Exhibit A
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 AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES. 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: [ ]
$[ ]
No. 1
MILLENNIUM CELL INC.
CONVERTIBLE DEBENTURE
DUE ON [ ](1)
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 Convertible Debentures,
due on [ ](2) (subject to extension as herein provided) in the aggregate
principal amount of Six Million Dollars ($6,000,000) [up to Four Million
Dollars ($4,000,000)] (collectively, the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to the order of
MAINFIELD ENTERPRISES, INC. or its registered assigns (the "Holder") the
principal sum of Six Million Dollars ($6,000,000) [up to $4,000,000 (Four
Million Dollars)] and any additional sums due pursuant to the terms hereof on
[ ](3), or such earlier date as the Debentures are required or permitted to be
repaid hereunder ("Maturity Date"), provided, that such Maturity Date may be
extended by mutual consent of the Company and the Holder on up to six occasions
by 30 days, and to pay interest to the Holder on the principal amount of this
Debenture in accordance with the provisions hereof. This Debenture is subject to
the following additional provisions.
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1 18th month anniversary
2 18th month anniversary
3 18th month anniversary
1. Definitions. As used in this Debenture, the following terms shall have the
meanings set forth in this Section 1:
"Adjustment Date" means the tenth Trading Day following the
Delivery Date.
"Adjustment Notice" means a written notice delivered by the
Company to a Holder pursuant to Section 5(c), indicating the Company's
intent to adjust the Conversion Price pursuant to Section 5(c).
"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 Original Issue Date 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 Original Issue Date (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 Original Issue
Date), (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).
2
"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 any 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
any successor thereto); (c) if the Common Stock is not then listed or
quoted on an Eligible Market or the OTC Bulletin Board (or any
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 a subsidiary thereof which entitle the holder thereof to acquire
Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock or other securities that
entitle the holder to receive, directly or indirectly, Common Stock.
"Company Conversion Date" means the tenth (10th) day
immediately following the date a Company Conversion Notice together
with the Conversion Schedule is delivered to the Holder pursuant to
Section 5(b).
"Company Conversion Notice" means a written notice in the form
attached hereto as Exhibit B.
"Conversion Date" means either a Holder Conversion Date, a
Company Conversion Date or an Adjustment Date.
"Conversion Notice" means either a Holder Conversion Notice or
a Company Conversion Notice.
"Conversion Price" means the Initial Conversion Price, subject
to adjustment from time to time pursuant to Sections 5(c) (solely with
respect to conversions pursuant to Section 5(c)) and 5(j)).
3
"Delivery Date" means the date an Adjustment Notice is
delivered to the Holder pursuant to Section 5(c).
"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 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 the
issuance of stock or Underlying Shares at issue; (ii) such shares of
Common Stock issuable in respect of the event for which the Equity
Conditions must be satisfied 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 Section 5(d)(i), Section 5(d)(ii) or 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 (vii) 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 or liquidated damages in
respect of any Debentures or any other "Debenture" (as such term is
defined in the Purchase Agreement), as and when the same becomes due
and payable (whether by acceleration or otherwise), or any default in
the payment of interest in respect of any Debentures, 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;
4
(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 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) during the Effectiveness Period (as defined in the Registration Rights
Agreement) relating to the First [Second] Registration Statement, the
effectiveness of the First [Second] 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
First [Second] Registration Statement, in either case, for more than
seven consecutive Trading Days or an aggregate of twenty Trading Days
(which need not be consecutive Trading Days);
(ix) 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);
(x) an Event (as defined in the Registration Rights Agreement) shall not
have been cured to the satisfaction of the Holder prior to the
expiration of ten days from the Event Date (as defined in the
Registration Rights Agreement) relating thereto;
(xi) the Company or any Subsidiary defaults in any of its obligations under
any other debenture (including without limitation, any Debenture (as
defined in the Purchase Agreement)) 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 Subsidiary 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;
5
(xii) the occurrence of an Event of Default (as defined in the Debentures)
under any Debenture or the occurrence of any event that, with the
passage of time and without being cured, would constitute an Event of
Default (as defined in the Debentures) under any Debenture; or
(xiii) the ratio of the Company's Unsecured Cash and Cash-Equivalents
balances to Unsecured Indebtedness shall be less than .80 to 1.
["First Registration Statement" shall have the meaning set
forth in the Registration Rights Agreement.]
"Holder Conversion Date" means the date a Holder Conversion
Notice together with the Conversion Schedule is delivered to the
Company pursuant to Section 5(a).
"Holder Conversion Notice" means a written notice in the form
attached hereto as Exhibit A.
"Holder Prepayment Price" for any Debentures required to be
prepaid pursuant to Section 7, shall equal the sum of: (i) the
principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"Initial Conversion Price" shall equal $[ ](4) (subject to
equitable adjustment for stock splits, recombinations and similar
events).
"Interest Payment Date" means each March 31, June 30,
September 30 and December 31, beginning on the first such date
following the Original Issue Date, except if such date is not a Trading
Day, in which case such Interest Payment Date shall be the next
succeeding Trading Day.
"Index Price" means the average of the VWAP's for the 5
consecutive Trading Days immediately following the Delivery Date.
"Interest Rate" means 6%.
"Liquidation" means for any Person, any liquidation,
dissolution or winding-up of such Person, whether voluntary or
involuntary, by operation or law or otherwise.
"Mandatory Convertible Amount" means $300,000, provided, that
any respect to each Adjustment Date, such amount may be increased up to
$2,500,000 by mutual consent of the Holder and the Company reached
prior to the applicable Adjustment Date.
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4 120% of the average of the Closing Prices for the five Trading Days
immediately preceding the [Closing Date] [Additional Closing Date].
6
"Mandatory Prepayment Amount" means for any Debentures: (I)
with respect to an Event of Default under clauses (i)-(xii) hereof,
shall equal the sum of: (i) the greater of (A) 130% of the principal
amount of Debentures to be prepaid and, if applicable, the Reinstated
Principal, plus all accrued and unpaid interest thereon, and (B) the
principal amount of Debentures to be prepaid and, if applicable, the
Reinstated Principal, plus all accrued and unpaid interest thereon,
divided by the Conversion Price on the Trading Day immediately
preceding (x) the date of the Event of Default or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the Closing Price on (x) the date of the Event of Default
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; and (II) with
respect to an Event of Default under clause (xiii) hereof, shall equal
the sum of: (i) 125% of the principal amount of Debentures to be
prepaid, plus 125% of all accrued and unpaid interest thereon and (ii)
all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures.
"Nasdaq" means the Nasdaq National Market.
"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.
"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 parties affiliates, directors, officers,
employees or agents).
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of January 16, 2004, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of January 16, 2004, to which the Company and the
original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Reinstated Principal" means the principal amount of
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.
["Second Registration Statement" shall have the meaning set
forth in the Registration Rights Agreement."]
7
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" shall have the meaning set forth in the Purchase
Agreement.
"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.
"Unsecured Cash and Cash Equivalents" shall have the meaning
set forth in the Purchase Agreement.
"Unsecured Indebtedness" 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.
"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. Interest.
(a) The Company shall pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture (including any interest
added to such principal in accordance with this Section 2) at an annual rate
equal to the Interest Rate, payable quarterly in arrears on each Interest
Payment Date. Interest shall be calculated on the basis of a 360-day year and
shall accrue daily commencing on the Original Issue Date. Subject to the
conditions and limitations set forth below, the Company will pay interest under
this Debenture either (i) in cash, or (ii) by delivering by the third Trading
Day following the Interest Payment Date, a number of freely tradable shares of
Common Stock equal to the quotient obtained by dividing the amount of such
interest by the arithmetic average of the VWAP for the five Trading Days
immediately preceding (but not including) the Interest Payment Date. To pay the
interest payable on an Interest Payment Date in freely tradable shares of Common
Stock, the Company must deliver written notice to the Holder indicating its
election to make such stock payment at least 20 calendar days prior to such
8
Interest Payment Date, but the Company may indicate in any such notice that the
election contained therein shall continue for subsequent Interest Payment Dates
until revised on not less than 20 calendar days notice prior to an Interest
Payment Date. Failure to timely provide such written notice shall be deemed an
election by the Company to pay such interest in cash. All interest payable on
any Interest Payment Date must be paid in the same manner.
(b) Notwithstanding the foregoing, the Company may not pay interest in shares of
Common Stock unless, on the Interest Payment Date, the Equity Conditions are
satisfied with respect to all of the Underlying Shares then issuable upon
conversion in full of all outstanding Debentures. If the Company is required but
fails to pay interest in cash on any Interest Payment Date, the Holder may (but
shall not be required to), by notice to the Company, treat such interest as if
it had been accreted to the principal amount of this Debenture as of such
Interest Payment Date.
3. 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 or any payment of interest hereon, and
for all other purposes, absent actual notice to the contrary.
4. 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.
5. Conversion
(a) At the option of the Holder. The principal amount of this Debenture then
outstanding is convertible into shares of Common Stock at the Conversion Price
(subject to limitations set forth in Section 5(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 5(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"). The number of Underlying
Shares issuable upon any conversion hereunder shall (subject to limitations set
forth in Section 5(d)) equal the outstanding principal amount of this Debenture
to be converted divided by the Initial 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 5(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.
9
(b) At the option of the Company. Subject to the conditions set forth in this
Section 5(b) and Section 5(d), at any time after the first year anniversary of
the Original Issue Date, the Company may require a conversion of principal
amount of this Debenture, at the Conversion Price and on the Company Conversion
Date, of all or a portion of the outstanding principal amount of this Debenture
if: (i) the Closing Price for each of 20 consecutive Trading Days is equal to or
greater than 135% of the Initial Conversion Price and (ii) all of the Equity
Conditions are satisfied as of the Company Conversion Date with respect to all
of the Underlying Shares potentially issuable in connection with such proposed
conversion. The Company shall exercise its right to require conversions
hereunder by delivering to the Holder a Company Conversion Notice together with
a Conversion Schedule within 10 Business Days of the satisfaction of the
condition set forth in clause (i) of the immediately preceding sentence.
Notwithstanding anything herein to the contrary, if any of the conditions set
forth in clauses (i) and (ii) herein shall cease to be in effect during the
period between the date of the delivery of the Company Conversion Notice and the
Company Conversion Date, then the Holder may elect, by written notice to the
Company given at any time after any such conditions shall cease to be in effect,
to invalidate ab initio such conversion. The number of Underlying Shares
issuable upon any conversion hereunder shall (subject to limitations set forth
in Section 5(d)) equal the outstanding principal amount of this Debenture to be
converted (including any interest payments accreted to principal pursuant to the
terms hereof) divided by the Conversion Price. The conversion subject to each
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 5(d)(i) and/or
Section 5(d)(ii), the Holder shall notify the Company of this fact and the
Company shall: (x) honor the conversion for the maximum principal amount of
Debentures permitted, pursuant to Section 5(d)(i) and/or Section 5(d)(ii), 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 exceed the amount permitted under Section 5(d)(i)
and/or Section 5(d)(ii). Notwithstanding anything herein to the contrary, the
Company shall not be entitled to deliver a Company Conversion Notice prior to
the 10th Business Day following the delivery of a Company Conversion Notice
pursuant to this or any other Debenture or prior to the 10th Business Day
following any Mandatory Conversion Date under Section 5(a).
(c) Company's option to adjust Conversion Price and force conversion. Subject to
the conditions set forth in this Section 5(c) and Section 5(d), at any time and
from time to time after the Original Issue Date, the Company shall have the
option, upon the delivery of an Adjustment Notice to the Holder, to adjust the
Conversion Price then in effect with respect to the Mandatory Convertible Amount
applicable to such Adjustment Notice to equal the lesser of: (A) the Initial
Conversion Price and (B) 93% of the Index Price. Subject to the terms hereof
(including, without limitation, Section 5(d)(i) and (ii)), on each Adjustment
Date immediately following the delivery of an Adjustment Notice, the applicable
Mandatory Convertible Amount shall be converted into Underlying Shares at the
Conversion Price as adjusted on such Adjustment Date pursuant to the terms of
the immediately preceding sentence, provided, that such conversion shall only
occur if all of the Equity Conditions are satisfied as of the Adjustment Date
with respect to all of the Underlying Shares potentially issuable in connection
with such proposed conversion. Notwithstanding anything herein to the contrary,
the Company shall not be entitled to deliver an Adjustment Notice prior to the
tenth (10th) Trading Day immediately following the immediately preceding
Delivery Date hereunder or within 10 Trading Days of a Company Conversion Date
under Section 5(b). If a conversion of the Mandatory Convertible Amount would
result in the issuance to the Holder of Underlying Shares in excess of the
amount permitted pursuant to Section 5(d)(i) and/or Section 5(d)(ii), the Holder
shall notify the Company of this fact and the Company shall: (x) honor the
conversion for the maximum principal amount of Debentures permitted, pursuant to
Section 5(d)(i) and/or Section 5(d)(ii), to be converted on the applicable
Adjustment Date and (y) cancel the Adjustment Notice and conversion as to the
portion of the Mandatory Convertible Amount the conversion of which would exceed
the amount permitted pursuant to Section 5(d)(i) and/or Section 5(d)(ii).
10
(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. 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. This restriction may not be waived.
(ii) If the Company has not previously obtained Shareholder Approval (as defined
below), then the Company may not issue in excess of the Issuable Maximum upon
conversions of the Debentures at a conversion price which is less than the
closing bid price of the Common Stock on the Trading Day immediately preceding
the Execution Date (as defined in the Purchase Agreement). The "Issuable
Maximum" means a number of shares equal to 6,922,594 (which equals 19.99% of the
Common Stock outstanding on the date of execution of the Purchase Agreement less
the Initial Shares issued at Closing) less [ ](5). 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
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5 For Debentures issuable at the Additional Closing, if any.
11
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 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 Holder shall have the right to require the Company to use
its best efforts to 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. 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. By the third Trading Day after 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 issuable upon such
conversion which, unless required by the Purchase Agreement, shall be free of
all restrictive legends. 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 limitations, Section 5(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 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.
12
(h) If by the third Trading Day after a Conversion Date the Company fails to
deliver to the Holder such Underlying Shares in such amounts and in the manner
required pursuant to Section 5(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 to the Holder such Underlying Shares in such amounts and in the manner
required pursuant to Section 5(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
5(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.
13
(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) Subsequent Equity Sales. If the Company or any subsidiary thereof, as
applicable, at any time while this Debenture is outstanding, shall issue shares
of Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock, at a price per share less than the Conversion Price (if
the holder of the Common Stock or Common Stock Equivalent 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 issued in connection with such issuance, be entitled
to receive shares of Common Stock at a price less than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion
Price), then, at the option of the Holder for such conversions as it shall
indicate, the Conversion Price shall be adjusted to mirror the conversion,
exchange or purchase price for such Common Stock or Common Stock Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The Company
shall notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalent subject to this section,
indicating therein the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms. No further adjustments
shall be made to the Conversion Price upon the actual issuance of Common Stock
upon conversion or exercise of the applicable Common Stock Equivalent.
Notwithstanding the foregoing, no adjustment will be made under this Section
5(j)(iii) 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 or exchange (but only if such exchange does
not, directly or indirectly, result in a reduction of the exercise price
therefor on a per share basis) of any options or warrants to employees, officers
and directors of or consultants to the Company pursuant to any stock option
plan, employee stock purchase plan or similar plan or incentive or consulting
arrangement approved by the Company's board of directors;
(B) Any rights or agreements to purchase Common Stock Equivalents outstanding on
the date hereof and as specified in Schedule 3.1(g) to the Purchase Agreement
(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);
14
(C) Any Common Stock or Common Stock Equivalents issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or other similar
business combination;
(D) Any issuances of Common Stock or Common Stock Equivalents to a Person which
is or will be, itself or through its subsidiaries, an operating company in a
business related to or complementary with the business of the Company and in
which the Company receives reasonably material benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities;
(E) Any Common Stock Equivalents that entitle the holders thereof to acquire up
to 500,000 shares of Common Stock issued pursuant to any equipment leasing
arrangement;
(F) Any Common Stock or Common Stock Equivalents issued to pay all or a portion
of any investment banking, finders or similar fee or commission, which entitles
the holders thereof to acquire shares of Common Stock at a price not less than
the market price of the Common Stock on the date of such issuance and which is
not subject to any adjustments other than on account of stock splits and reverse
stock splits;
(G) A bona fide underwritten public offering of the Common Stock resulting in
gross proceeds in excess of $15 million to the Company (it being understood that
equity line transactions, including any on going warrant financing, or any
similar arrangements shall not constitute a bona fide underwritten public
offering of the Common Stock for the purposes hereof);
(H) Any adjustment to the Conversion Price pursuant to Section 5(c);
(I) The issuance of any warrants or debentures or any shares of Common Stock
issued upon: (x) the exercise of warrants issued by the Company pursuant to the
June 19, 2002 Securities Purchase Agreement (the "June Purchase Agreement"), (y)
the exercise of any warrants issued by the Company pursuant to the October 31,
2002 Securities Purchase Agreement (the "October Purchase Agreement"), and (z)
the conversion of debentures issued pursuant to the October Purchase Agreement.
(iv) Calculations. All calculations under this Section 5(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.
15
(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 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
(omitting Section 5(j)(iii) hereof) 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 any accrued but unpaid interest 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.
16
(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 Change of Control Transactions), the
Holders of the Debentures then outstanding shall have the right thereafter to
convert such shares 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 shares of Debentures could have been converted immediately prior to such
reclassification or share exchange would have been entitled. 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
notify 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 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 principal amount of this Debenture 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. 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
5(o), be issuable upon a conversion hereunder, the Company shall pay an amount
in cash equal to the Conversion Price multiplied by such fraction.
17
(p) The issuance of certificates for Common Stock on conversion of
principal amount 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 5(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 5(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.
6. Prepayments Upon Events of Default. Upon the occurrence of an Event of
Default, each Holder shall (in addition to all other rights it may have
hereunder or under applicable law), have the right exercisable at the sole
option of such Holder, and by delivery of a written notice to the Company to
require the Company (an "Event of Default Notice"), 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 6 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 accrued but unpaid interest 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
18
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.
7. Prepayment at the Option of the Holder.
(i) At any time following the Original Issue Date and prior to the Maturity
Date, 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 (as indicated in such Holder Prepayment Notice) for an
amount in cash, equal to the Holder Prepayment Price which shall be due and
payable on the 20th Trading Day following the Holder Notice Date.
Notwithstanding anything herein to the contrary, the Holder shall only be
entitled to deliver a Holder Prepayment Notice pursuant to the terms hereof if
the average of the Closing Prices is less than: (x) $1.00 (subject to equitable
adjustment for stock splits, recombinations and similar events) during any 30
consecutive Trading Day period, (y) $.75 (subject to equitable adjustment for
stock splits, recombinations and similar events) during any 15 consecutive
Trading Day period and (z) $.50 (subject to equitable adjustment for stock
splits, recombinations and similar events) during any 5 consecutive Trading Day
period.
(ii) If any portion of the Holder Prepayment Price due pursuant to the terms
hereof remains unpaid after the 20th Trading Day following the Holder Notice
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 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. The Holder may convert any portion of the outstanding
principal amount of the Debentures subject to a prepayment hereunder prior to
the date that the Holder Prepayment Price is due and paid in full.
8. Ranking. This Debenture ranks pari passu with all other Debentures now or
hereafter issued pursuant to the Transaction Documents. Except as set forth in
Schedule 3.1(x) to the Purchase Agreement, no indebtedness of the Company is
senior to this Debenture in right of payment, whether with respect of interest,
damages or upon liquidation or dissolution or otherwise. Except as set forth in
Schedule 3.1(x) to the 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.
19
9. 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 9(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 therefor, 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.
20
(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.
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SIGNATURE PAGE FOLLOWS]
21
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: -------------------------------
Name: Xxxxxxx X. Xxxx Ph.D.
Title:President, Chief Executive Officer &
Acting Chief Financial Officer
22
EXHIBIT A
Debentures Due [ ]
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 indicated below, into shares of Common Stock of Millennium Cell Inc.,
as of the date written below. 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:
------------------------------------------------
Date to Effect Conversion
------------------------------------------------
Principal amount of Debenture owned prior to conversion
------------------------------------------------
Principal amount of Debenture to be Converted
(including _______________ of interest added under Section 2(b)
of the Debenture)
---------------------------------------------------
Principal amount of Debenture remaining after Conversion
-------------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------------
Applicable 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 5(d)(i) of the Debenture.
EXHIBIT B
Debentures Due [ ]
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 convert the principal amount of Debenture indicated below, into
shares of Common Stock of Millennium Cell Inc., as of the date written below. 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:
------------------------------------------------
Date to Effect Conversion
------------------------------------------------
Principal amount of Debenture owned prior to conversion
------------------------------------------------
Principal amount of Debenture to be Converted
(including _______________ of interest added under Section 2(b)
of the Debenture)
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Principal amount of Debenture remaining after Conversion
-------------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------------
Applicable Conversion Price
--------------------------------------------------
Name of Holder
By:_______________________________________________
Name:
Title:
MILLENNIUM CELL INC.
By:_______________________________________________
Name:
Title:
2
Schedule 1
CONVERSION SCHEDULE
Debentures due __________ in the aggregate principal amount of [$4,000,000]
[$6,000,000] issued by Millennium Cell Inc. This Conversion Schedule reflects
conversions made under the above referenced Debentures.
Dated:
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Date of Conversion Amount of Conversion Aggregate Principal Applicable Conversion Price
Amount Remaining
Subsequent to
Conversion
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