EXHIBIT 4.1
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: August 8, 2006
Original Conversion Price (subject to adjustment herein): $6.00
$_______________
VARIABLE RATE SECURED CONVERTIBLE DEBENTURE
THIS VARIABLE RATE SECURED CONVERTIBLE DEBENTURE is one of a series
of duly authorized and validly issued Variable Rate Secured Convertible
Debentures of Able Energy, Inc., a Delaware corporation, having its principal
place of business at 000 Xxxxx Xxxx Xxxx, Xxxxxxxx, Xxx Xxxxxx 00000 (the
"Company"), designated as its Variable Rate Secured Convertible Debenture (this
debenture, the "Debenture" and collectively with the other such series of
debentures, the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), or shall have
paid pursuant to the terms hereunder, the principal sum of $_______________ by
August 8, 2008, or such earlier date as this Debenture is required or permitted
to be repaid as provided hereunder (the "Maturity Date"), and to pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture in accordance with the provisions hereof. This Debenture is
subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings:
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"Alternate Consideration" shall have the meaning set forth in
Section 5(e).
"Bankruptcy Event" means any of the following events: (a) the
Company or any Significant Subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) 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 Significant Subsidiary
thereof; (b) there is commenced against the Company or any Significant
Subsidiary thereof any such case or proceeding that is not dismissed
within 60 days after commencement; (c) the Company or any Significant
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 Significant 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 calendar days
after such appointment; (e) the Company or any Significant Subsidiary
thereof makes a general assignment for the benefit of creditors; (f) the
Company or any Significant Subsidiary thereof calls a meeting of its
creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (g) the Company or any Significant
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.
"Base Conversion Price" shall have the meaning set forth in Section
5(b).
"Business Day" means any day except Saturday, Sunday, any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required
by law or other governmental action to close.
"Buy-In" shall have the meaning set forth in Section 4(d)(v).
"Change of Control Transaction" means, except with respect to the
Able Energy/All American Transaction, the occurrence after the date hereof
of any of (i) an acquisition after the date hereof by an individual or
legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal or
beneficial ownership of capital stock of the Company, by contract or
otherwise) of in excess of 40% of the voting securities of the Company
(other than by means of conversion or exercise of the Debentures and the
Securities issued together with the Debentures), or (ii) the Company
merges into or consolidates with any other Person, or any Person merges
into or consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to such
transaction own less than 60% of the aggregate voting power of the Company
or the successor entity of such transaction, or (iii) the Company sells or
transfers all or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction own less
than 60% of the aggregate voting power of the acquiring entity immediately
after the transaction, or (iv) a replacement at one time or within a three
year
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period of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who are
members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority
of the members of the board of directors who are members on the date
hereof), or (v) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the
events set forth in clauses (i) through (iv) above.
"Common Stock" means the common stock, par value $0.001 per share,
of the Company and stock of any other class of securities into which such
securities may hereafter be reclassified or changed into.
"Conversion Date" shall have the meaning set forth in Section 4(a).
"Conversion Price" shall have the meaning set forth in Section 4(b).
"Conversion Shares" means, collectively, the shares of Common Stock
issuable upon conversion of this Debenture in accordance with the terms
hereof.
"Debenture Register" shall have the meaning set forth in Section
2(c).
"Dilutive Issuance" shall have the meaning set forth in Section
5(b).
"Dilutive Issuance Notice" shall have the meaning set forth in
Section 5(b).
"Effectiveness Period" shall have the meaning set forth in the
Registration Rights Agreement.
"Equity Conditions" shall mean, during the period in question, (i)
the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of
Conversion of the Holder, if any, (ii) the Company shall have paid all
liquidated damages and other amounts owing to the Holder in respect of
this Debenture, (iii) there is an effective Registration Statement (if
required pursuant to the terms of the Registration Rights Agreement)
pursuant to which the Holder is permitted to utilize the prospectus
thereunder to resell all of the shares issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future),
(iv) the Common Stock is trading on a Trading Market and all of the shares
issuable pursuant to the Transaction Documents are listed for trading on
such Trading Market (and the Company believes, in good faith, that trading
of the Common Stock on a Trading Market will continue uninterrupted for
the foreseeable future), (v) there is a sufficient number of authorized
but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is no existing Event of Default or no existing event
which, with the passage of time or the giving of notice, would constitute
an Event of Default, (vii) the issuance of the shares in
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question (or, in the case of an Optional or Monthly Redemption, the shares
issuable upon conversion in full of the Optional or Monthly Redemption
Amount) to the Holder would not violate the limitations set forth in
Section 4(c)(i) and Section 4(c)(ii) herein, (viii) there has been no
public announcement of a pending or proposed Fundamental Transaction or
Change of Control Transaction that has not been consummated and (ix) the
Holder is not in possession of any information that constitutes, or may
constitute, material non-public information.
"Event of Default" shall have the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Fundamental Transaction" shall have the meaning set forth in
Section 5(e).
"Immediately Accretive Acquisition" is a business combination that
causes an increase in fully diluted earnings per share of the Company as
shown in the Company's Form 10-Q or 10-K next filed after the combined
results of such business combination are reflected in the Company's
financial reports for one full fiscal quarter.
"Interest Conversion Rate" means the lesser of (a) the Conversion
Price or (b) the 90% of the lesser of (i) the average of the VWAPs for the
20 consecutive Trading Days ending on the Trading Day that is immediately
prior to the applicable Interest Payment Date or (ii) the average of the
VWAPs for the 20 consecutive Trading Days ending on the Trading Day that
is immediately prior to the date the applicable Interest Conversion Shares
are issued and delivered if after the Interest Payment Date.
"Interest Conversion Shares" shall have the meaning set forth in
Section 2(a).
"Interest Notice Period" shall have the meaning set forth in Section
2(a).
"Interest Payment Date" shall have the meaning set forth in Section
2(a).
"Interest Period" means, initially, the period beginning on and
including the Original Issue Date and ending on and including September
30, 2006 and each successive period as follows: the period beginning on
October 1 and ending on and including December 31; the period beginning on
and including January 1 and ending on and including March 31; the period
beginning on and including April 1 and ending on and including June 30;
and the period beginning on and including July 1 and ending on and
including September 30.
"Interest Share Amount" shall have the meaning set forth in Section
2(a).
"Late Fees" shall have the meaning set forth in Section 2(d).
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"LIBOR" means, for each Interest Period (i) the six-month London
Interbank Offered Rate for deposits in U.S. dollars, as shown on such the
Trading Day immediately prior to the beginning of such Interest Period in
The Wall Street Journal (Eastern Edition) under the caption "Money Rates -
London Interbank Offered Rates (LIBOR)"; or (ii) if The Wall Street
Journal does not publish such rate, the offered one-month rate for
deposits in U.S. dollars which appears on the Reuters Screen LIBO Page as
of 10:00 a.m., New York time, the Trading Day immediately prior to the
beginning of such Interest Period, provided that if at least two rates
appear on the Reuters Screen LIBO Page on any such Trading Day, the
"LIBOR" for such day shall be the arithmetic mean of such rates.
"Mandatory Default Amount" means the sum of (i) the greater of (A)
125% of the outstanding principal amount of this Debenture, plus all
accrued and unpaid interest hereon, or (B) the outstanding principal
amount of this Debenture, plus all accrued and unpaid interest hereon,
divided by the Conversion Price on the date the Mandatory Default Amount
is either (a) demanded (if demand or notice is required to create an Event
of Default) or otherwise due or (b) paid in full, whichever has a lower
Conversion Price, multiplied by the VWAP on the date the Mandatory Default
Amount is either (x) demanded or otherwise due or (y) paid in full,
whichever has a higher VWAP, and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of this Debenture.
"Monthly Conversion Period" shall have the meaning set forth in
Section 6(b) hereof.
"Monthly Conversion Price" shall have the meaning set forth in
Section 6(b) hereof.
"Monthly Redemption" means the redemption of this Debenture pursuant
to Section 6(b) hereof.
"Monthly Redemption Amount" means, as to a Monthly Redemption,
$____(1).
"Monthly Redemption Date" means the 1st of each month, commencing
October 1, 2006 and terminating upon the full redemption of this
Debenture.
"Monthly Redemption Notice" shall have the meaning set forth in
Section 6(b) hereof.
"Monthly Redemption Period" shall have the meaning set forth in
Section 6(b) hereof.
"Monthly Redemption Share Amount" shall have the meaning set forth
in Section 6(b) hereof.
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(1) 1/20th of the original principal amount of this Debenture.
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"New York Courts" shall have the meaning set forth in Section 9(d).
"Notice of Conversion" shall have the meaning set forth in Section
4(a).
"Optional Redemption" shall have the meaning set forth in Section
6(a).
"Optional Redemption Amount" means the sum of (i) 120% of the
principal amount of the Debenture then outstanding, (ii) accrued but
unpaid interest and (iii) all liquidated damages and other amounts due in
respect of the Debenture.
"Optional Redemption Date" shall have the meaning set forth in
Section 6(a).
"Optional Redemption Notice" shall have the meaning set forth in
Section 6(a).
"Optional Redemption Notice Date" shall have the meaning set forth
in Section 6(a).
"Original Issue Date" means the date of the first issuance of the
Debentures, regardless of any transfers of any Debenture and regardless of
the number of instruments which may be issued to evidence such Debentures.
"Permitted Indebtedness" shall mean the individual and collective
reference to the following: (a) Indebtedness existing on the Closing Date
as described in the Disclosure Schedules to the Purchase Agreement; (b) up
to, in the aggregate during the term of this Debenture, $1,500,000 of new
Indebtedness; (c) non-equity linked Indebtedness incurred solely in
connection with any business combination provided that such Indebtedness
does not mature or require payments of principal prior to the two year
anniversary of the Original Issue Date and is made expressly subordinate
in right of payment to the Indebtedness evidenced by this Xxxxxxxxx, as
reflected in a written agreement acceptable to the Holder and approved by
the Holder in writing; and (d) a long-term non equity linked loan facility
of immediately available cash proceeds of at least $150,000,000 with
Windstar Financial Corp. and/or its Affiliates.
"Permitted Lien" shall mean the individual and collective reference
to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves (in the good faith
judgment of the management of the Company) have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred in the
ordinary course of business, such as carriers', warehousemen's and
mechanics' Liens, statutory landlords' Liens, and other similar Liens
arising in the ordinary course of business, and (x) which do not
individually or in the aggregate materially detract from the value of such
property or assets or materially impair the use thereof in the operation
of the business of the Company and its consolidated Subsidiaries or (y)
which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the
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forfeiture or sale of the property or asset subject to such Lien; (c)
Existing Liens as they exist on the date of the Purchase Agreement and
which are set forth in the Disclosure Schedules to the Purchase Agreement;
(d) Liens on the assets of a future Subsidiary incurred solely in
connection with a Permitted Indebtedness under clause (c) of the
definition of Permitted Indebtedness provided that such Lien is limited
only to the assets of the Subsidiary to be acquired in connection with
such Permitted Indebtedness; and (e) Liens incurred solely in connection
with a Permitted Indebtedness under clause (d) of the definition of
Permitted Indebtedness.
"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.
"Pre-Redemption Conversion Shares" shall have the meaning set forth
in Section 6(b) hereof.
"Purchase Agreement" means the Securities Purchase Agreement among
the Company and the original Holders, dated as of August 8, 2006, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Registration Rights Agreement" means the Registration Rights
Agreement among the Company and the original Holders, dated as of the date
of the Purchase Agreement, as amended, modified or supplemented from time
to time in accordance with its terms.
"Registration Statement" means a registration statement that
registers the resale of all Conversion Shares and Interest Conversion
Shares of the Holder, who shall be named as a "selling stockholder"
therein, and meets the requirements of the Registration Rights Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Share Delivery Date" shall have the meaning set forth in Section
4(d).
"Shareholder Approval" shall have the meaning set forth in the
Purchase Agreement.
"Subsidiary" shall have the meaning set forth in the Purchase
Agreement.
"Trading Day" means a day on which the principal Trading Market is
open for business.
"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
the American Stock
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Exchange, the Nasdaq Capital Market, the Nasdaq National Market or the New
York Stock Exchange.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"VWAP" 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 a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted for trading as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin
Board is not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Stock is not then quoted for trading on
the OTC Bulletin Board and if prices for the Common Stock are then
reported in the "Pink Sheets" published by Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices),
the most recent bid 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 and reasonably acceptable to the Company.
Section 2. Interest.
a) Payment of Interest in Cash or Kind. The Company shall pay
interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate per annum equal to, prior
to the date when (i) all Equity Conditions are met and (ii) all "Equity
Conditions", as that term is defined under Variable Rate Secured
Convertible Debenture to be issued as part of the Able Energy/All American
Transaction Documents are met ("Liquidity Date"), the greater of (y) LIBOR
for the applicable Interest Period plus 6.0% and (z) 12.5%, and, on and
after the Liquidity Date, LIBOR for the applicable Interest Period plus
4.0%, or such lesser rate as shall be the highest rate permitted by
applicable law, payable quarterly on April 1, July 1, October 1 and
January 1, beginning on the first such date after the Original Issue Date,
on each Monthly Redemption Date (as to that principal amount then being
redeemed), on each Conversion Date (as to that principal amount then being
converted), on each Optional Redemption Date (as to that principal amount
then being redeemed) and on the Maturity Date (except that, if any such
date is not a Business Day, then such payment shall be due on the next
succeeding Business Day) (each such date, an "Interest Payment Date"), in
cash or duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock at the Interest Conversion Rate (the amount to be
paid in shares, the "Interest Share Amount"), or a combination thereof;
provided, however, that (i) payment in shares of Common Stock may only
occur if during the 20 Trading Days immediately prior to the applicable
Interest Payment Date (the "Interest Notice Period") and through and
including the date such shares of Common Stock are issued to the Holder
all of the Equity Conditions have been met (unless waived by the Holder in
writing), (ii) the
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Company shall have given the Holder notice in accordance with the notice
requirements set forth below and (iii) as to such Interest Payment Date,
prior to such Interest Notice Period (but not more than 5 Trading Days
prior to the commencement of such Interest Notice Period), the Company
shall have delivered to the Holder's account with The Depository Trust
Company a number of shares of Common Stock to be applied against such
Interest Share Amount equal to the quotient of (x) the applicable Interest
Share Amount divided by (y) the then Conversion Price (the "Interest
Conversion Shares").
b) Company's Election to Pay Interest in Kind. Subject to the terms
and conditions herein, the decision whether to pay interest hereunder in
cash or shares of Common Stock shall be at the discretion of the Company.
Prior to the commencement of any Interest Notice Period, the Company shall
deliver to the Holder a written notice of its election to pay interest
hereunder on the applicable Interest Payment Date either in cash, shares
of Common Stock or a combination thereof and the Interest Share Amount as
to the applicable Interest Payment Date, provided that the Company may
indicate in such notice that the election contained in such notice shall
apply to future Interest Payment Dates until revised by a subsequent
notice. During any Interest Notice Period, the Company's election (whether
specific to an Interest Payment Date or continuous) shall be irrevocable
as to such Interest Payment Date. Subject to the aforementioned
conditions, failure to timely provide such written notice shall be deemed
an election by the Company to pay the interest on such Interest Payment
Date in cash. At any time the Company delivers a notice to the Holder of
its election to pay the interest in shares of Common Stock, the Company
shall timely file a prospectus supplement pursuant to Rule 424 disclosing
such election. The aggregate number of shares of Common Stock otherwise
issuable to the Holder on an Interest Payment Date shall be reduced by the
number of Interest Conversion Shares previously issued to the Holder in
connection with such Interest Payment Date.
c) Interest Calculations. Interest shall be calculated on the basis
of a 360-day year, consisting of twelve thirty consecutive calendar day
periods, and shall accrue daily commencing on the Original Issue Date
until payment in full of the principal sum, together with all accrued and
unpaid interest, liquidated damages and other amounts which may become due
hereunder, has been made. Payment of interest in shares of Common Stock
(other than the Interest Conversion Shares issued prior to an Interest
Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) herein
and, solely for purposes of the payment of interest in shares, the
Interest Payment Date shall be deemed the Conversion Date. Interest shall
cease to accrue with respect to any principal amount converted, provided
that the Company actually delivers the Conversion Shares within the time
period required by Section 4(d)(ii). Interest hereunder will be paid to
the Person in whose name this Debenture is registered on the records of
the Company regarding registration and transfers of this Debenture (the
"Debenture Register"). Except as otherwise provided herein, if at any time
the Company pays interest partially in cash and partially in shares of
Common Stock to the holders of the Debentures, then such payment shall be
distributed ratably among the holders of the then-outstanding Debentures
based on their (or their predecessor's) initial purchases of Debentures
pursuant to the Purchase Agreement.
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d) Late Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser
of 18% per annum or the maximum rate permitted by applicable law ("Late
Fees") which shall accrue daily from the date such interest is due
hereunder through and including the date of payment in full.
Notwithstanding anything to the contrary contained herein, if on any
Interest Payment Date the Company has elected to pay accrued interest in
the form of Common Stock but the Company is not able to pay accrued
interest in Common Stock because it fails to satisfy the conditions for
payment in Common Stock set forth above, then, at the option of the
Holder, the Company, in lieu of delivering either shares of Common Stock
pursuant to this Section 2 or paying the regularly scheduled interest
payment in cash, shall deliver, within three Trading Days of each
applicable Interest Payment Date, an amount in cash equal to the product
of (x) the number of shares of Common Stock otherwise deliverable to the
Holder in connection with the payment of interest due on such Interest
Payment Date multiplied by (y) the average VWAP during the period
commencing on the Interest Payment Date and ending on the Trading Day
prior to the date such payment is made. If any Interest Conversion Shares
are issued to the Holder in connection with an Interest Payment Date and
are not applied against an Interest Share Amount, then the Holder shall
promptly return such excess shares to the Company.
e) Prepayment. Except as otherwise set forth in this Debenture, the
Company may not prepay any portion of the principal amount of this
Debenture without the prior written consent of the Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No
service charge will be payable for such registration of transfer or
exchange.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder set
forth in the Purchase Agreement and may be transferred or exchanged only
in compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment for
transfer to the Company of this Debenture, the Company and any agent of
the Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose
of receiving payment as herein provided and for all other purposes,
whether or not this Debenture is overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.
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Section 4. Conversion.
a) Voluntary Conversion. At any time after the Original Issue Date
until this Debenture is no longer outstanding, this Debenture shall be
convertible, in whole or in part, into shares of Common Stock at the
option of the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(c) hereof). The Holder shall
effect conversions by delivering to the Company a Notice of Conversion,
the form of which is attached hereto as Annex A (a "Notice of
Conversion"), specifying therein the principal amount of this Debenture to
be converted and the date on which such conversion shall be effected (a
"Conversion Date"). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of
Conversion is deemed delivered hereunder. To effect conversions hereunder,
the Holder shall not be required to physically surrender this Debenture to
the Company unless the entire principal amount of this Debenture plus all
accrued and unpaid interest thereon has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal
amount of this Debenture in an amount equal to the applicable conversion.
The Holder and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s). The Company may
deliver an objection to any Notice of Conversion within 2 Business Days of
delivery of such Notice of Conversion. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder, and any
assignee by acceptance of this Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of a
portion of this Debenture, the unpaid and unconverted principal amount of
this Debenture may be less than the amount stated on the face hereof.
b) Conversion Price. The conversion price in effect on any
Conversion Date shall be equal to $6.00 (subject to adjustment herein)
(the "Conversion Price").
c) Conversion Limitations.
i. Trading Market Limitations. Notwithstanding anything herein
to the contrary, if the Company has not obtained Shareholder
Approval (as defined below), then the Company may not issue, upon
conversion of this Debenture, a number of shares of Common Stock
which, when aggregated with any shares of Common Stock issued on or
after the Original Issue Date and prior to such Conversion Date (A)
in connection with any Debentures issued pursuant to the Purchase
Agreement, (B) in connection with any Warrants issued pursuant to
the Purchase Agreement and (C) in connection with any warrants
issued to any registered broker-dealer as a fee in connection with
the issuance of the Securities pursuant to the Purchase Agreement,
would exceed 19.999% of the number of shares of Common Stock
outstanding on the Trading Day immediately preceding the Original
Issue Date (such number of shares, the "Issuable Maximum"). Each
Holder shall be entitled to a portion of the Issuable Maximum equal
to the quotient obtained by dividing (x) the aggregate principal
amount of the Debenture(s) issued and sold to such Holder on the
Original Issue Date by (y) the aggregate principal amount of all
Debentures issued and sold by the Company on the Original Issue
Date. If any Holder shall no longer hold the Debenture(s), then
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such Xxxxxx's remaining portion of the Issuable Maximum, if any,
shall be allocated pro-rata among the remaining Holders. If, on any
Conversion Date, (1) the applicable Conversion Price is such that
the shares issuable under this Debenture on such Conversion Date,
together with the aggregate number of shares of Common Stock that
would then be issuable upon conversion in full of all then
outstanding Debentures, would exceed the Issuable Maximum and (2)
the Company shall not have previously obtained Shareholder Approval,
then the Company shall issue to the Holder requesting a conversion 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
aggregate principal amount of the Debentures (including any accrued
interest) then held by such Holder for which a conversion in
accordance with the applicable Conversion Price would result in an
issuance of shares of Common Stock in excess of such Holder's
pro-rata portion (which shall be calculated pursuant to the terms
hereof) of the Issuable Maximum (the "Excess Principal"), the
Company shall be prohibited from converting such Excess Principal
and shall promptly notify the Holder of the reason therefor. This
Debenture shall thereafter be unconvertible to such extent until and
unless Shareholder Approval is subsequently obtained, but this
Debenture shall otherwise remain in full force and effect.
ii. Holder's Restriction on Conversion. The Company shall not
effect any conversion of this Debenture, and a Holder shall not have
the right to convert any portion of this Debenture, to the extent
that after giving effect to the conversion set forth on the
applicable Notice of Conversion, such Holder (together with such
Holder's Affiliates, and any other person or entity acting as a
group together with such Holder or any of such Holder's Affiliates)
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by
such Holder and its Affiliates shall include the number of shares of
Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall exclude the
number of shares of Common Stock which are issuable upon (A)
conversion of the remaining, unconverted principal amount of this
Debenture beneficially owned by such Holder or any of its Affiliates
and (B) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, any other
Debentures or the Warrants) beneficially owned by such Holder or any
of its Affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 4(c)(ii), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. To the extent that
the limitation contained in this Section 4(c)(ii) applies, the
determination of whether this Debenture is convertible (in relation
to other securities owned by such Holder together with any
Affiliates) and of which principal amount of this Debenture is
convertible shall be in the sole discretion of
12
such Holder, and the submission of a Notice of Conversion shall be
deemed to be such Xxxxxx's determination of whether this Debenture
may be converted (in relation to other securities owned by such
Holder together with any Affiliates) and which principal amount of
this Debenture is convertible, in each case subject to such
aggregate percentage limitations. To ensure compliance with this
restriction, each Holder will be deemed to represent to the Company
each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this
paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of
this Section 4(c)(ii), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of
the following: (A) the Company's most recent Form 10-Q or Form 10-K,
as the case may be; (B) a more recent public announcement by the
Company; or (C) a more recent notice by the Company or the Company's
transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing
to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Debenture, by
such Holder or its Affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. The "Beneficial
Ownership Limitation" shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this
Debenture held by the Holder. The Beneficial Ownership Limitation
provisions of this Section 4(c)(ii) may be waived by such Holder, at
the election of such Holder, upon not less than 61 days' prior
notice to the Company, to change the Beneficial Ownership Limitation
to 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock upon conversion of this Debenture held by the Holder and the
provisions of this Section 4(c)(ii) shall continue to apply. Upon
such a change by a Holder of the Beneficial Ownership Limitation
from such 4.99% limitation to such 9.99% limitation, the Beneficial
Ownership Limitation may not be further waived by such Holder. The
provisions of this paragraph shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this
Section 4(c)(ii) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial
Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply
to a successor holder of this Debenture.
13
d) Mechanics of Conversion.
i. Conversion Shares Issuable Upon Conversion of Principal
Amount. The number of shares of Common Stock issuable upon a
conversion hereunder shall be determined by the quotient obtained by
dividing (x) the outstanding principal amount of this Debenture to
be converted by (y) the Conversion Price.
ii. Delivery of Certificate Upon Conversion. Not later than
three Trading Days after each Conversion Date (the "Share Delivery
Date"), the Company shall deliver, or cause to be delivered, to the
Holder (A) a certificate or certificates representing the Conversion
Shares which, on or after the Effective Date, shall be free of
restrictive legends and trading restrictions (other than those which
may then be required by the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion
of this Debenture (including, if the Company has given continuous
notice pursuant to Section 2(b) for payment of interest in shares of
Common Stock at least 20 Trading Days prior to the date on which the
Conversion Notice is delivered to the Company, shares of Common
Stock representing the payment of accrued interest otherwise
determined pursuant to Section 2(a) but assuming that the Interest
Payment Period is the 20 Trading Days period immediately prior to
the date on which the Conversion Notice is delivered to the Company
and excluding for such issuance the condition that the Company
deliver Interest Conversion Shares as to such interest payment) and
(B) a bank check in the amount of accrued and unpaid interest (if
the Company has elected or is required to pay accrued interest in
cash). On or after the Effective Date, the Company shall use its
best efforts to deliver any certificate or certificates required to
be delivered by the Company under this Section 4 electronically
through the Depository Trust Company or another established clearing
corporation performing similar functions.
iii. Failure to Deliver Certificates. If in the case of any
Notice of Conversion such certificate or certificates are not
delivered to or as directed by the applicable Holder by the fifth
Trading Day after the Conversion Date, the Holder shall be entitled
to elect by written notice to the Company at any time on or before
its receipt of such certificate or certificates, to rescind such
Conversion, in which event the Company shall promptly return to the
Holder any original Debenture delivered to the Company and the
Holder shall promptly return the Common Stock certificates
representing the principal amount of this Debenture tendered for
conversion to the Company.
iv. Obligation Absolute; Partial Liquidated Damages. The
Company's obligations to issue and deliver the Conversion Shares
upon conversion of this Debenture in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any
obligation to the Company or any
14
violation or alleged violation of law by the Holder or any other
Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the
Company of any such action the Company may have against the Holder.
In the event the Holder of this Debenture shall elect to convert any
or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or anyone
associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason, unless an
injunction from a court, on notice to Holder, restraining and or
enjoining conversion of all or part of this Debenture shall have
been sought and obtained, and the Company posts a surety bond for
the benefit of the Holder in the amount of 150% of the outstanding
principal amount of this Debenture, which is subject to the
injunction, which bond shall remain in effect until the completion
of arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed
conversion. If the Company fails for any reason to deliver to the
Holder such certificate or certificates pursuant to Section 4(d)(ii)
by the fifth Trading Day after the Conversion Date, the Company
shall pay to such Holder, in cash, as liquidated damages and not as
a penalty, for each $1000 of principal amount being converted, $10
per Trading Day (increasing to $20 per Trading Day on the tenth
Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such fifth Trading Day until such certificates are
delivered. Nothing herein shall limit a Xxxxxx's right to pursue
actual damages or declare an Event of Default pursuant to Section 8
hereof for the Company's failure to deliver Conversion Shares within
the period specified herein and such Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law. Notwithstanding
anything herein to the contrary, as to any delays in performance
caused solely and directly by a Force Majeure, the Trading Days
during which such delay is occurring shall be tolled hereunder with
respect to liquidated damages, provided that the Company has used,
and continues to use, best efforts to perform its obligations
notwithstanding such Force Majeure.
v. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Conversion. In addition to any other rights
available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate or certificates by the Share
Delivery Date pursuant to Section 4(d)(ii), and if after such Share
Delivery Date the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Holder of
the Conversion Shares which the
15
Holder was entitled to receive upon the conversion relating to such
Share Delivery Date (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any other remedies available to
or elected by the Holder) the amount by which (x) the Holder's total
purchase price (including any brokerage commissions) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder was entitled to
receive from the conversion at issue multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase
obligation was executed (including any brokerage commissions) and
(B) at the option of the Holder, either reissue (if surrendered)
this Debenture in a principal amount equal to the principal amount
of the attempted conversion or deliver to the Holder the number of
shares of Common Stock that would have been issued if the Company
had timely complied with its delivery requirements under Section
4(d)(ii). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of this Debenture with respect to which the
actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of
$10,000 under clause (A) of the immediately preceding sentence, the
Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall
limit a Xxxxxx's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect
to the Company's failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Debenture as required
pursuant to the terms hereof.
vi. Reservation of Shares Issuable Upon Conversion. The
Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock
for the sole purpose of issuance upon conversion of this Debenture
and payment of interest on this Debenture, each as herein provided,
free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of
the Debentures), not less than such aggregate number of shares of
the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 5) upon the conversion
of the outstanding principal amount of this Debenture and payment of
interest hereunder. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid and nonassessable and, if the
Registration Statement is then effective under the Securities Act,
shall be registered for public sale in accordance with such
Registration Statement.
vii. Fractional Shares. Upon a conversion hereunder the
Company shall not be required to issue stock certificates
representing fractions of shares of
16
Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the VWAP at such
time. If the Company elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in lieu of the
final fraction of a share, 1 whole share of Common Stock.
viii. Transfer Taxes. The issuance of certificates for shares
of the Common Stock on conversion of this Debenture shall be made
without charge to the Holder hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificates, 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 this Debenture so converted and the Company shall not be required
to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Company, at any time
while this Debenture is outstanding: (A) pays a stock dividend or
otherwise makes a distribution or distributions payable in shares of
Common Stock on shares of Common Stock or any Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon conversion of, or payment of interest on,
this Debenture); (B) subdivides outstanding shares of Common Stock into a
larger number of shares; (C) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of shares;
or (D) issues, in the event of a reclassification of shares of the Common
Stock, any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding any treasury shares of the
Company) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while this Debenture is outstanding,
sells or grants any option to purchase or sells or grants any right to
reprice its securities, or otherwise disposes of or issues (or announces
any sale, grant or any option to purchase or other disposition) any Common
Stock or Common Stock Equivalents entitling any Person to acquire shares
of Common Stock at an effective price per share that is lower than the
then Conversion Price (such lower price, the "Base Conversion Price" and
such issuances collectively, a "Dilutive Issuance") (if the holder of the
Common Stock or Common Stock Equivalents
17
so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights per share which
are issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share that is lower than the
Conversion Price, such issuance shall be deemed to have occurred for less
than the Conversion Price on such date of the Dilutive Issuance), then the
Conversion Price shall be reduced to equal the Base Conversion Price. Such
adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. Notwithstanding the foregoing, no adjustment will
be made under this Section 5(b) in respect of an Exempt Issuance. The
Company shall notify the Holder in writing, no later than the Business Day
following the issuance of any Common Stock or Common Stock Equivalents
subject to this Section 5(b), indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the "Dilutive Issuance Notice"). For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 5(b), upon the occurrence of any
Dilutive Issuance, the Holder is entitled to receive a number of
Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether the Holder
accurately refers to the Base Conversion Price in the Notice of
Conversion.
c) Subsequent Rights Offerings. If the Company, at any time while
the Debenture is outstanding, shall issue rights, options or warrants to
all holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per share that
is lower than the VWAP on the record date referenced below, then the
Conversion Price shall be multiplied by a fraction of which the
denominator shall be the number of shares of the Common Stock outstanding
on the date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus
the number of shares which the aggregate offering price of the total
number of shares so offered (assuming delivery to the Company in full of
all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.
d) Pro Rata Distributions. If the Company, at any time while this
Debenture is outstanding, distributes to all holders of Common Stock (and
not to the Holders) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or
purchase any security (other than the Common Stock, which shall be subject
to Section 5(b)), then in each such case the Conversion Price shall be
adjusted by multiplying such Conversion Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be
the VWAP determined as of the record date
18
mentioned above, and of which the numerator shall be such VWAP 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 1 outstanding share of the Common Stock as determined by the
Board of Directors of the Company in good faith. In either case the
adjustments shall be described in a statement delivered to the Holder
describing the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to 1 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.
e) Fundamental Transaction. If, at any time while this Debenture is
outstanding, other than the Able Energy/All American Transaction, (A) the
Company effects any merger or consolidation of the Company with or into
another Person, (B) the Company effects any sale of all or substantially
all of its assets in one transaction or a series of related transactions,
(C) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or
property (in any such case, a "Fundamental Transaction"), then, upon any
subsequent conversion of this Debenture, the Holder shall have the right
to receive, for each Conversion Share that would have been issuable upon
such conversion immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or property as
it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of 1 share of Common Stock (the
"Alternate Consideration"). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to
apply to such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of 1 share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Conversion
Price among the Alternate Consideration in a reasonable manner reflecting
the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Debenture following
such Fundamental Transaction. To the extent necessary to effectuate the
foregoing provisions, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new debenture
consistent with the foregoing provisions and evidencing the Holder's right
to convert such debenture into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply
with the provisions of this Section 5(e) and insuring that this Debenture
(or any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
19
f) Calculations. All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding any treasury shares of the
Company) issued and outstanding.
g) Notice to the Holder.
i. Adjustment to Conversion Price. Whenever the Conversion
Price is adjusted pursuant to any provision of this Section 5, 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. If the Company
issues a variable rate security, despite the prohibition thereon in
the Purchase Agreement, the Company shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be
converted or exercised in the case of a Variable Rate Transaction
(as defined in the Purchase Agreement).
ii. Notice to Allow Conversion by Xxxxxx. If (A) the Company
shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock,
(C) the Company shall authorize the granting to all holders of the
Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company,
of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E) the Company
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in
each case, the Company shall cause to be filed at each office or
agency maintained for the purpose of conversion of this Debenture,
and shall cause to be delivered to the Holder at its last address as
it shall appear upon the Debenture Register, at least 10 calendar
days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect
20
therein or in the delivery thereof shall not affect the validity of
the corporate action required to be specified in such notice. The
Holder is entitled to convert this Debenture during the 10-day
period commencing on the date of such notice through the effective
date of the event triggering such notice.
Section 6. Redemption.
a) Optional Redemption at Election of Company. Subject to the
provisions of this Section 6, at any time after (i) the Company shall have
obtained Shareholder Approval and it shall have been deemed effective and
(ii) the Able Energy/All American Transaction and the Able Energy/All
American Transaction Documents shall have been consummated and be
effective, the Company may deliver a notice to the Holder (an "Optional
Redemption Notice" and the date such notice is deemed delivered hereunder,
the "Optional Redemption Notice Date") of its irrevocable election to
redeem some or all of the then outstanding Debentures for cash in an
amount equal to the Optional Redemption Amount on the 20th Trading Day
following the Optional Redemption Notice Date (such date, the "Optional
Redemption Date" and such redemption, the "Optional Redemption"). The
Optional Redemption Amount is payable in full on the Optional Redemption
Date. The Company may only effect an Optional Redemption if on each
Trading Day during the period commencing on the Optional Redemption Notice
Date through to the Optional Redemption Date and through and including the
date payment of the Optional Redemption Amount is actually made, each of
the Equity Conditions shall have been met. If any of the Equity Conditions
shall cease to be satisfied at any time during the 20 Trading Day period,
then the Holder may elect to nullify the Optional Redemption Notice by
notice to the Company within 3 Trading Days after the first day on which
any such Equity Condition has not been met (provided that if, by a
provision of the Transaction Documents, the Company is obligated to notify
the Holder of the non-existence of an Equity Condition, such notice period
shall be extended to the third Trading Day after proper notice from the
Company) in which case the Optional Redemption Notice shall be null and
void, ab initio. The Company covenants and agrees that it will honor all
Notices of Conversion tendered from the time of delivery of the Optional
Redemption Notice through the date all amounts owing thereon are due and
paid in full. Notwithstanding anything herein to the contrary, in the
event an Optional Redemption is being undertaken in connection with a
financing that would otherwise result in an adjustment to the Conversion
Price pursuant to Section 5(b) and the Company arranges for the direct
redemption of all or part of this Debenture out of the closing of such
Dilutive Issuance, the Conversion Price as to the principal amount of this
Debenture subject to an Optional Redemption shall not be adjusted as to
such Dilutive Issuance on or before the Optional Redemption Date, provided
that in the event the Optional Redemption Amount is not paid in full on or
before the Optional Redemption Date, the Conversion Price shall be
immediately adjusted to the lower price pursuant to Section 5(b).
b) Monthly Redemption. On each Monthly Redemption Date, the Company
shall redeem the Monthly Redemption Amount plus accrued but unpaid
interest,
21
liquidated damages and any other amounts then owing to such Holder in
respect of this Debenture (the "Monthly Redemption"). The Monthly
Redemption Amount payable on each Monthly Redemption Date shall be paid in
cash; provided, however, as to any Monthly Redemption and upon 25 Trading
Days' prior written irrevocable notice (the "Monthly Redemption Notice"
and the 25 Trading Day period immediately following the Monthly Redemption
Notice, the "Monthly Redemption Period"), in lieu of a cash redemption
payment the Company may elect to pay all or part of a Monthly Redemption
Amount in Conversion Shares (such dollar amount to be paid on a Monthly
Redemption Date in Conversion Shares, the "Monthly Redemption Share
Amount") based on a conversion price equal to the lesser of (i) the then
Conversion Price and (ii) 90% of the average of the VWAPs for the 20
consecutive Trading Days ending on the Trading Day that is immediately
prior to the applicable Monthly Redemption Date (subject to adjustment for
any stock dividend, stock split, stock combination or other similar event
affecting the Common Stock during such 20 Trading Day period) (the price
calculated during the 20 Trading Day period immediately prior to the
Monthly Redemption Date, the "Monthly Conversion Price" and such 20
Trading Day period, the "Monthly Conversion Period"); provided, further,
that the Company may not pay the Monthly Redemption Amount in Conversion
Shares unless (y) from the date the Holder receives the duly delivered
Monthly Redemption Notice through and until the date such Monthly
Redemption is paid in full, the Equity Conditions have been satisfied,
unless waived in writing by the Holder, and (z) as to such Monthly
Redemption, prior to such Monthly Redemption Period (but not more than 5
Trading Days prior to the commencement of the Monthly Redemption Period),
the Company shall have delivered to the Holder's account with The
Depository Trust Company a number of shares of Common Stock to be applied
against such Monthly Redemption Share Amount equal to the quotient of (x)
the applicable Monthly Redemption Share Amount divided by (y) the lesser
of (1) the then Conversion Price and (2) 90% of the average of the VWAPs
for the 20 consecutive Trading Days ending immediately prior to the 5th
Trading Day prior to the commencement of the Monthly Redemption Period
(the "Pre-Redemption Conversion Shares"). The Holder may convert, pursuant
to Section 4(a), any principal amount of this Debenture subject to a
Monthly Redemption at any time prior to the date that the Monthly
Redemption Amount, plus accrued but unpaid interest, liquidated damages
and any other amounts then owing to the Holder are due and paid in full.
Unless otherwise indicated by the Holder in the applicable Notice of
Conversion, any principal amount of this Debenture converted during the
applicable Monthly Redemption Period until the date the Monthly Redemption
Amount is paid in full shall be first applied to the principal amount
subject to the Monthly Redemption Amount payable in cash and then to the
Monthly Redemption Share Amount. Any principal amount of this Debenture
converted during the applicable Monthly Redemption Period in excess of the
Monthly Redemption Amount shall be applied against the last principal
amount of this Debenture scheduled to be redeemed hereunder, in reverse
time order from the Maturity Date; provided, however, if any such
conversion is applied against such Monthly Redemption Amount, the
Pre-Redemption Conversion Shares, if any were issued in connection with
such Monthly Redemption or were not already applied to such conversions,
shall be first applied against such conversion. The Company covenants and
agrees that it will honor all Notice of
22
Conversions tendered up until such amounts are paid in full. The Company's
determination to pay a Monthly Redemption in cash, shares of Common Stock
or a combination thereof shall be applied ratably to all of the holders of
the then outstanding Debentures based on their (or their predecessor's)
initial purchases of Debentures pursuant to the Purchase Agreement. At any
time the Company delivers a notice to the Holder of its election to pay
the Monthly Redemption Amount in shares of Common Stock, the Company shall
file a prospectus supplement pursuant to Rule 424 disclosing such
election.
c) Redemption Procedure. The payment of cash or issuance of Common
Stock (other than the Pre-Redemption Conversion Shares), as applicable,
pursuant to an Optional or Monthly Redemption shall be made on the
Optional or Monthly Redemption Date, as applicable. The aggregate number
of Conversion Shares issued to the Holder pursuant to a Monthly Redemption
shall be reduced by the number of Pre-Redemption Conversion Shares issued
to the Holder in connection with the Monthly Redemption less the number of
Pre-Redemption Conversion Shares applied to conversions of the Holder
during the 20 Trading Days immediately prior to the Monthly Conversion
Date. If any portion of the payment pursuant to an Optional or Monthly
Redemption, as applicable, shall not be paid by the Company by the
applicable due date, interest shall accrue thereon until such amount is
paid in full at an interest rate equal to the lesser of 18% per annum or
the maximum rate permitted by applicable law. Notwithstanding anything
herein contained to the contrary, if any portion of the Optional or
Monthly Redemption Amount, as applicable, remains unpaid after such date,
the Holder may elect, by written notice to the Company given at any time
thereafter, to invalidate ab initio such redemption, and, with respect to
the Company's failure to honor the Optional Redemption, the Company shall
have no further right to exercise such Optional Redemption.
Notwithstanding anything to the contrary in this Section 6, the Company's
determination to redeem in cash or its elections under Section 6(b) shall
be applied ratably among the Holders of Debentures. The Holder may elect
to convert the outstanding principal amount of the Debenture pursuant to
Section 4 prior to actual payment in cash for any redemption under this
Section 6 by the delivery of a Notice of Conversion to the Company. If any
Pre-Redemption Conversion Shares are issued to the Holder in connection
with a Monthly Redemption and are not applied against either the Monthly
Redemption Amount or against voluntary conversions during the Monthly
Redemption, then the Holder shall promptly return such excess shares to
the Company.
Section 7. Negative Covenants. As long as any portion of this Debenture
remains outstanding, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:
a) other than Permitted Indebtedness, enter into, create, incur,
assume, guarantee or suffer to exist any indebtedness for borrowed money
of any kind, including but not limited to, a guarantee, on or with respect
to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom;
23
b) other than Permitted Liens, enter into, create, incur, assume or
suffer to exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom;
c) amend its charter documents, including without limitation, the
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;
d) repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common Stock or
Common Stock Equivalents other than as to (a) the Conversion Shares or
Warrant Shares as permitted or required under the Transaction Documents
and (b) repurchases of Common Stock or Common Stock Equivalents of
departing officers and directors of the Company, provided that such
repurchases shall not exceed an aggregate of $100,000 for all officers and
directors during the term of this Debenture);
e) enter into any agreement with respect to any of the foregoing; or
f) pay cash dividends or distributions on any equity securities of
the Company.
Section 8. Events of Default.
a) "Event of Default" means, wherever used herein, any of the
following events (whatever the reason for such event and whether such
event 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 (A) the principal amount of
any Debenture or (B) interest, liquidated damages and other amounts
owing to a Holder on any Debenture, as and when the same shall
become due and payable (whether on a Conversion Date or the Maturity
Date or by acceleration or otherwise) which default, solely in the
case of an interest payment or other default under clause (B) above,
is not cured within 5 Trading Days;
ii. the Company shall fail to observe or perform any other
covenant or agreement contained in the Debentures (other than a
breach by the Company of its obligations to deliver shares of Common
Stock to the Holder upon conversion, which breach is addressed in
clause (xi) below) which failure is not cured, if possible to cure,
within the earlier to occur of (A) 10 Trading Days after notice of
such failure sent by the Holder or by any other Holder and (B) 20
Trading Days after the Company has become or should have become
aware of such failure;
24
iii. a material default or event of default (subject to any
grace or cure period provided in the applicable agreement, document
or instrument) shall occur under (A) any of the Transaction
Documents or (B) any other material agreement, lease, document or
instrument to which the Company or any Subsidiary is obligated (and
not covered by clause (vi) below);
iv. any representation or warranty made in this Debenture, any
other Transaction Documents, any written statement pursuant hereto
or thereto or any other report, financial statement or certificate
made or delivered to the Holder or any other Holder shall be untrue
or incorrect in any material respect as of the date when made or
deemed made;
v. the Company or any Significant Subsidiary shall be subject
to a Bankruptcy Event;
vi. the Company or any Subsidiary shall default on any of its
obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or
evidenced, any indebtedness for borrowed money or money due under
any long term leasing or factoring arrangement that (a) involves an
obligation greater than $600,000, whether such indebtedness now
exists or shall hereafter be created, and (b) results in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable;
vii. the Common Stock shall not be eligible for listing or
quotation for trading on a Trading Market and shall not be eligible
to resume listing or quotation for trading thereon within five
Trading Days;
viii. the Company shall be a party to any Change of Control
Transaction or Fundamental Transaction or shall agree to sell or
dispose of all or in excess of 40% of its assets in one transaction
or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction);
ix. a Registration Statement shall not have been declared
effective by the Commission on or prior to the 180th calendar day
after the Closing Date;
x. if, during the Effectiveness Period (as defined in the
Registration Rights Agreement), either (a) the effectiveness of the
Registration Statement lapses for any reason or (b) the Holder shall
not be permitted to resell Registrable Securities (as defined in the
Registration Rights Agreement) under the Registration Statement for
a period of more than 20 consecutive Trading Days or 40
non-consecutive Trading Days (except that, if in connection with the
acquisition of Able Energy/All American Transaction, 120 consecutive
or non-consecutive Trading Days) during any 12 month period;
provided, however, that
25
if the Company is negotiating a merger, consolidation, acquisition
or sale of all or substantially all of its assets or a similar
transaction and, in the written opinion of counsel to the Company,
the Registration Statement would be required to be amended to
include information concerning such pending transaction(s) or the
parties thereto which information is not available or may not be
publicly disclosed at the time, the Company shall be permitted an
additional 20 consecutive Trading Days during any 12 month period
pursuant to this Section 8(a)(x);
xi. the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a
Conversion Date pursuant to Section 4(d) or the Company shall
provide at any time notice to the Holder, including by way of public
announcement, of the Company's intention to not honor requests for
conversions of any Debentures in accordance with the terms hereof;
xii. any Person shall breach any agreement delivered to the
initial Holders pursuant to Section 2.2(a)(iv) of the Purchase
Agreement;
xiii. the Company and the Holder shall have entered into and
consummated the Able Energy/All American Transaction and the Able
Energy/All American Transaction Documents on or before December 31,
2006; or
xiv. any monetary judgment, writ or similar final process
shall be entered or filed against the Company, any Subsidiary or any
of their respective property or other assets for more than $250,000,
and such judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of 45 calendar days.
b) Remedies Upon Event of Default. If any Event of Default occurs,
the outstanding principal amount of this Debenture, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect
thereof through the date of acceleration, shall become, at the Holder's
election, immediately due and payable in cash at the Mandatory Default
Amount. Commencing 5 days after the occurrence of any Event of Default
that results in the eventual acceleration of this Debenture, the interest
rate on this Debenture shall accrue at an interest rate equal to the
lesser of 18% per annum or the maximum rate permitted under applicable
law. Upon the payment in full of the Mandatory Default Amount, the Holder
shall promptly surrender this Debenture to or as directed by the Company.
In connection with such acceleration described herein, the Holder need not
provide, and the Company hereby waives, any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable
law. Such acceleration may be rescinded and annulled by Xxxxxx at any time
prior to payment hereunder and the Holder shall have all rights as a
holder of the Debenture until such time, if any, as the Holder
26
receives full payment pursuant to this Section 8(b). No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
Section 9. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth above,
facsimile number (000) 000-0000, Attn: Xxxxxxxxxxx X. Xxxxxx or such other
facsimile number or address as the Company may specify for such purpose by
notice to the Holder delivered in accordance with this Section 9. 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 number or address of such Xxxxxx
appearing on the books of the Company, or if no such facsimile 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
number specified in this Section 9 prior to 5:30 p.m. (New York City
time), (ii) the date immediately following the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
number specified in this Section 9 between 5:30 p.m. (New York City time)
and 11:59 p.m. (New York City time) on any date, (iii) the second Business
Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
liquidated damages and accrued interest, as applicable, on this Debenture
at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct debt obligation of the Company.
This Debenture ranks pari passu with all other Debentures now or hereafter
issued under the terms set forth herein.
c) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the principal amount of this
Debenture so mutilated, lost, stolen or destroyed, but only upon receipt
of evidence of such loss, theft or destruction of such Debenture, and of
the ownership hereof, reasonably satisfactory to the Company.
d) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be
governed by and construed and
27
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof. Each party
agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or
agents) shall be commenced in the state and federal courts sitting in the
City of New York, Borough of Manhattan (the "New York Courts"). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices
to it under this Debenture and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising
out of or relating to this Debenture or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce
any provisions of this Debenture, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
e) Waiver. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any
other provision of this Debenture. The failure of the Company or the
Holder to insist upon strict adherence to any term of this Debenture on
one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term
or any other term of this Debenture. Any waiver by the Company or the
Holder must be in writing.
f) Severability. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any Person or
circumstance, it shall nevertheless remain applicable to all other Persons
and circumstances. If it shall be found that any interest or other amount
deemed interest due hereunder violates the applicable law governing usury,
the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under applicable
law. The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury
law or other law which would prohibit or forgive the Company from paying
all or any portion of
28
the principal of or interest on this Debenture as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this indenture, and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefits
or advantage of any such law, and covenants that it will not, by resort to
any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every
such as though no such law has been enacted.
g) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
h) Headings. The headings contained herein are for convenience only,
do not constitute a part of this Debenture and shall not be deemed to
limit or affect any of the provisions hereof.
i) Assumption. Any successor to the Company or any surviving entity
in a Fundamental Transaction shall (i) assume, prior to such Fundamental
Transaction, all of the obligations of the Company under this Debenture
and the other Transaction Documents pursuant to written agreements in form
and substance satisfactory to the Holder (such approval not to be
unreasonably withheld or delayed) and (ii) issue to the Holder a new
debenture of such successor entity evidenced by a written instrument
substantially similar in form and substance to this Debenture, including,
without limitation, having a principal amount and interest rate equal to
the principal amount and the interest rate of this Debenture and having
similar ranking to this Debenture, which shall be satisfactory to the
Holder (any such approval not to be unreasonably withheld or delayed). The
provisions of this Section 9(i) shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to
any limitations of this Debenture.
j) Security Interest. The obligations of the Company under this
Debenture are secured by all of the assets of the Company and its
Subsidiaries pursuant to that certain Security Agreement entered into in
connection with the Purchase Agreement.
*********************
29
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.
ABLE ENERGY, INC.
By:__________________________________________
Name:
Title:
30
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Variable Rate
Convertible Debenture of Able Energy, Inc., a Delaware corporation (the
"Company"), due on August __, 2007 , into shares of common stock, par value
$0.001 per share (the "Common Stock"), of the Company according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion, except for
such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts determined in accordance with Section 13(d) of the Exchange
Act, specified under Section 4 of this Debenture.
The undersigned agrees to comply with the prospectus delivery requirements
under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debenture to be Converted:
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued on Account
of Conversion at Issue.
Number of shares of Common Stock to be issued:
Signature:
Name:
Address:
31
Schedule 1
CONVERSION SCHEDULE
The Variable Rate Convertible Debentures due August 8, 2007, in the aggregate
principal amount of $____________ issued by Able Energy, Inc., a Delaware
corporation. This Conversion Schedule reflects conversions made under Section 4
of the above referenced Debenture.
Dated:
======================------------------====================-------------------
Aggregate
Principal
Amount
Remaining
Date of Conversion Subsequent to
(or for first entry, Amount of Conversion
Original Issue Date) Conversion (or original Company Attest
Principal
Amount)
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