuant to the Transaction Documents, (vi) there is then existing no
Event of Default or event which, with the passage of time or the giving
of notice, would constitute an Event of Default, (vii) the issuance of
the shares in question to the Holder would not violate the limitations
set forth in Section 4(c) and (viii) no public announcement of a
pending or proposed Fundamental Transaction, Change of Control
Transaction or acquisition transaction has occurred that has not been
consummated.
"Event of Default" shall have the meaning set forth in Section
8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(d).
"Mandatory Prepayment Amount" for any Debentures shall equal the
sum of (i) the greater of: (A) 130% of the principal amount of
Debentures to be prepaid, or (B) the principal amount of Debentures to
be prepaid divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is
less, multiplied by the Closing Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures.
"New York Courts" shall have the meaning set forth in Section
9(d).
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"Notice of Conversion" shall have the meaning set forth in
Section 4(a).
"Original Issue Date" shall mean the date of the first issuance
of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of April 6, 2005, to which the Company and the original Holder
are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Registration Statement" means a registration statement meeting
the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Conversion Shares and
naming the Holder as a "selling stockholder" thereunder.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsidiary" shall have the meaning given to such term in the
Purchase Agreement.
"Trading Day" means a day on which the Common Stock is traded on
a Trading Market.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
Section 2. Interest.
a) No Payment of Interest. The Company shall not pay
interest to the Holder on this Debenture. The Company acknowledges and
agrees that this Debenture was issued for an Original Issue Discount.
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b) 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.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable
for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration of transfer
or exchange.
b) Investment Representations. This Debenture has been
issued subject to certain investment representations of the original
Holder set forth in the Purchase Agreement and may be transferred or
exchanged only in compliance with the Purchase Agreement and applicable
federal and state securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment
to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture
is duly registered on the Debenture Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
a) Voluntary Conversion. At any time after the Original
Issue Date until this Debenture is no longer outstanding, this
Debenture shall be convertible into shares of Common Stock at the
option of the Holder, in whole or in part at any time and from time to
time (subject to the limitations on conversion set forth in Section
4(c) hereof). The Holder shall effect conversions by delivering to the
Company the form of Notice of Conversion attached hereto as Annex A (a
"Notice of Conversion"), specifying therein the principal amount of
Debentures to be converted and the date on which such conversion is to
be effected (a "Conversion Date"). If no Conversion Date is specified
in a Notice of Conversion, the Conversion Date shall be the date that
such Notice of Conversion is provided hereunder. To effect conversions
hereunder, the Holder shall not be required to physically surrender
Debentures to the Company unless the entire principal amount of this
Debenture has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Debenture
in an amount equal to the applicable conversion. The Holder and the
Company shall maintain records showing the principal amount converted
and the date of such conversions. The Company shall deliver any
objection to any Notice of Conversion within 1 Business Day of receipt
of such notice. 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 $0.30 (subject to adjustment
herein)(the "Conversion Price").
c) Conversion Limitations; Xxxxxx's Restriction on
Conversion. The Company shall not effect any conversion of this
Debenture, and the Holder shall not have the right to convert any
portion of this Debenture, pursuant to Section 4(a) or otherwise, to
the extent that after giving effect to such conversion, the Holder
(together with the Holder's affiliates), as set forth on the applicable
Notice of Conversion, would beneficially own in excess of 4.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to such conversion. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by
the Holder and its affiliates shall include the number of shares of
Common Stock issuable upon conversion of this Debenture with respect to
which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted portion of this
Debenture beneficially owned by the Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted portion
of any other securities of the Company (including, without limitation,
any other Debentures or the Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 4(c),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act. To the extent that the limitation contained
in this section applies, the determination of whether this Debenture is
convertible (in relation to other securities owned by the Holder) and
of which a portion of this Debenture is convertible shall be in the
sole discretion of such Holder. To ensure compliance with this
restriction, the Holder will be deemed to represent to the Company each
time it delivers a Notice of Conversion that such Notice of Conversion
has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of
such determination. For purposes of this Section 4(c), in determining
the number of outstanding shares of Common Stock, the Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x)
the Company's most recent Form 10-QSB or Form 10-KSB, as the case may
be, (y) a more recent public announcement by the Company or (z) any
other notice by the Company or the Company's Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon the
written or oral request of the Holder, the Company shall within two
Trading Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Debenture, by the Holder or its affiliates since the
date as of which such number of outstanding shares of Common Stock was
reported. The provisions of this Section 4(c) may be waived by the
Holder, at the election of the Holder, upon not less than 61 days'
prior notice to the Company, and the provisions of this Section 4(c)
shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver).
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d) Mechanics of Conversion
i. Conversion Shares Issuable Upon Conversion of
Principal Amount. The number of shares of Common Stock issuable
upon a conversion hereunder shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of
this Debenture to be converted by (y) the Conversion Price.
ii. Delivery of Certificate Upon Conversion. Not later
than three Trading Days after any Conversion Date, the Company
will deliver or cause to be delivered to the Holder a
certificate or certificates representing the Conversion Shares
which shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase
Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of Debentures. The Company
shall, if available and if allowed under applicable securities
laws, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation
or another established clearing corporation performing similar
functions.
iii. Failure to Deliver Certificates. If in the case of
any Notice of Conversion such certificate or certificates are
not delivered to or as directed by the applicable Holder by the
third Trading Day after a Conversion Date, the Holder shall be
entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing
the principal amount of Debentures tendered for conversion.
iv. Obligation Absolute; Partial Liquidated Damages.
If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(d)(ii) by
the third Trading Day after the Conversion Date, the Company
shall pay to such Holder, in cash, as liquidated damages and not
as a penalty, for each $1000 of principal amount being
converted, $10 per Trading Day (increasing to $20 per Trading
Day after 5 Trading Days after such damages begin to accrue) for
each Trading Day after such third Trading Day until such
certificates are delivered. The Company's obligations to issue
and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged
violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection
with the issuance of such Conversion Shares; provided, however,
such delivery shall not operate as a waiver by the Company of
any such action the Company may have against the Holder.
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In the event a Holder of this Debenture shall elect to convert
any or all of the outstanding principal amount hereof, the
Company may not refuse conversion based on any claim that the
Holder or any one associated or affiliated with the Holder has
been engaged in any violation of law, agreement or for any other
reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of this
Debenture shall have been sought and obtained and the Company
posts a surety bond for the benefit of the Holder in the amount
of 150% of the principal amount of this Debenture outstanding,
which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such
Holder to the extent it obtains judgment. In the absence of an
injunction precluding the same, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly
noticed conversion. Nothing herein shall limit a Xxxxxx's right
to pursue actual damages or declare an Event of Default pursuant
to Section 8 herein for the Company's failure to deliver
Conversion Shares within the period specified herein and such
Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief. The exercise
of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under
applicable law.
v. Compensation for Buy-In on Failure to Timely
Deliver Certificates Upon Conversion. In addition to any other
rights available to the Holder, if the Company fails for any
reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder
is required by its brokerage firm to purchase (in an open market
transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares
which the Holder anticipated receiving upon such conversion (a
"Buy-In"), then the Company shall (A) pay in cash to the Holder
(in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase
price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue multiplied by (2) the
actual sale price of the Common Stock at the time of the sale
(including brokerage commissions, if any) giving rise to such
purchase obligation and (B) at the option of the Holder, either
reissue Debentures in principal amount equal to the principal
amount of the attempted conversion or deliver to the Holder the
number of shares of Common Stock that would have been issued had
the Company timely complied with its delivery requirements under
Section 4(d)(ii). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of Debentures with
respect to which the actual sale price of the Conversion Shares
at the time of the sale (including brokerage commissions, if
any) giving rise to such purchase obligation was a total of
$10,000 under clause (A) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a
Holder requires the Company to make payment in respect of a
Buy-In for the failure to timely deliver certificates hereunder
and the Company timely pays in full such payment, the Company
shall not be required to pay such Holder liquidated damages
under Section 4(d)(iv) in respect of the certificates resulting
in such Buy-In.
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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 solely for the purpose of issuance upon conversion of the
Debentures, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (and
the other Holders of the Debentures), not less than such number
of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon
the conversion of the outstanding principal amount of the
Debentures hereunder. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid,
nonassessable and, if the Registration Statement is then
effective under the Securities Act, registered for public sale
in accordance with such Registration Statement.
vii. Fractional Shares. Upon a conversion hereunder the
Company shall not be required to issue stock certificates
representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Closing Price at such time. If
the Company elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
viii. Transfer Taxes. The issuance of certificates for
shares of the Common Stock on conversion of this Debenture shall
be made without charge to the Holder hereof for any documentary
stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of
any such certificate upon conversion in a name other than that
of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that
such tax has been paid.
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Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any
time while this Debenture is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to
this Debenture), (B) subdivides outstanding shares of Common Stock into
a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number
of shares, or (D) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while this Debenture is
outstanding, shall offer, sell, grant any option to purchase or offer,
sell or grant any right to reprice its securities, or otherwise dispose
of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at
an effective price per share less than the then Conversion Price (such
lower price, the "Base Conversion Price" and such issuances
collectively, a "Dilutive Issuance"), as adjusted hereunder (if the
holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share which is less than the
Conversion Price, such issuance shall be deemed to have occurred for
less than the Conversion Price on such date of the Dilutive Issuance),
then the Conversion Price shall be reduced to equal the Base Conversion
Price. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of an Exempt
Issuance. The Company shall notify the Holder in writing, no later than
the Business Day following the issuance of any Common Stock or Common
Stock Equivalents subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms (such notice the
"Dilutive Issuance Notice"). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to this
Section 5(b), upon the occurrence of any Dilutive Issuance, after the
date of such Dilutive Issuance the Holder is entitled to receive a
number of Conversion Shares based upon the Base Conversion Price
regardless of whether the Holder accurately refers to the Base
Conversion Price in the Notice of Conversion.
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c) Pro Rata Distributions. If the Company, at any time while
Debentures are outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe
for or purchase any security, then in each such case the Conversion
Price shall be adjusted by multiplying such Conversion Price in effect
immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the 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 the
Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided
to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
d) Fundamental Transaction. If, at any time while this
Debenture is outstanding, (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the
Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or
property (in any such case, a "Fundamental Transaction"), then upon any
subsequent conversion of this Debenture, the Holder shall have the
right to receive, for each Conversion Share that would have been
issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction, the same kind and amount of securities,
cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of one share of
Common Stock (the "Alternate Consideration"). For purposes of any such
conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction. To
the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new debenture consistent with
the foregoing provisions and evidencing the Holder's right to convert
such debenture into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (d) and insuring that this Debenture
(or any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
11
e) Calculations. All calculations under this Section 5 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 5, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
f) Notice to Holders.
i. Adjustment to Conversion Price. Whenever the
Conversion Price is adjusted pursuant to any of this Section 5,
the Company shall, within 3 business days, mail to each Holder a
notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the 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) on
the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Company
is a party, any sale or transfer of all or substantially all of
the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities,
cash or property; (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the
purpose of conversion of the Debentures, and shall cause to be
mailed to the Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 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 mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are
entitled to convert Debentures during the 20-day period
commencing the date of such notice to the effective date of the
event triggering such notice.
12
Section 6. RESERVED.
Section 7. Negative Covenants. So long as any portion of this
Debenture is outstanding or with the written consent of Holders holding at least
50% of the principal amount of Debentures, in the aggregate, then outstanding,
the Company will not and will not permit any of its Subsidiaries to directly or
indirectly:
a) except for (i) the existing indebtedness set forth on
Schedule 3.1(ff) to the Purchase Agreement provided such indebtedness
is not amended or revised at anytime after the date of the Purchase
Agreement but the Company may extend or renew such indebtedness after
the date of the Purchase Agreement or (ii) indebtedness incurred in
connection with the purchase of equipment to be used in the ordinary
course of the Company's business; provided, however, that in each case
such obligations are not secured by liens on any assets of the Company
or its Subsidiaries existing as of the date of the Purchase Agreement
and may only be secured by the assets so acquired or leased thereafter,
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 that is senior to, or pari passu with, in any
respect, the Company's obligations hereunder;
b) except for liens that were created prior to the date of
the Purchase Agreement and as set forth on Schedule 3.1(n) of the
Purchase Agreement and not amended or revised at anytime after the date
of the Purchase Agreement, 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 that is senior to, in any
respect, the Company's obligations hereunder;
c) amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder;
13
d) repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of shares of its Common
Stock or Common Stock Equivalents other than as to the Conversion
Shares to the extent permitted or required under the Transaction
Documents or as otherwise permitted by the Transaction Documents;
e) enter into any agreement with respect to any of the
foregoing; or
f) pay cash dividends on any equity securities of the
Company.
Section 8. Events of Default.
a) "Event of Default", wherever used herein, means any one
of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body) occurring during
the time that this Debenture is outstanding:
i. any default in the payment of (A) the principal
amount of any Debenture, or (B) liquidated damages in respect
of, any Debenture, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, other default under
clause (B) above, is not cured, within 3 Trading Days;
ii. the Company shall fail to observe or perform any
other covenant or agreement contained in this Debenture (other
than a breach by the Company of its obligations to deliver
shares of Common Stock to the Holder upon conversion which
breach is addressed in clause (xi) below) which failure is not
cured, if possible to cure, within the earlier to occur of (A) 5
Trading Days after notice of such default sent by the Holder or
by any other Holder and (B)10 Trading Days after the Company
shall become or should have become aware of such failure;
iii. a default or event of default (subject to any
grace or cure period provided for in the applicable agreement,
document or instrument) shall occur under (A) any of the
Transaction Documents other than the Debentures, or (B) any
other material agreement, lease, document or instrument to which
the Company or any Subsidiary is bound and which default would
have a Material Adverse Effect on the Company;
iv. any representation or warranty made herein, in any
other Transaction Documents, in any written statement pursuant
hereto or thereto, or in any other report, financial statement
or certificate made or delivered to the Holder or any other
holder of Debentures shall be untrue or incorrect in any
material respect as of the date when made or deemed made;
14
v. (i) the Company or any of its Subsidiaries shall
commence, a case under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto, or
the Company or any Subsidiary commences any other proceeding
under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or any Subsidiary thereof or (ii)
there is commenced against the Company or any Subsidiary thereof
any such bankruptcy, insolvency or other proceeding which
remains undismissed or unstayed for a period of 60 days; or
(iii) the Company or any Subsidiary thereof is adjudicated by a
court of competent jurisdiction insolvent or bankrupt; or any
order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company or any Subsidiary
thereof suffers any appointment of any custodian or the like for
it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or (v) the
Company or any Subsidiary thereof makes a general assignment for
the benefit of creditors; or (vi) the Company shall fail to pay,
or shall state that it is unable to pay, or shall be unable to
pay, its debts generally as they become due; or (vii) the
Company or any Subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any
Subsidiary thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of
the foregoing; or (ix) any corporate or other action is taken by
the Company or any Subsidiary thereof for the purpose of
effecting any of the foregoing;
vi. the Company or any Subsidiary shall default in any
of its obligations under any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money
or money due under any long term leasing or factoring
arrangement of the Company in an amount exceeding $150,000,
whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
vii. the Common Stock shall not be eligible for
quotation on or quoted for trading on a Trading Market and shall
not again be eligible for and quoted or listed for trading
thereon within five Trading Days;
viii. the Company shall be a party to any Change of
Control Transaction or Fundamental Transaction, shall agree to
sell or dispose of all or in excess of 33% of its assets in one
or more transactions (whether or not such sale would constitute
a Change of Control Transaction) or shall redeem or repurchase
more than a de minimis number of its outstanding shares of
Common Stock or other equity securities of the Company (other
than redemptions of Conversion Shares and repurchases of shares
of Common Stock or other equity securities of departing officers
and directors of the Company; provided such repurchases shall
not exceed $100,000, in the aggregate, for all officers and
directors during the term of this Debenture);
15
ix. a Registration Statement shall not have been
declared effective by the Commission on or prior to the 210th
calendar day after the Closing Date;
x. if, during the Effectiveness Period (as defined in
the Registration Rights Agreement), the effectiveness of the
Registration Statement lapses for any reason or the Holder shall
not be permitted to resell Registrable Securities (as defined in
the Registration Rights Agreement) under the Registration
Statement, in either case, for more than 10 consecutive Trading
Days or 15 non-consecutive Trading Days during any 12 month
period; provided, however, that in the event that the Company is
negotiating a merger, consolidation, acquisition or sale of all
or substantially all of its assets or a similar transaction and
in the written opinion of counsel to the Company, the
Registration Statement, would be required to be amended to
include information concerning such transactions or the parties
thereto that is not available or may not be publicly disclosed
at the time, the Company shall be permitted an additional 10
consecutive Trading Days during any 12 month period relating to
such an event; and
xi. the Company shall fail for any reason to deliver
certificates to a Holder prior to the third Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(d)
or the Company shall provide notice to the Holder, including by
way of public announcement, at any time, of its intention not to
comply with requests for conversions of any Debentures in
accordance with the terms hereof.
b) Remedies Upon Event of Default. If any Event of Default
occurs, the full principal amount of this Debenture, together with
other amounts owing in respect thereof, to the date of acceleration
shall become, at the Holder's election, immediately due and payable in
cash. The aggregate amount payable upon an Event of Default shall be
equal to the Mandatory Prepayment Amount. Commencing 5 days after the
occurrence of any Event of Default that results in the eventual
acceleration of this Debenture, the interest rate on this Debenture
shall accrue at the rate of 18% per annum, or such lower maximum amount
of interest permitted to be charged under applicable law. All
Debentures for which the full Mandatory Prepayment Amount hereunder
shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The Holder need not
provide and the Company hereby waives any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by
Xxxxxx at any time prior to payment hereunder and the Holder shall have
all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
16
Section 9. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, facsimile number 000-000-0000, Attn: Xxxxxxxx Xxxxxxx or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this
Section. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile telephone
number or address of such Xxxxxx appearing on the books of the Company,
or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:30 p.m. (New York
City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required
to be given.
b) Absolute Obligation. Except as expressly provided herein,
no provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal
of and liquidated damages (if any) on, this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct debt obligation of the Company. This Debenture
ranks pari passu with all other Debentures 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, at the expense of the Holder, in exchange and substitution for
and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen
or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and
indemnity, if requested, all reasonably satisfactory to the Company.
17
d) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by any of the Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the
state and federal courts sitting in the City of New York, Borough of
Manhattan (the "New York Courts"). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and
hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it
under this Debenture and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Debenture or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any
provisions of this Debenture, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
e) Waiver. Any waiver by the Company or the Holder of a
breach of any provision of this Debenture shall not operate as or be
construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Debenture. The failure of the
Company or the Holder to insist upon strict adherence to any term of
this Debenture on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any
waiver must be in writing.
f) Severability. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of
interest. The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the
Company from paying all or any portion of the principal of or interest
on this Debenture as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefits or advantage of
any such law, and covenants that it will not, by resort to any such
law, hinder, delay or 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.
18
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.
*********************
19
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.
PACIFIC GOLD CORP.
By: __________________________________
Name:
Title:
20
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the
Convertible Debenture of Pacific Gold Corp., a Nevada corporation (the
"Company"), due on April 6, 2008, into shares of common stock, par value $0.001
per share (the "Common Stock"), of the Company according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts determined in accordance with Section 13(d) of the Exchange
Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection with any
transfer of the aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted:
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
21
Schedule 1
CONVERSION SCHEDULE
The Convertible Debentures due on April 6, 2008, in the aggregate principal
amount of $____________ issued by Pacific Gold Corp. This Conversion Schedule
reflects conversions made under Section 4 of the above referenced Debenture.
Dated:
________________________________________________________________________________
| | Aggregate |
| | Principal |
| | Amount |
| | Remaining |
Date of Conversion | | Subsequent to |
(or for first entry, | | Conversion |
Original Issue Date) | Amount of Conversion | (or original | Company Attest
| | Principal |
| | Amount) |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
| | |
______________________|______________________|_________________|_______________
22
