EXHIBIT 10.3
EXHIBIT A
FORM OF CONVERTIBLE DEBENTURE
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED AS OF THE
DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS
OF THE HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT AND
REDEMPTION RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING
WHICH THE REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE ACCELERATED.
No. 1 $525,000
7% CONVERTIBLE DEBENTURE
of
eMISSIONS TESTING, Inc., a Georgia corporation (together with its
successors, the "Company"), for value received hereby promises to pay to:
GCA STRATEGIC INVESTMENT FUND LIMITED
(The "Holder") and registered assigns, the principal sum of Five Hundred Twenty
Five Thousand ($525,000) or, if less, the principal amount of this Debenture
then outstanding, on the Maturity Date by wire transfer of immediately available
funds to the Holder in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest, which shall begin to accrue on the date of
this Debenture, quarterly in arrears, on (i) the last day of March, June,
September and December of each year until the Maturity Date, commencing
September 30, 2000 (unless such day is not a Business Day, in which event on the
next succeeding Business Day) (each an "Interest Payment Date"), (ii) the
Maturity Date, (iii) each Conversion Date, as hereafter defined, and (iv) the
date the principal amount of the Convertible Debentures shall be declared to be
or shall automatically become due and payable, on the principal sum hereof
outstanding in like coin or currency, at the rates per annum set forth below,
from the most recent Interest Payment Date to which interest has been paid on
this Convertible Debenture, or if no interest has been paid on this Convertible
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Debenture, from the date of this Convertible Debenture until payment in full of
the principal sum hereof has been made. The Maturity Date is June 1, 2002.
The interest rate shall be seven percent (7%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also accrue
interest at the Interest Rate plus 2% per annum or, if less, the maximum rate
permitted by applicable law, and will be payable on demand ("Default Interest").
Interest on this Convertible Debenture will be calculated on the basis of a
360-day year of twelve 30 day months. All payments of principal and interest
hereunder shall be made for the benefit of the Holder pursuant to the terms of
the Agreement (hereafter defined). At the option of the Company, interest may be
paid in cash or in shares of Common Stock. If the Company determines to pay
interest in shares of Common Stock, it shall be required to notify the Holder of
such election on the Closing Date. On each Conversion Date, interest shall be
paid in shares of Common Stock on the portion of the principal balance of the
Convertible Debenture then being converted. The number of shares of Common Stock
issued as interest shall be determined by dividing the dollar amount of interest
due on the applicable Interest Payment Date by the Conversion Price then in
effect.
This Convertible Debenture (this "Convertible Debenture") is one of a duly
authorized issuance of up to $1,000,000 aggregate principal amount of
Convertible Debentures of the Company referred to in that certain Securities
Purchase Agreement dated as of the date hereof between the Company and the
Purchaser named therein (the "Agreement"). The Agreement contains certain
additional agreements among the parties with respect to the terms of this
Convertible Debenture, including, without limitation, provisions which (A) limit
the conversion rights of the Holder, (B) specify voluntary and mandatory
repayment, prepayment and redemption rights and obligations and (C) specify
Events of Default following which the remaining balance due and owing hereunder
may be accelerated. All such provisions are an integral part of this Convertible
Debenture and are incorporated herein by reference. This Convertible Debenture
is transferable and assignable to one or more Persons, in accordance with the
limitations set forth in the Agreement.
This Convertible Debenture is secured by a Security Agreement (the
"Security Agreement") of even date herewith made by the Company and Holder
creating a security interest in favor of the Holder in certain of the Company's
assets described in the Security Agreement.
The Company shall keep a register (the "Register") in which shall be
entered the names and addresses of the registered holder of this Convertible
Debenture and particulars of this Convertible Debenture held by such holder and
of all transfers of this Convertible Debenture. References to the Holder or
"Holders" shall mean the Person listed in the Register as registered holder of
such Convertible Debentures. The ownership of this Convertible Debenture shall
be proven by the Register.
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1. CERTAIN TERMS DEFINED. All terms defined in the Agreement and not
otherwise defined herein shall have for purposes hereof the meanings provided
for in the Agreement.
2. COVENANTS. The Company covenants and agrees to observe and perform each
of its covenants, obligations and undertakings contained in the Agreement, which
obligations and undertakings are expressly assumed herein by the Company and
made for the benefit of the holder hereof.
3. PAYMENT OF PRINCIPAL. The Company shall repay the remaining unpaid
balance of this Convertible Debenture on the Maturity Date. The Company may, and
shall be obligated to, prepay all or a portion of this Convertible Debenture on
the terms specified in the Agreement.
4. CONVERSION.
4.1 CONVERSION OF CONVERTIBLE DEBENTURE. Subject to Section 5 hereof, the
Holder shall have the right, at its option, at any time from and after the
date of issuance of this Convertible Debenture, convert the principal
amount of this Convertible Debenture, or any portion of such principal
amount, into that number of fully paid and nonassessable shares of Common
Stock (as such shares shall then be constituted) determined pursuant to
this Section 4.1. The number of shares of Common Stock to be issued upon
each conversion of this Convertible Debenture shall be determined by
dividing the Conversion Amount (as defined below) by the Conversion Price
in effect on the date (the "Conversion Date") a Notice of Conversion is
delivered to the Company, as applicable, by the Holder by facsimile or
other reasonable means of communication dispatched prior to 5:00 p.m.,
E.S.T. The term "Conversion Amount" means, with respect to any conversion
of this Convertible Debenture, the sum of (1) the principal amount of this
Convertible Debenture to be converted in such conversion plus (2) accrued
and unpaid interest, if any, on such principal amount at the interest
rates provided in this Convertible Debenture to the Conversion Date plus
(3) Default Interest, if any, on the interest referred to in the
immediately preceding clause (2) plus (4) at the Holder's option, any
amounts owed to the Holder pursuant to Section 4.3 hereof, Section 10.1 of
the Agreement or Section 10.4 of the Agreement.
4.2 CONVERSION PRICE AND LIMITATION. At the option of the Holder, any
portion or all of the outstanding principal amount of this Convertible
Debenture shall be converted into a number of shares of Common Stock at
the conversion price (the "Conversion Price") equal to the lesser of
(i)$1.00 (the "Fixed Conversion Price") and (ii) 80% of the three lowest
weighted average sales prices as reported by Bloomberg LP for the ten (10)
Trading Days immediately preceding but not including the date of the
related Notice of Conversion (the "Formula Conversion Price").
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4.3 AUTHORIZED SHARES.
(1) Consistent with Section 7.11 of the Agreement, the Company
(i) shall promptly irrevocably instruct the Company's transfer agent to
issue certificates for the Common Stock issuable upon conversion of this
Convertible Debenture and (ii) agrees that its issuance of this
Convertible Debenture shall constitute full authority to its officers and
agents who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Convertible Debenture.
(2) If at any time a Holder of this Convertible Debenture submits a
Notice of Conversion (x) the Company does not have sufficient authorized
but unissued shares of Common Stock available to effect such conversion in
full in accordance with the provisions of this Article 4 or (y) the
Company is prohibited by the applicable rules of the OTC Bulletin Board or
the National Market on which the Common Shares are listed and traded at
that time to effect such conversion in full as provided in subsection (d)
below, without stockholder approval (each, a "Conversion Default"), the
Company shall issue to the Holder all of the shares of Common Stock which
are then available to effect such conversion. The portion of this
Convertible Debenture which the Holder included in its Conversion Notice
and which exceeds the amount which is then convertible into available
shares of Common Stock (the "Excess Amount") shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common
Stock in accordance with the terms hereof until (and at the Holder's
option at any time after) the date additional shares of Common Stock are
authorized by the Company, or its stockholders, as applicable, at which
time the Conversion Price in respect thereof shall be the lower of (i) the
Conversion Price on the Conversion Default Date (as defined below) and
(ii) the Conversion Price on the Conversion Date thereafter elected by the
Holder in respect thereof. The Company shall pay to the Holder payments
("Conversion Default Payments") for a Conversion Default in the amount of
(N/365) x .24 x the Excess Amount on the Conversion Date in respect of the
Conversion Default (the "Conversion Default Date"), where N = the number
of days from the Conversion Default Date to the date (the "Authorization
Date") that the Company, or its stockholders, as applicable, authorizes a
sufficient number of shares of Common Stock to effect conversion of the
full outstanding principal balance of this Convertible Debenture. The
Company shall use its best efforts to authorize, or cause its stockholders
to authorize within 40 days of the occurrence of a Conversion Default, as
applicable, a sufficient number of shares of Common Stock as soon as
practicable following the earlier of (i) such time that the Holder
notifies the Company or that the Company otherwise becomes aware that
there are or likely will be insufficient shares to allow full conversion
thereof and (ii) a Conversion Default. The Company shall send notice to
the Holder of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month
shall be paid in cash or shall be convertible into Common Stock (at
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such time as there are sufficient authorized shares of Common Stock) at
the Market Price, at the Holder's option, as follows:
(1) In the event the Holder elects to take such payment in
cash, cash payment shall be made to Holder by the fifth Business Day
of the month following the month in which it has accrued; and
(2) In the event the Holder elects to take such payment in
Common Stock, the Holder may convert such payment amount into
Common Stock at the Conversion Price (as in effect at the time of
conversion) at any time after the fifth Business Day of the month
following the month in which it has accrued (at such time as there
are sufficient authorized shares of Common Stock) in accordance with
the terms of this Article 4.
(3) The Holder's election pursuant to this Section 4.3 shall
be made in writing to the Company at any time prior to 5:00 p.m., E.S.T.,
on the third Business Day of the month following the month in which
Conversion Default payments have accrued. If no election is made, the
Holder shall be deemed to have elected to receive cash. Nothing herein
shall limit the Holders right to pursue actual damages (to the extent in
excess of the Conversion Default Payments) due to the Company's failure to
maintain a sufficient number of authorized shares of Common Stock.
(4) In no event shall the Company issue more than the Maximum
Number of Shares upon conversion of this Convertible Debenture, unless the
Company shall have obtained approval by the stockholders of the Company
("Stockholder Approval") or a waiver of such requirement by the OTC
Bulletin Board or the National Market on which the Common Shares are
listed and traded at that time. Once the Maximum Number of Shares has been
issued (the date of which is hereinafter referred to as the "Maximum
Conversion Date"), unless the Company shall have obtained Stockholder
Approval or a waiver of such requirement by the OTC Bulletin Board or the
National Market on which the Common Shares are listed and traded at that
time within 40 days of the Maximum Conversion Date, the Company shall pay
to the Holder within five (5) Business Days of the Maximum Conversion Date
(or, if the Company is, in good faith, using its best efforts to obtain
Stockholder Approval, then the earlier of (x) 40 days following the
Maximum Conversion Date, and (y) such date that it becomes reasonably
apparent that Stockholder Approval will not be obtained within such 40
days period), the Formula Price plus accrued and unpaid Default Interest,
if any. The Maximum Number of Shares shall be subject to adjustment from
time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring
after the date hereof as contemplated by Article XI of the Agreement. With
respect to each Holder of Convertible Debentures, the Maximum Number of
Shares shall refer to such Holder's pro rata share thereof based upon the
aggregate principal balance of the Convertible Debentures then
outstanding. In the event that the Company obtains
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Stockholder Approval, approval of the OTC Bulletin Board or the National
Market on which the Common Shares are listed and traded at that time, or
otherwise is able to increase the number of shares to be issued above the
Maximum Number of Shares (such increased number being the "New Maximum
Number of Shares"), the references to Maximum Number of Shares above shall
be deemed to be, instead, references to the New Maximum Number of Shares.
4.4 METHOD OF CONVERSION.
(1) Notwithstanding anything to the contrary set forth herein,
upon conversion of this Convertible Debenture in accordance with the terms
hereof, the Holder shall not be required to physically surrender this
Convertible Debenture to the Company unless the entire unpaid principal
amount of this Convertible Debenture is so converted. Rather, records
showing the principal amount converted (or otherwise repaid) and the date
of such conversion or repayment shall be maintained on a ledger
substantially in the form of ANNEX A attached hereto (a copy of which
shall be delivered to the Company or transfer agent with each Notice of
Conversion). It is specifically contemplated that the Holder hereof shall
act as the calculation agent for conversions and repayments. In the event
of any dispute or discrepancies, such records maintained by the Holder
shall be controlling and determinative in the absence of manifest error or
failure of Holder to record the principal amount converted (or otherwise
repaid) from time to time, in which events the record of the Company shall
be controlling and determinative. The Holder and any assignee, by
acceptance of this Convertible Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following a conversion of a
portion of this Convertible Debenture, the principal amount represented by
this Convertible Debenture will be the amount indicated on ANNEX A
attached hereto (which may be less than the amount stated on the face
hereof).
(2) The Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery
of shares of Common Stock or other securities or property on conversion of
this Convertible Debenture in a name other than that of the Holder (or in
street name), and the Company shall not be required to issue or deliver
any such shares or other securities or property unless and until the
person or persons (other than the Holder or the custodian in whose street
name such shares are to be held for the Holder's account) requesting the
issuance thereof shall have paid to the Company the amount of any such tax
or shall have established to the satisfaction of the Company that such tax
has been paid.
(3) Subject to Section 5 hereof, upon receipt by the Company of a
Notice of Conversion, the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such conversion, the outstanding
principal amount and the amount of accrued and unpaid interest on this
Convertible Debenture shall be deemed reduced to reflect such conversion,
and, unless the Company defaults on its obligations under this
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Article 4, all rights with respect to the portion of this Convertible
Debenture being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. Subject to Section 5 hereof, if the
Holder shall have given a Notice of Conversion as provided herein, the
Company's obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective of the
absence of any action by the Holder to enforce the same, any waiver or
consent with respect to any provisions thereof, the recovery of any
judgment against any person or any action by the Holder to enforce the
same, any failure or delay in the enforcement of any other obligation of
the Company to the Holder of record, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by
the Holder of any obligation to the Company, and subject to Section 4.4(a)
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with such
conversion. The date of receipt (including receipt via telecopy) of such
Notice of Conversion shall be the Conversion Date so long as it is
received before 5:00 p.m., E.S.T., on such date.
(4) Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the expiration of the
Deadline with respect to a conversion of any portion of this Convertible
Debenture for any reason, then (unless the Holder otherwise elects to
retain its status as a holder of Common Stock by so notifying the
Company), the Holder shall regain the rights of a Holder of this
Convertible Debenture with respect to such unconverted portions of this
Convertible Debenture and the Company shall, as soon as practicable,
return such unconverted Convertible Debenture to the holder or, if the
Convertible Debenture has not been surrendered, adjust its records to
reflect that such portion of this Convertible Debenture not been
converted. In all cases, the Holder shall retain all of its rights and
remedies (including, without limitation, (i) the right to receive
Conversion Default Payments to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the
right to have the Conversion Price with respect to subsequent conversions
determined in accordance with Section 4.3 for the Company's failure to
convert this Convertible Debenture.
(5) In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and its
compliance with the provisions contained in Section 4.1 and in this
Section 4.4, the Company shall use its best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon conversion
to the Holder by crediting the account of Holder's Prime Broker with DTC
through its Deposit Withdrawal Agent Commission System.
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5. REDEMPTION BY COMPANY.
5.1 COMPANY'S RIGHT TO REDEEM. In accordance with the provisions of the
Purchase Agreement, the Company may elect, or be required, upon receipt of
a Notice of Conversion, to redeem in whole or in part, the remaining
unpaid principal amount of this Convertible Debenture, for cash at a
redemption price (the "Redemption Price") equal to (x) the number of
shares of Common Stock into which this Convertible Debenture is then
convertible, times (y) the average Closing Bid Price of Common Stock for
the five (5) Trading Days as reported by Bloomberg L.P. immediately prior
to the date that this Convertible Debenture is called for redemption, plus
accrued and unpaid interest.
5.2 MECHANICS OF REDEMPTION. The Company shall effect each such redemption
within 10 business days of giving notice of its election to redeem by
facsimile with a copy by either overnight or 2-day courier to the Holder
of this Convertible Debenture to be redeemed at the address and facsimile
number of such Holder appearing in the Company's register for the
Convertible Debentures. Such redemption notice shall indicate whether the
Company will redeem all or part of such portion of the Convertible
Debenture to be redeemed and the applicable Redemption Price. The Company
shall not be entitled to send any notice of redemption and begin the
redemption procedure unless it has (i) the full amount of the Redemption
Price, in cash, available in a demand or other immediately available
account in a bank or similar financial institution or (ii) immediately
available credit facilities, in the full amount of the Redemption Price,
with a bank or similar financial institution on the date the redemption
notice is sent to the Holders of this Convertible Debenture. Provided,
however, the Company will process any Notice of Conversion received prior
to the issuance of a notice of redemption; and further provided that,
after a notice of redemption has been issued, the Holder may issue a
Notice of Conversion which will not be honored unless the Company fails to
make the redemption payment when due. In the event of such failure, the
Notice of Conversion will be honored as of the date of the Notice of
Conversion. Additionally, if the Company fails to make full payments of
the Redemption Price of this Convertible Debenture being redeemed by the
tenth day following the notice or redemption, then the Company waives its
right to redeem any of the remaining then outstanding Debentures, unless
approved by the Holder.
5.3 PAYMENT OF REDEMPTION PRICE. The Redemption Price shall be paid to the
Holder of this Convertible Debenture within 10 business days of the
delivery of the notice of such redemption to such Holder.
6. HOLDER'S RIGHT TO ADVANCE NOTICE OF ELECTION REDEEM.
6.1 HOLDER'S RIGHT TO ELECT TO RECEIVE NOTICE OF CASH REDEMPTION BY
COMPANY. The Holder of this Convertible Debenture shall have the right to
require Company to provide advance notice stating whether the Company will
elect to redeem all or part of
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the redeemable portion in cash, pursuant to the Company's redemption
rights discussed in Section 5.1 above.
6.2 MECHANICS OF HOLDER'S ELECTION NOTICE. Holder shall give notice to the
Company by facsimile (the "Election Notice"), requiring that the Company
disclose whether the Company would elect to redeem the redeemable portion
of this Convertible Debenture (in whole or in part) if the Holder were to
provide a Notice of Conversion and sought to convert the Convertible
Debenture in such principal amount as is specified in the Notice of
Election.
6.3 COMPANY'S RESPONSE. Company must respond, disclosing its election,
within two (2) business days of receipt of Holder's Election Notice via
facsimile. If Company does not respond to Holder within two (2) business
days (by 12:00 noon, if required above) via facsimile, Company shall be
deemed to have forfeited its right to exercise redemption pursuant to
Section 5(a) upon its receipt of (but only with respect to) that Notice of
Conversion.
7. MISCELLANEOUS. This Convertible Debenture shall be deemed to be a
contract made under the laws of the State of Georgia, and for all purposes shall
be governed by and construed in accordance with the laws of said State. The
parties hereto, including all guarantors or endorsers, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Convertible Debenture,
except as specifically provided herein, and asset to extensions of the time of
payment, or forbearance or other indulgence without notice. The Company hereby
submits to the exclusive jurisdiction of the United States District Court for
the Middle District of Georgia and of any Georgia state court sitting in
Atlanta, Georgia for purposes of all legal proceedings arising out of or
relating to this Convertible Debenture. The Company irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. The Company hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to
this Convertible Debenture.
The Holder of this Convertible Debenture by acceptance of this Convertible
Debenture agrees to be bound by the provisions of this Convertible Debenture
which are expressly binding on such Holder.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: June 1, 2000
eMissions Testing, Inc.
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------
Xxxxxxx Xxxxxxx
President
CONVERTIBLE DEBENTURE
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ANNEX A
CONVERSION AND REPAYMENT LEDGER
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INTEREST PRINCIPAL CONVERTED
DATE PRINCIPAL BALANCE CONVERTED PAID OR PAID NEW PRINCIPAL BALANCE ISSUER INITIALS HOLDER INITIALS
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FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES:
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
SPECIAL INSTRUCTIONS:
-----------------------------------------------------------
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NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible Debenture)
The undersigned hereby irrevocably elects to convert $________ of the
principal balance of the Convertible Debenture into shares of Common Stock, no
par value per share (the "Common Stock"), of eMissions Testing, Inc. (the
"Company") according to the conditions hereof, as of the date written below. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. The undersigned, as contemplated by Section 5.1 of the Securities
Purchase Agreement pursuant to which the Convertible Debenture was issued,
hereby states that the representations and warranties of the undersigned set
forth therein are true and correct in all material respects as of the date
hereof (provided, the undersigned makes no representations concerning its
investment intent with respect to the Common Stock received upon this
conversion).
Conversion calculations:
Date of Conversion
Applicable Conversion Price
Number of Shares
Name/Signature
Address:
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