FORM OF DEBENTURE
ANNEX
I
TO
<PROTOTYPE
FOR EACH ISSUANCE>
FORM
OF DEBENTURE
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
AMERICAN
SECURITY RESOURCES CORPORATION
7.75%
CONVERTIBLE DEBENTURE SERIES 08-__4
DUE
_______, 20__5
FOR VALUE RECEIVED, AMERICAN SECURITY RESOURCES
CORPORATION, a corporation organized and existing under the laws of the
State of Nevada (the "Company"), promises to pay to ___________________, the
registered holder hereof (the "Holder"), the principal sum of
_____________________ and 00/100 Dollars (US
$_______)6 on ______, 20__7 (the “Maturity Date”) and to pay
interest on the principal sum outstanding from time to time in arrears at the
rate of 7.75% per annum, accruing from ______________, 200_,8 the date of initial issuance of
this Debenture (the “Issue Date”), on the date (each, an “Interest Payment
Date”) which is the earlier of (i) the next Conversion Date (as defined below),
or (iii the Maturity Date, as the case may be. Interest shall accrue
monthly (pro-rated on a daily basis for any period longer or shorter than a
month) from the later of the Issue Date or the previous Interest Payment Date
and shall be payable, subject to the other provisions of this Debenture, in cash
or in Common Stock. If not paid in full on an Interest Payment Date, interest
shall be fully cumulative and shall accrue on a daily basis, based on a 365-day
year, monthly or until paid, whichever is earlier. Additional
provisions regarding the payment of interest are provided in Section 4(D) below
(the terms of which shall govern as if this sentence were not included in this
Debenture).
This Debenture is being issued pursuant
to the terms of the Securities Purchase Agreement, dated as of February ___,
2008 (the “Securities Purchase Agreement”), to which the Company and the Holder
(or the Holder’s predecessor in interest) are parties. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Securities Purchase Agreement.
This
Debenture is subject to the following additional provisions:
1. The
Debentures will initially be issued in denominations determined by the Company,
but are exchangeable for an equal aggregate principal amount of Debentures of
different denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration or
transfer or exchange.
2. The
Company shall be entitled to withhold from all payments of principal of, and
interest on, this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and Holder shall execute and deliver all
required documentation in connection therewith.
3. This
Debenture has been issued subject to investment representations of the original
purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended (the "Act"), and other applicable state and
foreign securities laws and the terms of the Securities Purchase
Agreement. In the event of any proposed transfer of this Debenture,
the Company may require, prior to issuance of a new Debenture in the name of
such other person, that it receive reasonable transfer documentation that is
sufficient to evidence that such proposed transfer complies with the Act and
other applicable state and foreign securities laws and the terms of the
Securities Purchase Agreement. Prior to due presentment for transfer
of this Debenture, the Company and any agent of the Company may treat the person
in whose name this Debenture is duly registered on the Company's Debenture
Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Debenture be overdue,
and neither the Company nor any such agent shall be affected by notice to the
contrary.
4. A.
(i) At any time on or after the Issue Date and prior to the time this
Debenture is paid in full in accordance with its terms (including, without
limitation, after the occurrence of an Event of Default, as defined below, or,
if the Debenture is not fully paid or converted after the Maturity Date), the
Holder of this Debenture is entitled, at its option, subject to the following
provisions of this Section 4, to convert this Debenture at any time into shares
of Common Stock, $0.001 par value ("Common Stock"), of the Company at the
Conversion Price (as defined below). Any such conversion is referred
to as a “Voluntary Conversion.”
(ii) On the Maturity Date
the Company shall pay the principal and accrued interest (through the actual
date of payment) of any portion of this Debenture which is then
outstanding.
(iii) For purposes of this
Debenture, the following terms shall have the meanings indicated
below:
“Conversion
Price” means the (i) the VWAP for the three (3) Regular Trading Days (which need
not be consecutive) selected by the Holder from 20 Trading
Days ending on the Trading Day immediately before the relevant Conversion Date,
multiplied by (ii) eighty percent (80%).
“Regular
Trading Day,” “Reporting Service,” “Trading Day,” and “VWAP” have the
meanings ascribed to them in the Securities Purchase Agreement.
“Conversion
Date” means the date on which the Holder faxes or otherwise delivers
a Notice of Conversion to the Company so that it is received by the Company on
or before such specified date.
“Conversion
Shares” has the meaning ascribed to in Section 4(H) hereof.
B. A
Voluntary Conversion shall be effectuated by the Holder by faxing a notice of
conversion (“Notice of Conversion”) to the Company as provided in this
paragraph. The Notice of Conversion shall be executed by the Holder
of this Debenture and shall evidence such Holder's intention to convert this
Debenture or a specified portion hereof in the form annexed hereto as Exhibit
A. Delivery of the Notice of Conversion shall be accepted by the
Company by hand, mail or courier delivery at the address specified in said
Exhibit A or at the facsimile number specified in said Exhibit A (each of such
address or facsimile number may be changed by notice given to the Holder in the
manner provided in the Securities Purchase Agreement). On the Issue
Date, the Holder issued a Purchase Note specifically designated as payment of
the balance of the purchase price for this specific Debenture (the “Specific
Purchase Note”). Notwithstanding the foregoing, this
Debenture may be converted by way of a Voluntary Conversion only
after the Specific Purchase Note has been paid or otherwise satisfied in
full.
C. Notwithstanding
any other provision hereof or of any of the other Transaction Agreements, in no
event (except (i) as specifically provided herein as an exception to this
provision, or (ii) while there is outstanding a tender offer for any or all of
the shares of the Company’s Common Stock) shall the Holder be entitled to
convert any portion of this Debenture, or shall the Company have the obligation
to convert such Debenture (and the Company shall not have the right to pay
interest hereon in shares of Common Stock) to the extent that, after such
conversion or issuance of stock in payment of interest, the sum of (1) the
number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Debentures or
other convertible securities or of the unexercised portion of warrants or other
rights to purchase Common Stock), and (2) the number of shares of Common Stock
issuable upon the conversion of the Debentures with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such conversion). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, except as otherwise provided in clause (1) of such
sentence. Nothing herein shall preclude the Holder from disposing of
a sufficient number of other shares of Common Stock beneficially owned by the
Holder so as to thereafter permit the continued conversion of this
Debenture.
D. (i)
Subject to the terms of Section 4(C) and to the other terms of this Section
4(D),
(x)
interest on the principal amount of this Debenture converted pursuant to a
Notice of Conversion, and
(y) any
other amounts due to the Holder with respect to this Debenture or pursuant to
any other provision of any of the Transaction Agreements, including but not
necessarily limited to, costs of collection (collectively, “Other
Costs”),
shall be
due and payable, at the option of the Holder, in cash or in shares of Common
Stock on the Interest Payment Date.
(ii) If the interest
payable in connection with a Voluntary Conversion or if Other Costs are to be
paid in cash, the Company shall make such payment within three (3) Trading Days
after the Interest Payment Date (for interest) or of the demand for such Other
Costs by the Holder, as the case may be.
(iii) If interest or Other
Costs are to be paid in Common Stock, the number of shares of Common
Stock to be received shall be determined by dividing the dollar amount of the
interest by the Conversion Price in effect on the relevant Interest Payment Date
or on the date of demand for such Other Costs by the Holder, as the case may
be. For such purposes, the date of a demand for Other Costs by the
Holder shall be treated (with respect to the amount of such Other Costs) as an
Interest Payment Date.
E. Anything
in the other provisions of this Debenture or any of the other Transaction
Agreements to the contrary notwithstanding, the Company shall not have the right
to prepay any or all of the outstanding principal of this Debenture, without the
prior written consent of the Holder in each instance (which consent may be
withheld for any reason or no reason, in the sole discretion of the
Holder).
F. (i) The
following provisions apply to the issuances of Common Stock in payment of the
amounts due under this Debenture, whether as principal or interest, as provided
in the preceding provisions of this Section 4.
(ii) No fractional shares
of Common Stock or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share.
(iii) All shares issuable
with respect to a Conversion Date or Interest Payments Date shall be deemed
“Conversion Shares” for all purposes of this Debenture and the other Transaction
Agreements. Certificates representing the relevant Conversion Shares
(“Conversion Certificates”) will be delivered to the Holder at the address
specified in the relevant Notice of Conversion or demand for payment of Other
Costs (and if none, the Holder’s the Holder’s address for notices as
contemplated by the Securities Purchase Agreement, which address the Holder may
change from time to time in the manner provided therein), via express courier,
by electronic transfer or otherwise, within three (3) Trading Days (such third
Trading Day, the “Delivery Date”) after the relevant Conversion
Date. The Holder shall be deemed to be the holder of the shares
issuable to it in accordance with the relevant provisions of this Debenture on
the Conversion Date or Interest Payment Date, as the case may be.
G. Except
as may specified in a specific provision of this Debenture, any payments under
this Debenture shall be applied in the following order of priority:
(i) first to Other Costs, (ii) then to accrued but unpaid interest;
and (iii) then, to principal in the inverse order of maturity.
5. Subject
to the terms of the Securities Purchase Agreement, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency or where contemplated
herein in shares of its Common Stock, as applicable, as herein
prescribed. This Debenture and all other Debentures now or hereafter
issued of similar terms are direct obligations of the Company.
6. A. Each
Pledgor (as defined in the Securities Purchase Agreement) is
personally guarantying to the Holder the timely and full fulfillment of all of
the obligations of the Company under this Debenture on the terms provided above
and in (and as limited by) the Guarantee, which has been executed by such
Pledgor in favor of, and delivered to, the Holder.
B. The
obligations of the Company under this Debenture and of each respective Pledgor
under the Guarantee executed and delivered by such Pledgor are secured under the
terms of the Pledge Agreement, to which the Holder and the Pledgor are parties
(the "Pledge Agreement"), the terms of which are incorporated herein by
reference, by a pledge from each respective Pledgor of the number of shares of
the Company's Common Stock identified opposite such Pledgor’s name on Schedule A
to this Debenture, of which shares the relevant Pledgor is the record and
beneficial owner. If the Holder forecloses on any of the Pledged Shares, the
obligations of the Company will be reduced only to the extent of the proceeds
actually realized from such foreclosure, in the priority specified in Section
4(I) hereof.
7. Except
as provided in Sections 5 and 6 above or in a separate instrument signed by the
party to be charged therewith, no recourse shall be had for the payment of the
principal of, or the interest on, this Debenture, or for any claim based hereon,
or otherwise in respect hereof (including, but not limited to, a claim for Other
Costs), against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
8. All
payments contemplated hereby to be made “in cash” shall be made in immediately
available good funds of United States of America currency by wire transfer to an
account designated in writing by the Holder to the Company (which account may be
changed by notice similarly given). All payments of cash and each
delivery of shares of Common Stock issuable to the Holder as contemplated hereby
shall be made to the Holder at the address last appearing on the
Debenture Register of the Company as designated in writing by the Holder from
time to time; except that the Holder can designate, by notice to the Company, a
different delivery address for any one or more specific payments or
deliveries.
9. If,
for as long as this Debenture remains outstanding, the Company enters into a
merger (other than where the Company is the surviving entity) or consolidation
with another corporation or other entity or a sale or transfer of all or
substantially all of the assets of the Company to another person (collectively,
a "Sale"), the Company will require, in the agreements reflecting such
transaction, that the surviving entity expressly assume the obligations of the
Company hereunder. Notwithstanding the foregoing, if the Company
enters into a Sale and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such Sale, the Company and any such successor, purchaser
or transferee will agree that the Debenture may thereafter be converted on the
terms and subject to the conditions set forth above into the kind and amount of
stock, securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable. In the event of any such proposed
Sale, (i) the Holder hereof shall have the right to convert by delivering a
Notice of Conversion to the Company within fifteen (15) days of receipt of
notice of such Sale from the Company, except that Section 4(C) shall not apply
to such conversion.
10. If,
at any time while any portion of this Debenture remains outstanding, the Company
spins off or otherwise divests itself of a part of its business or operations or
disposes of all or of a part of its assets in a transaction (the “Spin Off”) in
which the Company, in addition to or in lieu of any other compensation received
and retained by the Company for such business, operations or assets, causes
securities of another entity (the “Spin Off Securities”) to be issued to
security holders of the Company, the Company shall cause (i) to be reserved Spin
Off Securities equal to the number thereof which would have been issued to the
Holder had all of the Holder’s Debentures outstanding on the record date (the
“Record Date”) for determining the amount and number of Spin Off Securities to
be issued to security holders of the Company (the “Outstanding Debentures”) been
converted as of the close of business on the Trading Day immediately before the
Record Date (the “Reserved Spin Off Shares”), and (ii) to be issued to the
Holder on the conversion of all or any of the Outstanding Debentures, such
amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares
multiplied by (y) a fraction, of which (I) the numerator is the principal amount
of the Outstanding Debentures then being converted, and (II) the denominator is
the principal amount of the Outstanding Debentures.
11. If,
at any time while any portion of this Debenture remains outstanding, the Company
effectuates a stock split or reverse stock split of its Common Stock or issues a
dividend on its Common Stock consisting of shares of Common Stock, the prices
used in determining the Conversion Price from dates prior to such action or and
any other fixed amounts calculated as contemplated hereby or by any of the other
Transaction Agreements shall be equitably adjusted to reflect such
action.
12. The
Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Debenture or the shares of Common Stock issuable upon
conversion thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky or foreign laws or similar
laws relating to the sale of securities.
13. This
Debenture shall be governed by and construed in accordance with the laws of the
State of Illinois for contracts to be wholly performed in such state and without
giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of Chicago or
the state courts of the State of Illinois sitting in the City of Chicago in
connection with any dispute arising under this Debenture and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions.
To the extent determined by such court, the Company shall reimburse the Holder
for any reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under any of this
Debenture.
13. JURY TRIAL WAIVER.
The Company and the Holder hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out of or in connection with
this Debenture.
14. The
term "Event of Default" means the occurrence of any one or more of the following
events:
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a.
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The
Company shall default in the payment of principal or interest on this
Debenture or any other Debenture under the terms of the Securities
Purchase Agreement or any other amount due hereunder or thereunder
(including payment of a Redemption Amount, as defined below) when due and
such default shall continue for a period of five (5) Trading Days;
or
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b.
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There
is Cancellation Date; or
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c.
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Any
of the representations or warranties made by the Company herein, in the
Securities Purchase Agreement or any of the other Transaction Agreements
or in any certificate or financial or other written statements heretofore
or hereafter furnished by the Company in connection with the execution and
delivery of this Debenture or the Securities Purchase Agreement shall be
false or misleading in any material respect at the time made;
or
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d.
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Subject
to the terms of the Securities Purchase Agreement, the Company fails (i)
to cause its Transfer Agent to issue shares of Common Stock upon exercise
by the Holder of the conversion rights of the Holder in accordance with
the terms of this Debenture (provided, however, that for purposes of this
provision, such failure to cause the Transfer Agent to issue such shares
shall not be deemed to occur until two (2) Trading Days after the Delivery
Date), or (ii) to transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon
conversion of this Debenture and when required by this Debenture or any
other Transaction Agreement, and such transfer is otherwise lawful, and
such failure shall continue uncured for five (5) Trading Days, or (iii) to
remove any restrictive legend on any certificate or fails to cause its
Transfer Agent to remove such restricted legend, in each case where such
removal is lawful, as and when required by this Debenture, or any other
Transaction Agreement, and such failure shall continue uncured for five
(5) Trading Days; or
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e.
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The
cumulative value of the shares of Common Stock of the Company traded on
the Principal Trading Market over any consecutive ten (10) Trading Days
shall be shall less than $100,000 and the same shall be true with respect
to each of the five (5) Trading Days thereafter;
or
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f.
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The
Company shall fail to perform or observe, in any material respect, any
other covenant, term, provision, condition, agreement or obligation of any
Debenture issued under the Securities Purchase Agreement and such failure
if capable of being cured, shall continue uncured for a period of five (5)
Trading Days after the Company’s receipt written notice from the Holder of
such failure (but if not capable of being cured, such five (5)
Trading Day period shall be deemed expired immediately upon the giving of
such notice); or
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g.
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The
Company shall fail to perform or observe, in any material respect, any
covenant, term, provision, condition, agreement or obligation of the
Company under any of the Transaction Agreements and such failure, if
capable of being cured, shall continue uncured for a period of five (5)
Trading Days after the Holder gives the Company written notice thereof
(but if not capable of being cured, such five (5) Trading Day period shall
be deemed expired immediately upon the giving of such notice);
or
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h.
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The
Company shall fail to maintain its status as a reporting company under the
federal securities laws; or
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i.
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The
Company shall to timely file all reports required to be filed by it with
the SEC pursuant to Section 12 or 15(d) of the 1934 Act, or otherwise
required by the 1934 Act; or
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j.
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The
Company shall have its Common Stock suspended from trading on the
Principal Trading Market for in excess of fifteen (15) Trading Days or if
its Common Stock is delisted from trading on the Principal Trading Market;
or
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k.
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The
Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or
for a substantial part of its property or business;
or
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l.
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A
trustee, liquidator or receiver shall be appointed for the Company or for
a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment;
or
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m.
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Any
governmental agency or any court of competent jurisdiction at the instance
of any governmental agency shall assume custody or control of the whole or
any substantial portion of the properties or assets of the Company and
shall not be dismissed within sixty (60) days thereafter;
or
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n.
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Bankruptcy,
reorganization, insolvency or liquidation proceedings or other proceedings
for relief under any bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if instituted against
the Company, shall not be dismissed within sixty (60) days after such
institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
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o.
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Any
money judgment, writ or warrant of attachment, or similar process in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate shall
be entered or filed against the Company or any of its properties or other
assets and shall remain unpaid, unvacated, unbonded or unstayed for a
period of five (5) Trading Days; or
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p.
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The
Company is, by the end of any relevant grace period, in default in the
payment of principal or interest as and when due and payable under any one
or more debt obligations of the Company such that the aggregate amount of
such defaults is in excess of One Hundred Thousand Dollars ($100,000);
or
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q.
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It
becomes unlawful for the Company to perform its outstanding obligations
under this Debenture or any other Debenture issued pursuant to the
Securities Purchase Agreement.
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(ii) If
an Event of Default shall have occurred and is continuing, then,
(x)
unless and until such Event of Default shall have been cured or waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent default), at the option of the Holder and in the Holder’s sole
discretion, but without further notice from the Holder, the unpaid amount of
this Debenture, computed as of such date, will bear interest at the rate (the
“Default Rate”) equal to one and one-half percent (1.5%) per month or the
highest rate allowed by law, whichever is lower, from the date of the Event of
Default to until and including the date actually paid; and any partial payments
shall be applied as provided in Section 5 hereof; and
(y) at
any time thereafter, and in each and every such case, unless such Event of
Default shall have been cured or waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default), at the option of
the Holder and in the Holder's sole discretion, the Holder may elect to redeem
all or part of the Unconverted Debenture (as defined below) on the terms
provided in Section 15 hereof.
15. A. The
Company acknowledges that if there is an Event of Default, the Holder may
require the Company to immediately redeem all or any part of the outstanding
portion of this Debenture for an amount equal to the Redemption Amount (as
defined below). The Redemption Amount shall be paid in cash by the
Company to the Holder. As of the Redemption Due Date or,
if earlier Redemption Payment Date (as those terms are defined
below), the Redemption Amount shall be deemed automatically applied first to the
any outstanding balance due any Purchase Notes issued by the Holder to the
Company on the Issue Date, and the balance shall be paid in cash to the Holder
in the priority provided in Section 4(I) hereof.
B. For
purposes of this Debenture, the following terms shall have the meanings
indicated below:
“Unconverted
Debenture” means the principal amount of this Debenture which has not been
converted as of the relevant date.
“Redemption
Payment Date” means the date on which the Company actually pays the Redemption
Amount.
“Redemption
Amount” means the amount equal to:
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V
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x
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M
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CP
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where:
“V” means the principal of an
Unconverted Debenture plus any accrued but unpaid interest thereon;
“CP” means the Conversion Price in
effect on the date (the “Redemption Notice Date”) of the Redemption Notice (as
defined below); provided, however, if the Redemption Amount is not paid in full
on or before the Redemption Due Date, “CP” means the lower of (x) the Conversion
Price in effect on the Redemption Notice Date or (y) the lowest Conversion Price
in effect during the period commencing on the Redemption Due Date and ending on
the Redemption Payment Date; and
“M” means the highest closing price per
share of the Common Stock during the period beginning on the
Redemption Notice Date and ending on the Redemption Payment Date.
C. The
Holder of an Unconverted Debenture may elect to redeem a portion of such
Unconverted Debenture without electing to redeem the balance of the Unconverted
Debenture. The Holder’s option to redeem all or part of the
Unconverted Debenture shall be exercised by the Holder giving
written notice of the exercise of this provision by the Holder (a
“Redemption Notice”) at any time after a relevant Event of Default has occurred
but before such Event of Default is cured.. The Redemption Notice
shall specify (a) the date (the “Redemption Due Date”) on which the Redemption
Amount shall be paid, which date shall be at least five (5) Trading Days after
the date (a “Redemption Notice Date”) on which the Holder Redemption Notice is
given, and (b) the wire instructions for the account to which the Redemption
Amount is to be paid; provided, however, that the Company shall have the right
to accelerate the date of such payment.
D. If
all of the Unconverted Debentures are being redeemed pursuant to this Section 5,
then, upon payment in full of the Redemption Amount for all of the Unconverted
Debentures in accordance with the provisions of this Section 5, the
Holder shall deliver the Debenture to the Company marked “paid in
full”.
E. If
the Redemption Amount is not timely paid by the Company, the Redemption Amount
shall accrue interest at the Default Rate and the Holder may declare the
Redemption Amount, together with such interest, due under this Debenture
immediately due and payable, without presentment, demand, protest or notice of
any kinds, all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding, and the
Holder may immediately enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law, including, but
not necessarily limited to, the equitable remedy of specific performance and
injunctive relief.
16. Nothing
contained in this Debenture shall be construed as conferring upon the Holder the
right to vote or to receive dividends or to consent or receive notice as a
shareholder in respect of any meeting of shareholders or any rights whatsoever
as a shareholder of the Company, unless and to the extent converted in
accordance with the terms hereof.
17. Any
notice required or permitted hereunder shall be given in manner provided in the
Section headed "NOTICES" in the Securities Purchase Agreement, the terms of
which are incorporated herein by reference.
18. In
the event for any reason, any payment by or act of the Company or the Holder
shall result in payment of interest which would exceed the limit authorized by
or be in violation of the law of the jurisdiction applicable to this Debenture,
then ipso facto the
obligation of the Company to pay interest or perform such act or requirement
shall be reduced to the limit authorized under such law, so that in no event
shall the Company be obligated to pay any such interest, perform any such act or
be bound by any requirement which would result in the payment of interest in
excess of the limit so authorized. In the event any payment by or act
of the Company shall result in the extraction of a rate of interest in excess of
a sum which is lawfully collectible as interest, then such amount (to the extent
of such excess not returned to the Company) shall, without further agreement or
notice between or by the Company or the Holder, be deemed applied to the payment
of principal, if any, hereunder immediately upon receipt of such excess funds by
the Holder, with the same force and effect as though the Company had
specifically designated such sums to be so applied to principal and the Holder
had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has
been paid in full, whether by the provisions of the preceding sentences of this
Section or otherwise, such excess shall be deemed to be an interest-free loan
from the Company to the Holder, which loan shall be payable immediately upon
demand by the Company. The provisions of this Section shall control
every other provision of this Debenture.
1Insert
unique series letter no. (e.g., A, B, C, etc.) for Debentures issued at each
closing.
IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed by an officer thereunto duly
authorized.
Dated:
_________________, 20___
|
AMERICAN
SECURITY RESOURCES CORPORATION
|
||
|
By:_______________________________________
|
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|
__________________________________________
|
||
|
(Print
Name)
|
||
|
__________________________________________
|
||
|
(Title)
|
EXHIBIT
A
AMERICAN
SECURITY RESOURCES CORPORATION
NOTICE OF
CONVERSION
OF
7.75%
CONVERTIBLE DEBENTURE SERIES 08-__-__ DUE __________, 20__
(To be
Executed by the Registered Holder in Order to Convert the
Debenture)
TO: American
Security Resources
Corporation VIA
FAX: (____) ___-____
0000 Xxxx Xxxxxxx, Xxxxx
000
Xxxxxxx, XX 00000
Attn: President
FROM:
_________________________________________________________
(“Holder”)
DATE:
_______________________________________________ (the “Conversion
Date”)
RE: Conversion
of $_________________ principal amount (the “Converted Debenture”) of the 7.75%
Convertible Debenture Series 08-__ Due __________, 20___, No.
08-__-__ (the “Debenture”) of AMERICAN SECURITY RESOURCES CORPORATION
(the “Company”) into ______________________ shares (the “Principal Conversion
Shares”) of Common Stock (defined below)
The captioned Holder hereby gives notice to the Company, pursuant to the Debenture of AMERICAN SECURITY RESOURCES CORPORATION that the Holder elects to convert the Converted Debenture into fully paid and non-assessable shares of Common Stock, $0.001 par value (the “Common Stock”), of the Company as of the Conversion Date specified above. Said conversion shall be based on Conversion Price of $________________ (equal to 70% of the VWAP for the five (5) Trading Days ending on the Trading Day immediately before the date of this Notice).
As contemplated by the Debenture, the
Company should also pay all accrued but unpaid interest on the Converted
Debenture to the Holder. The Holder elects that such accrued but
unpaid interest should be paid
n in
______________ shares of Common Stock (“Interest Conversion Shares”),
representing such interest amount converted at the Conversion Price indicated
above, which Interest Conversion Shares should be delivered together with the
Principal Conversion Shares, or
n in cash, which should be paid as provided in
the Debenture by wire transfer as follows:9
___________________________________
___________________________________
___________________________________
Based on this Conversion Price, the
number of Principal Conversion Shares plus Interest Conversion Shares
(collectively, “Conversion Shares”) indicated above should be issued in the
following name(s):
Name and Record
Address Conversion
Shares
_______________________________ _______________
_______________________________ _______________
_______________________________ _______________
It is the intention of the Holder to
comply with the provisions of Section 4(C) of the Debenture regarding certain
limits on the Holder's right to convert thereunder. The Holder believe this
conversion complies with the provisions of said Section
4(C). Nonetheless, to the extent that, pursuant to the conversion
effected hereby, the Holder would have more shares than permitted under said
Section, this notice should be amended and revised, ab initio, to refer to the
conversion which would result in the issuance of shares consistent with such
provision. Any conversion above such amount is hereby deemed void and
revoked.
As contemplated by the Debenture, this
Notice of Conversion is being sent by facsimile to the telecopier number and
officer indicated above.
If this Notice of Conversion represents
the full conversion of the outstanding balance of the Converted Debenture, the
Holder either (1) has previously surrendered the Converted Debenture to the
Company or (2) will surrender (or cause to be surrendered) the Converted
Debenture to the Company at the address indicated above by express courier
within five (5) Trading Days after delivery or facsimile transmission of this
Notice of Conversion.
The certificates representing the
Conversion Shares should be transmitted by the Company to the
Holder
via
express courier, or
by
electronic transfer
within
the time contemplated by the Debenture after receipt of this Notice of
Conversion (by facsimile transmission or otherwise) to:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
(Print name of Holder)
By:
_________________________________
(Signature of Authorized Person)
(Signature of Authorized Person)
______________________________________
(Printed Name and Title)
