EXHIBIT A
NEITHER THIS SECURITY NOR THE ISSUANCE TO THE HOLDER OF THE SECURITIES INTO
WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION 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.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN THE EVENT OF A
PARTIAL REPAYMENT OR CONVERSION. AS A RESULT, FOLLOWING ANY REPAYMENT OR
CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT SET FORTH BELOW.
Original Issue Date: July ___, 2006
$______________
UNSECURED CONVERTIBLE DEBENTURE
DUE JUNE __, 2008
THIS CONVERTIBLE DEBENTURE is one of a series of duly authorized and
validly issued Unsecured Convertible Debentures of Consolidated Energy, Inc., a
Wyoming corporation, having its principal place of business at 00 Xxxxxx Xxxx,
Xxxxx Xxxxx, Xxxxxxxx 00000 (the "Company"), designated as its Debenture, due
July ___, 2008 (this debenture, the "Debenture" and collectively with the other
such series of debentures, the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to the order of
________________________ or its registered assigns (the "Holder"), or shall have
paid pursuant to the terms hereunder, the principal sum of $_______________ by
July __, 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 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:
"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.
"Blocked Account" means account number 4002127332 at Community Trust
Bank, Inc., Pikeville, Kentucky established pursuant to the Blocked Account
Agreement, dated as of July ___, 2006, between the Company, Community Trust
Bank, Inc. and Atoll Asst Management, LLC, as agent.
"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.
"Change of Control Transaction" means 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 33% of the voting securities of the Company, or
(ii) the Company merges into or consolidates with any other Person, or any
Person merges into or consolidates with the Company and, after giving
effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power
of the Company or the successor entity of such transaction, or (iii) the
Company sells or transfers all or substantially all of its assets to
another Person and the stockholders of the Company immediately prior to
such transaction own less than 66% of the aggregate voting power of the
acquiring entity immediately after the transaction, or (iv) a replacement
at one time or within a three year period of more than one-half of the
members of the Company's board of directors which is not approved by a
majority of those individuals who are members of the board of directors on
the date hereof (or by those individuals who are serving as members of the
board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), or (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.
"Control Account" shall mean account number 4002127324 at Community
Trust Bank, Inc., Pikeville, Kentucky established pursuant to the Control
Account and Security Agreement, dated as of July ___, 2006, between the
Company, Community Trust Bank, Inc. and Atoll Asset Management, LLC, as
agent.
"Conversion Price" means $0.90, subject to adjustment as set forth
herein.
"Current Market Price" means when used with respect to the Common
Stock as of a specified date with respect to each share of Common Stock:
(i) if the principal trading market for such securities is a national or
regional securities exchange, the closing price on such exchange on such
day; or (ii) if sales prices for shares of Common Stock are reported by the
NASDAQ National Market System (or a similar system then in use), the last
reported sales price (regular way) so reported on such day; or (iii) if
neither (i) nor (ii) above are applicable, and if bid and ask prices for
shares of Common Stock are reported in the over-the-counter market by
NASDAQ (or, if not so reported, by the National Quotation Bureau), the
average of the high bid and low ask prices so reported on such day.
Notwithstanding the foregoing, if there is no reported closing price, last
reported sales price, or bid and ask prices, as the case may be, for the
day in question, then the Current Market Price shall be determined as of
the latest date prior to such day for which such closing price, last
reported sales price, or bid and ask prices, as the case may be, are
available, unless such securities have not been traded on an exchange or in
the over-the-counter market for 5 or more days immediately prior to the day
in question, in which case the Current Market Price shall be determined by
an Independent Financial Expert (and the costs of such determination shall
be bourne entirely by the Company). An "Independent Financial Expert" shall
mean a reputable accounting, appraisal or investment banking firm that is,
in the reasonable judgment of the Board of Directors, qualified to perform
the task for which such firm has been engaged hereunder, is nationally
recognized and disinterested and Independent with respect to the Company
and its affiliates and is reasonably acceptable to the Holder.
"Independent" shall mean any person or entity that (A) is in fact
independent, (B) does not have any direct financial interest or any
material indirect financial interest in the Company or any of its
subsidiaries, or in any affiliate of the Company or any of its subsidiaries
(other than as a result of holding securities of the Company in trading
accounts), and (C) is not an officer, employee, promoter, trustee, partner,
director or person performing similar functions for the Company or any of
its subsidiaries or any affiliate of the Company or any of its
subsidiaries.
"Debenture Register" shall have the meaning set forth in Section 3
(c).
"Event of Default" shall have the meaning set forth in Section 5.
"Fundamental Transaction" means any transaction pursuant to which (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.
"Late Fees" shall have the meaning set forth in Section 2(d).
"Mandatory Default Amount" means the sum of 120% of the outstanding
principal amount of this Debenture, plus all accrued and unpaid interest
hereon.
"New York Courts" shall have the meaning set forth in Section 6(d).
"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" means (a) the Indebtedness existing on the
Original Issue Date and set forth on Schedule 3.1(aa) attached to the
Purchase Agreement, (b) Variable Rate Original Issue Discount Convertible
Secured Debentures to be issued on or immediately after the date hereof,
and (c) capital lease obligations and purchase money indebtedness of up to
$500,000, in the aggregate, incurred in connection with the acquisition of
capital assets and lease obligations with respect to newly acquired or
leased assets.
"Permitted Lien" means 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 the Company's business, such as carriers',
warehousemen's and mechanics' Liens, statutory landlords' Liens, and other
similar Liens arising in the ordinary course of the Company's business, and
which (x) 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) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing for the
foreseeable future the forfeiture or sale of the property or asset subject
to such Lien; (c) Liens incurred in connection with Permitted Indebtedness
under clauses (a) and (b) thereunder; or (d) Liens incurred in connection
with Permitted Indebtedness under clause (c) thereunder, provided that such
Liens are not secured by assets of the Company or its Subsidiaries other
than the assets so acquired or leased.
"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.
"Prepayment Amount" means the sum of (i) 105% of the then outstanding
principal amount of the Debenture, (ii) accrued but unpaid interest and
(iii) all liquidated damages and other amounts due in respect of the
Debenture.
"Principal Amount" means at any time the sum of (i) the outstanding
principal amount of this Note at such time, (ii) all accrued but unpaid
interest hereunder to such time, and (iii) any default payments owing at
such time to the Holder under the Transaction Documents but not theretofore
paid or added to the Principal Amount.
"Principal Market" means the OTC Bulletin Board or such other U.S.
market or exchange which is the principal market on which the Common Stock
is then listed for trading.
"Purchase Agreement" means the Securities Purchase Agreement
among the Company and the original Holders, dated as of July __, 2006,
as amended, modified or supplemented from time to time in accordance
with its terms.
"Subsidiary" shall have the meaning set forth in the Purchase
Agreement.
"Trading Day" means a day on which the Principal Market is open for
the general trading of securities.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issued or
issuable upon conversion of, in lieu of cash payment of principal of, or
interest on, as repayment of principal under, or otherwise pursuant to,
this Note in accordance with the terms hereof and the Purchase Agreement.
Section 2. Principal and Interest.
a) Payment of Principal. The Company shall make equal monthly
principal payments under this Debenture commencing on the first Business
Day (the "Initial Principal Payment Date") in which the Company had a
monthly EBITDA in the preceding calendar month of at least $800,000,
provided that, for purposes hereof, "EBITDA" means, for the applicable
period, the net income (or net loss) of the Company and its consolidated
Subsidiaries, determined in accordance with GAAP, consistently applied,
plus (a) any provision for (or less any benefit from) income taxes, (b) any
deduction for interest expense, net of interest income, (c) depreciation
and amortization expense, and (d) any other non-cash adjustments recorded
"below the line" including but not limited to adjustments to the Company's
statement of operations made in accordance with EITF 00-19. Notwithstanding
the foregoing, the Company shall not pay in cash any payments of any kind
(including prepayments) pursuant to this Section 2 (a) if (i) the Control
Account has a balance of less than $250,000 unless such Control Account has
been terminated pursuant to the terms of the agreements governing its
existence and (ii) the holders of the Secured Debentures have not received
payment in full of the first Monthly Redemption payment payable under the
Secured Debentures. The monthly principal amount to be paid under this
Section 2(a), shall be determined by dividing the outstanding principal
balance immediately preceding the Initial Principal Payment Date by the
number of monthly payments due until the Maturity Date.
b) Payment of Interest. The Company shall accrue interest on a monthly
basis on the aggregate then outstanding principal amount of this Debenture
at the rate per annum equal to 15%. The Company shall only pay interest in
cash in arrears to the Holder commencing simultaneously with the Initial
Principal Payment Date.
c) Interest Calculations. Interest shall be calculated on the basis of
a 360-day year and shall accrue daily commencing on the Original Issue Date
until payment in full of the principal sum, plus all accrued and unpaid
interest, liquidated damages and other amounts which may become due
hereunder, has been made.
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.
e) Prepayment. The Company may prepay all or any portion of the
principal amount of this Debenture for an amount in cash equal to the
Prepayment Amount, at any time after the one year anniversary of the
Original Issue Date, without the prior written consent of the Holder;
provided, however, that the Company shall deliver a written notice to the
Holder at least 10 Business Days prior to a full or partial prepayment of
this Debenture, which notice shall specify the date of prepayment and
amount of prepayment of this Debenture.
Section 3. Conversion.
a) Conversion Rights. Upon the terms and subject to the conditions
hereof, the Holder shall have the right, at the Holder's option, to convert
the outstanding Principal Amount , in whole at any time or in part from
time to time, by delivering to the Company a duly executed notice of
conversion in the form attached hereto as Annex A (the "Optional Conversion
Notice"), which may be transmitted by telephone line facsimile
transmission.
b) Common Stock Issuance Upon Conversion.
(i) Conversion Procedures. Upon any conversion of this Note
pursuant to Section 3(a) above, the outstanding Principal Amount being
converted and accrued and unpaid interest thereon to the applicable
Conversion Date shall be converted into such number of fully paid, validly
issued and non-assessable shares of Common Stock, free of any liens, claims
and encumbrances, as is determined by dividing the outstanding Principal
Amount being converted and accrued and unpaid interest thereon to the
applicable Conversion Date by the then applicable Conversion Price. The
date of any Conversion Notice hereunder shall be referred to herein as the
"Conversion Date". If a conversion under this Note cannot be effected in
full for any reason, or if the Holder is converting less than all of the
outstanding Principal Amount hereunder pursuant to a Conversion Notice, the
Company shall, upon request of the Holder, promptly deliver to the Holder
(but no later than five Trading Days after the surrender of this Note to
the Company) a new Note having a Principal Amount equal to the amount of
such outstanding Principal Amount as has not been converted. The Holder
shall not be required physically to surrender this Note to the Company upon
any conversion unless the full outstanding Principal Amount of this Note is
being converted or repaid. The Holder and the Company shall maintain
records showing the outstanding Principal Amount so converted and repaid
and the dates of such conversions or repayments or shall use such other
method, reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of this Note upon each such conversion or
repayment. The Holder agrees that, if the outstanding Principal Amount of
this Note is less than the Principal Xxxxxx stated on the face of this
Note, the Holder will not voluntarily transfer this Note at any time when
no Event of Default has occurred and is continuing without first
surrendering this Note to the Company for issuance, without charge to the
Holder, of a replacement instrument that reflects the outstanding Principal
Amount of this Note. The Company will deliver such replacement instrument
to the Holder as promptly as practical, but in no event later than three
Trading Days, after surrender by the Holder.
(ii) Stock Certificates or DWAC. The Company will deliver to the
Holder not later than five (5) Trading Days after a particular Conversion
Date, a certificate or certificates, for the number of shares of Common
Stock issuable upon such conversion of this Note. In lieu of delivering
physical certificates for the shares of Common Stock issuable upon any
conversion of this Note, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder, the
Company shall use commercially reasonable efforts to cause its transfer
agent electronically to transmit such shares issuable upon conversion to
the Holder (or its designee), by crediting the account of the Holder's (or
such designee's) broker with DTC through its Deposit Withdrawal Agent
Commission system (provided that the same time periods herein as for stock
certificates shall apply). If in the case of any conversion hereunder, such
shares are not delivered to or as directed by the Holder by the third
Trading Day after the applicable Conversion Date, the Holder shall be
entitled by written notice to the Company at any time on or before its
receipt of such shares, to rescind such conversion, in which event the
Company shall immediately return this Note to the Holder if the Holder has
tendered it to the Company in connection with such conversion. If the
Holder notifies the Company that the Holder has not received such shares
within three Trading Days after a particular Conversion Date (each, a
"Holder Share Notice") and the Holder does not receive such shares within
two Trading Days after giving such Holder Share Notice, then, in addition
to any other liability the Company may have, the Company shall pay to the
Holder, in cash, an amount, computed at the rate of 1.5% of the outstanding
Principal Amount per month, for a period not to exceed six months such
failure continues (the "Conversion Delay Payments"). A Holder Share Notice
may be given by telephone or e-mail to the Company's Chief Financial
Officer or General Counsel or Chief Executive Officer. The Company's
obligation to issue and deliver such shares of Common Stock upon conversion
of this Note shall be absolute and unconditional, irrespective of the
absence of any action by the Holder to enforce the same, of 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, any failure or delay
in the enforcement of any other obligation of the Company to the Holder, or
any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any
obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with such exercise.
(iii) Liability for Late Delivery; Force Majeure. If in any case
the Company shall fail to issue and deliver the shares of Common Stock to
the Holder pursuant to this Note on the due date therefor, in addition to
any other liabilities the Company may have hereunder and under applicable
law (A) the Company shall pay or reimburse the Holder on demand for all
out-of-pocket expenses, including, without limitation, reasonable fees and
expenses of legal counsel, incurred by the Holder as a result of such
failure, so long as the Holder shall have given the Company a Holder Share
Notice with respect to such shares of Common Stock, (B) if as a result of
such failure the Holder shall suffer any direct damages or liabilities from
such failure (including, without limitation, margin interest and the cost
of purchasing securities to cover a sale (whether by the Holder or the
Holder's securities broker) or borrowing of shares of Common Stock by the
Holder for purposes of settling any trade involving a sale of shares of
Common Stock made by the Holder during the period beginning on the Issuance
Date and ending on the date the Company delivers or causes to be delivered
to the Holder such shares of Common Stock), then the Company shall upon
demand of the Holder pay to the Holder an amount equal to the actual,
direct out-of-pocket damages and liabilities suffered by the Holder by
reason thereof which the Holder documents to the reasonable satisfaction of
the Company, so long as the Holder shall have given the Company a Holder
Share Notice with respect to such shares of Common Stock, and (C) the
Holder may by written notice (which may be given by mail, courier, personal
service or telephone line facsimile transmission) or oral notice (promptly
confirmed in writing), given at any time prior to delivery to the Holder of
the shares of Common Stock issuable in connection with any exercise of the
Holder's rights by reason of which such shares are deliverable, rescind
such exercise in whole or in part, in which case the Holder shall
thereafter be entitled to exercise its rights with respect to that portion
of this Note as to which such exercise is so rescinded and to exercise its
other rights and remedies with respect to such failure by the Company.
Notwithstanding the foregoing and Section 3(b)(ii), (x) the Company shall
not be liable to the Holder under clauses (A) and (B) of the immediately
preceding sentence or (y) for Conversion Delay Payments, in either such
case of the preceding clause (x) or (y) to the extent the failure of the
Company to deliver or to cause to be delivered such shares of Common Stock
results from a Force Majeure Event (it being understood that the action or
failure to act of the Company's Transfer Agent shall not be deemed a Force
Majeure Event unless outside the control of such Transfer Agent or
resulting from the bankruptcy, liquidation or reorganization of such
Transfer Agent under any bankruptcy, insolvency or other similar law). The
Holder shall notify the Company in writing (or by telephone conversation,
confirmed in writing) as promptly as practicable following the third
Trading Day after the due date for delivery to it of shares of Common Stock
under this Note if the Holder becomes aware that such shares of Common
Stock so issuable have not been received as provided herein, but any
failure so to give such notice shall not affect the Holder's rights under
this Note or otherwise. If pursuant to this Section 3(b)(iii) the Company
is relieved of its obligation to make Conversion Delay Payments, then the
Principal Amount of this Note for which a Conversion Notice has been given
and for which the Company has not issued the shares of Common Stock within
the period provided in Section 3(b)(ii) shall continue to bear interest at
the applicable rate provided in this Note from the applicable Conversion
Date to the date the Company so issues such shares of Common Stock.
c) Conversion Price Adjustments.
(i) Stock Dividends, Splits and Combinations. In the event that
the Company shall (A) pay a dividend or make a distribution to all its
stockholders, in shares of Common Stock, on any class of capital stock of
the Company or any subsidiary which is not directly or indirectly wholly
owned by the Company, (B) split or subdivide its outstanding Common Stock
into a greater number of shares, or (C) combine its outstanding Common
Stock into a smaller number of shares, then in each such case the
Conversion Price in effect immediately prior thereto shall be adjusted so
that the Holder of this Note thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock that such Holder
would have owned or have been entitled to receive after the occurrence of
any of the events described above had this Note been fully converted
immediately prior to the occurrence of such event. An adjustment made
pursuant to this Section 3(c)(i) shall become effective immediately after
the close of business on the record date in the case of a dividend or
distribution and shall become effective immediately after the close of
business on the effective date in the case of such subdivision, split or
combination, as the case may be. Any shares of Common Stock issuable in
payment of a dividend shall be deemed to have been issued immediately prior
to the close of business on the record date for such dividend for purposes
of calculating the number of outstanding shares of Common Stock under
clause (ii) below.
(ii) Adjustment for Certain Issuances.
(A) In the event that the Company shall commit to issue or
distribute securities, in any such case at a price per share (on
an as converted basis with respect to any options, warrants or
convertible securities) less than the Current Market Price per
share (but more than the then applicable Conversion Price as
described in Section 3(c)(ii)(B) below) on the earliest of (1)
the date the Company shall enter into a firm contract for such
issuance or distribution, (2) the record date for the
determination of stockholders entitled to receive any such
securities, if applicable, or (3) the date of actual issuance or
distribution of any such securities (provided that the issuance
of Common Stock upon the exercise of securities that are rights,
warrants, options or convertible or exchangeable securities ("New
Derivative Securities") will not cause an adjustment in the
Conversion Price if no such adjustment would have been required
at the time such New Derivative Security was issued), then the
Conversion Price in effect immediately prior to such earliest
date shall be adjusted so that the new Conversion Price shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to such earliest date by the fraction:
(x) whose numerator shall be (I) the number of shares of
Common Stock outstanding on such date (on a fully-diluted
basis after giving effect to any securities (other than this
Note) convertible or exchangeable into Common Stock) plus
(II) the number of shares of Common Stock which the
aggregate offering price of the total number of such
securities so offered would have purchased at such Current
Market Price (such amount, with respect to any New
Derivative Securities, determined by multiplying the total
number of shares of Common Stock subject thereto by the
exercise price of such New Derivative Securities (or the
Conversion Price, if less), and dividing the product so
obtained by such Current Market Price), and
(y) whose denominator shall be (I) the number of shares of
Common Stock outstanding on such date (on a fully-diluted
basis after giving effect to any securities (other than this
Note) convertible or exchangeable into Common Stock) plus
(II) the number of additional shares of Common Stock to be
issued or distributed or receivable upon exercise of any
such New Derivative Security.
Such adjustment shall be made successively whenever any such
securities are issued. In determining whether any New
Derivative Securities entitle the holders to subscribe for
or purchase shares of Common Stock at less than such Current
Market Price, and in determining the aggregate offering
price of shares of Common Stock so issued, there shall be
taken into account any consideration received by the Company
for such Common Stock or New Derivative Securities, the
value of such consideration, if other than cash, to be
determined by the Board of Directors, whose determination
shall be conclusive and described in a certificate filed
with the records of corporate proceedings of the Company. If
any New Derivative Security to purchase or acquire Common
Stock, the issuance of which resulted in an adjustment in
the Conversion Price pursuant to this subsection (A) shall
expire and shall not have been exercised, the Conversion
Price shall immediately upon such expiration be recomputed
to the Conversion Price which would have been in effect had
the adjustment of the Conversion Price made upon the
issuance of such New Derivative Security been made on the
basis of offering for subscription, purchase or issuance, as
the case may be, only of that number of shares of Common
Stock actually purchased or issued upon the actual exercise
of such New Derivative Security.
(B) In addition, if the Company or any Subsidiary thereof,
as applicable, at any time while this Note is outstanding, shall
offer, sell, grant any option to purchase or offer, sell or grant
any right to reprice its securities, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or other
securities (whether new or existing securities, including without
limitation, a repricing of the Company's 8% Senior Convertible
Notes Due June 30, 2008 as a result of Section 3 c) of such
Notes) entitling any Person to acquire shares of Common Stock, at
an effective price per share of Common Stock less than the then
Conversion Price (such lower price, the "Base Conversion Price"
and such issuances collectively, a "Dilutive Issuance"), as
adjusted hereunder (if the holder of the Common Stock or the
securities so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which is issued in
connection with such issuance, be entitled to receive shares of
Common Stock at an effective price per share which is less than
the Conversion Price, such issuance shall be deemed to have
occurred for less than the Conversion Price on such date of the
Dilutive Issuance), then the Conversion Price shall be reduced to
equal the Base Conversion Price. Such adjustment shall be made
whenever such Common Stock or New Securities are issued. The
Company shall notify the Holder in writing, no later than the
Business Day following the issuance of any Common Stock or the
securities subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms (such notice the
"Dilutive Issuance Notice"). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 3(c), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the
Holder is entitled to receive a number of Conversion Shares based
upon the Base Conversion Price regardless of whether the Holder
accurately refers to the Base Conversion Price in the Notice of
Conversion.
(iii) Rounding of Adjustments. No adjustment in the Conversion
Price shall be required unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Price then in effect; provided,
however, that any adjustments that by reason of this Section 3(c) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 3 or Section 2
shall be made to the nearest cent or nearest 1/100th of a share.
(iv) Notice of Adjustments. Whenever the Conversion Price is
adjusted pursuant to this Section 3(c), the Company shall promptly deliver
to the Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment, provided that any failure to so provide such notice shall not
affect the automatic adjustment hereunder.
(v) Change of Control Transactions. In case of any Change in
Control Transaction, the Holder shall have the right thereafter, at its
option, (A) to convert this Note, in whole or in part, at the then
applicable Conversion Price into the shares of stock and other securities,
cash and/or property receivable upon or deemed to be held by holders of
Common Stock following such Change in Control Transaction, and the Holder
shall be entitled upon such event to receive such amount of securities,
cash or property as the shares of the Common Stock of the Company into
which this Note could have been converted immediately prior to such Change
in Control Transaction would have been entitled if such conversion were
permitted (determined without regard to any limitations contained in
Section 3.13 of the Purchase Agreement), subject to such further applicable
adjustments set forth in this Section 3, or (B) to require the Company or
its successor to redeem this Note, in whole or in part, at a redemption
price equal to 125% of the outstanding Principal Amount being redeemed,
plus accrued interest thereon. The terms of any such Change in Control
Transaction shall include such terms so as to continue to give to the
Holder the right to receive the amount of securities, cash and/or property
upon any conversion or redemption following such Change in Control
Transaction to which a holder of the number of shares of Common Stock
deliverable upon conversion of this Note immediately prior to such Change
in Control Transaction would have been entitled to receive in such Change
in Control Transaction and if such Holder had continued to hold such
securities, cash and/or property until the date of such conversion or
redemption, and interest payable hereunder after such Change in Control
Transaction shall be paid in cash or such new securities and/or property,
at the Holder's option. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, amalgamations, sales, transfers
or share exchanges.
(vi) Notice of Certain Events. If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a tender offer for, offer to purchase or
redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
D. the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation, amalgamation
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 of 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; or
F. there exists an agreement to which the Company is a party or
by which it is bound providing for a Change in Control
Transaction, or a Change in Control Transaction has
occurred;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of this Note, and shall cause to
be mailed to the Holder at its last address as it shall appear upon the
books of the Company, at least 20 calendar days prior to the 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, tender offer,
offer to purchase, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, tender offer, offer to purchase,
redemption, rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, amalgamation, merger, sale,
transfer, share exchange or Change of Control Transaction is expected to
become effective or close, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, amalgamation, merger, sale,
transfer, share exchange or Change in Control Transaction. The Holder is
entitled to convert this Debenture during the 20-day period commencing on
the date of such notice to the effective date of the event triggering such
notice.
d) Reservation and Issuance of Underlying Shares. The Company
covenants that it will at all times reserve from its authorized and
unissued Common Stock a sufficient number of shares solely for the purpose
of issuance upon conversion in full of this Note, free from preemptive
rights or any other actual contingent purchase rights of persons other than
the Holder (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement and taking
into account the adjustments under this Section 3, but determined without
regard to any ownership limitations contained in the Purchase Agreement).
The Company represents, warrants and covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid, and nonassessable.
e) No Fractions. Upon a conversion hereunder the Company shall
not be required to issue stock certificates for a fraction of a share of
Common Stock, but may if otherwise permitted, make a cash payment in
respect of any fraction of a share based on the Current Market Price of a
share of Common Stock 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 fraction of a share, one whole share of Common
Stock.
f) Charges, Taxes and Expenses. Issuance of shares of Common
Stock upon the conversion of this Note shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in respect
of the issuance of such shares, all of which taxes and expenses shall be
paid by the Company, and such shares shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder; provided,
however, that in the event certificates for shares of Common Stock are to
be issued in a name other than the name of the Holder, the applicable
Conversion Notice, when given for such conversion shall be accompanied or
followed by an assignment form for the applicable portion of this Note or
such shares, as the case may be; and provided further, that the Company
shall not be required to pay any tax or taxes which may be payable in
respect of any such transfer.
g) Cancellation. After the entire Principal Amount (including
accrued but unpaid interest and default payments at any time owed on this
Note) has been paid in full or converted into Common Stock, this Note shall
automatically be deemed canceled and the Holder shall promptly surrender
this Note to the Company at the Company's principal executive offices;
provided, however, that the failure to surrender this Note shall not delay
or limit such cancellation.
h) Xxxxxx's Restriction on Conversion. The Company shall not
effect any conversion of this Note, and a Holder shall not have the right
to convert any portion of this Note to the extent that after giving effect
to such 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), as set forth on the applicable Notice
of Conversion, 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 Note with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) conversion of the remaining,
nonconverted principal amount of this Note beneficially owned by such
Holder or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Notes or the Warrants) subject to
a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes of
this Section 3(i), 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 3(i) applies, the determination of whether this Note is convertible
(in relation to other securities owned by such Holder together with any
affiliates) and of which amounts of this Note are convertible shall be in
the sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder's determination of whether
this Note may be converted (in relation to other securities owned by such
Holder) and which amounts of this Note are 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 3(i), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in the most recent of the following:
(A) the Company's most recent Form 10-QSB or Form 10-KSB, as the case may
be, (B) a more recent public announcement by the Company or (C) any other
notice by the Company or the Company's transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral
request of 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 Note, 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
9.99% 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 Note held by the Holder. The Beneficial Ownership
Limitation provisions of this Section 3(h) may be waived by such Xxxxxx, at
the election of such Holder, upon not less than 61 days' prior notice to
the Company..
Section 4. 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.
Section 4. 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;
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 adversely
affects any rights of the Holder;
d) enter into any transaction with any Affiliate of the Company
which would be required to be disclosed in any public filing with the
Commission, unless such transaction is made on an arm's-length basis and
expressly approved by a majority of the disinterested directors of the
Company (even if less than a quorum otherwise required for board approval);
e) enter into any agreement with respect to any of the foregoing;
f) maintain a balance of cash and equivalents of less than
$250,000 in each of the Blocked Account and the Control Account;
g) pay cash dividends or distributions on any equity securities
of the Company; or
h) incur any past-due taxes imposed by any federal, state or
local government, other than those which are the subject of a bona fide
dispute and as to which lawful procedures for contesting the same are being
diligently pursued.
Section 5. 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 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 3 Business Days;
ii. the Company shall fail to observe or perform any other
covenant or agreement contained in the Debentures which failure
is not cured, if possible to cure, by the earlier of (A) 5
Business Days after notice of such failure delivered by the
Holder or by any other Holder and (B) 10 Business Days after the
Company has become aware of such failure;
iii. a 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 by the Company 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 $150,000, 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 (unless the indebtedness is already due or past
due);
vii. 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 33% of its assets in one
transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);
viii. a Registration Statement shall not have been declared
effective by the Commission on or prior to the 210th calendar day
after the Closing Date;
ix. any Person shall breach any agreement delivered to the
initial Holders pursuant to Section 2.2(a)(ix) of the Purchase
Agreement; or
x. 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
$50,000, 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 (other than in a Bankruptcy Event, in which case 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 immediately due and payable without
further actions on the part of the Holder), 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 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 6. Miscellaneous.
a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder 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, Attention: President, 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
6. 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 6 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.
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 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 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.
*********************
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.
CONSOLIDATED ENERGY, INC.
By:__________________________________________
Name: Xxxxx Xxxxxxx
Title: President
ASSIGNMENT
For value received hereby sell(s), assign(s) and transfer(s) unto (Please
insert social security or other Taxpayer Identification Number of assignee: )
the within Note, and hereby irrevocably constitutes and appoints attorney to
transfer the said Note on the books of Consolidated Energy, Inc., a Wyoming
corporation (the "Company"), with full power of substitution in the premises.
In connection with any transfer of the Note within the period prior to the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Note is being transferred:
[ ] To the Company or a subsidiary thereof; or
[ ] To a QIB pursuant to and in compliance with Rule 144A; or
[ ] To an "accredited investor" pursuant to and in compliance with
the Securities Act; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Note is not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the Securities Act (an
"Affiliate").
[ ] The transferee is an Affiliate of the Company.
Capitalized terms used in this Assignment and not defined in this
Assignment shall have the respective meanings provided in the Note.
Dated: NAME:________________________________
Signature(s) _____________________________________
ANNEX A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order
to convert 15% Unsecured Convertible Note)
Re: 15% Unsecured Convertible Note issued by CONSOLIDATED
ENERGY, INC. identified below (the "Note")
The undersigned hereby elects to convert the outstanding Principal Amount (as
defined in the Note) indicated below of the Note into shares of Common Stock, of
CONSOLIDATED ENERGY, INC., a Wyoming corporation (the "Company") according to
the terms hereof and of the Note, as of the date written below. If shares are to
be issued in the name of a person other than undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the Holder for any conversion,
except for such transfer taxes, if any.
Conversion information:
_____________________________________________
Note Number
_____________________________________________
Conversion Date
_____________________________________________
Principal Amount of Note Being Converted
_____________________________________________
Number of Shares of Common Stock to Be Issued
_____________________________________________
Applicable Conversion Price
_____________________________________________
Signature
_____________________________________________
Name
_____________________________________________
Address
