Contract
Exhibit
10.4
THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING
OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF
THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
7
¾ % CONVERTIBLE DEBENTURE
Company:
Celsius Holdings,
Inc.
Company
Address: 000 XX 0xx
Xxxxxx,
Xxxxx X, Xxxxxx Xxxxx, Xxxxxxx 00000
Closing
Date: December 19,
2007
Maturity
Date: December 19,
2011
Principal
Amount:
$1,500,000
Celsius
Holdings, Inc., a Nevada corporation, and any successor or resulting corporation
by way of merger, consolidation, sale or exchange of all or substantially all
of
the assets or otherwise (the “Company”), for value
received, hereby promises to pay to the Holder (as such term is hereinafter
defined), or such other Person (as such term is hereinafter defined) upon order
of the Holder, on the Maturity Date (as such term is hereinafter defined),
the
Principal Amount (as such term is hereinafter defined), as such sum may be
adjusted pursuant to Article 3, and to pay interest thereon with such interest
commencing to accrue as of the date hereof and payable monthly beginning on
the
date hereof and such interest shall be paid within three days of the beginning
of each month that such interest is due, 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), at the rate of seven and three-quarters percent
(7 ¾ %) per annum (the “Debenture Interest Rate”).
All interest payable on the Principal Amount of this Debenture shall be
calculated on the basis of a 360-day year for the actual number of days
elapsed. Payment of interest on this Debenture shall be in cash or,
at the option of the Holder, in shares of Common Stock of the Company valued
at
the then applicable Conversion Price (as defined herein). This
Debenture may not be prepaid without the written consent of the
Holder.
ARTICLE
1
DEFINITIONS
SECTION
1.1 Definitions. The
terms defined in this Article whenever used in this Debenture have the following
respective meanings:
(i) “Affiliate”
has the meaning
ascribed to such term in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended.
(ii) “Bankruptcy
Code” means the
United States Bankruptcy Code of 1986, as amended (11 U.S.C. §§ 101 et. seq.).
TWH
JAN
Initials
Initials
Page
1
(iii) “Business
Day” means a day
other than Saturday, Sunday or any day on which banks located in the State
of
California are authorized or obligated to close.
(iv) “Capital
Shares” means the
Common Stock and any other shares of any other class or series of capital stock,
whether now or hereafter authorized and however designated, which have the
right
to participate in the distribution of earnings and assets (upon dissolution,
liquidation or winding-up) of the Company.
(v) “Closing
Date” means the
closing date set forth in the first paragraph of this Debenture.
(vi) “Common
Shares” or “Common Stock” means shares
of
the Company’s Common Stock.
(vii) “Common
Stock Issued at
Conversion”, when used with reference to the securities deliverable upon
conversion of this Debenture, means all Common Shares now or hereafter
Outstanding and securities of any other class or series into which this
Debenture hereafter shall have been changed or substituted, whether now or
hereafter created and however designated.
(viii) “Conversion”
or“conversion” means the
repayment by the Company of the Principal Amount of this Debenture (and, to
the
extent the Holder elects as permitted by Section 3.1, accrued and unpaid
interest thereon) by the delivery of Common Stock on the terms provided in
Section 3.2, and “convert,”“converted,”“convertible”
and like words
shall have a corresponding meaning.
(ix) “Conversion
Date” means any
day on which all or any portion of the Principal Amount of this Debenture is
converted in accordance with the provisions hereof.
(x) “Conversion
Notice” means a
written notice of conversion substantially in the form annexed hereto as Exhibit
A.
(xi) “Conversion
Price” on any date
of determination means the applicable price for the conversion of this Debenture
into Common Shares on such day as set forth in Section 3.1(a).
(xii) “Current
Market Price” on any
date of determination means the closing price of a Common Share on such day
as
reported in the “pink sheets” through the Interdealer Trading Quotation System;
provided, if such security is not traded on the over the counter market via
the
pink sheets, then the closing price on the NASDAQ OTCBB Exchange; provided further,
that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
as reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by Bloomberg LP or a similar generally
accepted reporting service, as the case may be.
TWH
JAN
Initials
Initials
Page
2
(xiii) “Debenture”
or
“Debentures”
means this
Convertible Debenture of the Company or such other convertible debenture(s)
exchanged therefor as provided in Section 2.1.
(xiv) “Discount
Multiplier” has the
meaning set forth in Section 3.1(a).
(xv) “Event
of Default” has the
meaning set forth in Section 6.1.
(xvi) “Holder”
means Golden Gate
Investors, Inc., any successor thereto, or any Person to whom this Debenture
is
subsequently transferred in accordance with the provisions hereof.
(xvii) “Interest
Payment Due Date”
has the meaning set forth in the opening paragraph of this
Debenture.
(xviii) “Market
Disruption Event”
means any event that results in a material suspension or limitation of trading
of the Common Shares.
(xix) “Maturity
Date” means the
maturity date set forth in the first paragraph of this Debenture.
(xx) “Maximum
Rate” has the meaning
set forth in Section 6.4.
(xxi) “Outstanding”
when used with
reference to Common Shares or Capital Shares (collectively, “Shares”) means, on any date
of determination, all issued and outstanding Shares, and includes all such
Shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in such Shares; provided, however,
that any
such Shares directly or indirectly owned or held by or for the account of the
Company or any Subsidiary of the Company shall not be deemed “Outstanding” for purposes
hereof.
(xxii) “Person”
means an individual,
a corporation, a partnership, an association, a limited liability company,
an
unincorporated business organization, a trust or other entity or organization,
and any government or political subdivision or any agency or instrumentality
thereof.
(xxiii) “Principal
Amount” means, for
any date of calculation, the principal sum set forth in the first paragraph
of
this Debenture (but only such principal amount as to which the Holder has (a)
actually advanced, and (b) not theretofore furnished a Conversion Notice in
compliance with Section 3.2).
(xxiv) “Promissory
Note” means that
certain Secured Promissory Note in the principal amount of $1,250,000 of even
date herewith issued by Golden Gate Investors, Inc. to Celsius Holdings, Inc.,
as the same may be amended from time to time.
(xxv) “SEC”
means the United States
Securities and Exchange Commission.
(xxvi) “Securities
Act” means the
Securities Act of 1933, as amended, and the rules and regulations of the SEC
thereunder, all as in effect at the time.
TWH
JAN
Initials
Initials
Page
3
(xxvii) “Securities
Purchase
Agreement” means that certain Securities Purchase Agreement of even date
herewith by and among the Company and Holder, as the same may be amended from
time to time.
(xxviii) “Subsidiary”
means any entity
of which securities or other ownership interests having ordinary voting power
to
elect a majority of the board of directors or other persons performing similar
functions are owned directly or indirectly by the Company.
(xxix) “Trading
Day” means any day on
which (i) purchases and sales of securities on the principal national security
exchange or quotation system on which the Common Shares are traded are reported
thereon, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, as reported by Bloomberg LP or a
similar generally accepted reporting service, as the case may be, (ii) at least
one bid for the trading of Common Shares is reported and (iii) no Market
Disruption Event occurs.
(xxx) “Volume
Weighted Average
Price” per Common Share means the volume weighted average
price of the Common Shares during any Trading Day as reported in the “pink
sheets” through the Interdealer Trading Quotation System; provided, if such
security is not traded on the over the counter market via the pink sheets,
then
the volume weighted average price on the NASDAQ OTCBB; provided further,
that, if such security is not listed or admitted to trading on the NASDAQ OTCBB,
as reported on the principal national security exchange or quotation system
on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or
quotation system, the volume weighted average price of the Common Shares during
any Trading Day on the over-the-counter market as reported by Bloomberg LP
or a
similar generally accepted reporting service, as the case may be.
All
references to “cash” or “$” herein means currency of the United States of
America.
ARTICLE
2
EXCHANGES,
TRANSFER AND REPAYMENT
SECTION
2.1 Registration
of Transfer of
Debentures. This Debenture, when presented for registration of transfer,
shall (if so required by the Company) be duly endorsed, or be accompanied by
a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed, by the Holder duly authorized in writing.
SECTION
2.2 Loss,
Theft, Destruction of
Debenture. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and,
in
the case of any such loss, theft or destruction, upon receipt of indemnity
or
security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Debenture, the Company
shall
make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated
Debenture, a new Debenture of like tenor and unpaid Principal Xxxxxx dated
as of
the date hereof (which shall accrue interest from the most recent Interest
Payment Due Date on which an interest payment was made in full). This
Debenture shall be held and owned upon the express condition that the provisions
of this Section 2.2 are exclusive with respect to the replacement of a
mutilated, destroyed, lost or stolen Debenture and shall preclude any and all
other rights and remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
TWH
JAN
Initials
Initials
Page
4
SECTION
2.3 Who
Deemed Absolute
Owner. The Company may deem the Person in whose name this
Debenture shall be registered upon the registry books of the Company to be,
and
may treat it as, the absolute owner of this Debenture (whether or not this
Debenture shall be overdue) for the purpose of receiving payment of or on
account of the Principal Amount of this Debenture, for the conversion of this
Debenture and for all other purposes, and the Company shall not be affected
by
any notice to the contrary. All such payments and such conversions
shall be valid and effectual to satisfy and discharge the liability upon this
Debenture to the extent of the sum or sums so paid or the conversion or
conversions so made.
SECTION
2.4 Repayment
at
Maturity. At the Maturity Date, the Company shall repay the
outstanding Principal Amount of this Debenture in whole in cash, together with
all accrued and unpaid interest thereon, in cash, to the Maturity
Date. The Company shall first apply against such amount due on the
Maturity Date an amount equal to the outstanding amount owed by the Holder
to
the Company under the Promissory Note, if any, and the amount otherwise owed
by
the Company to the Holder in connection with the maturity of this Debenture
shall be reduced by the outstanding amount owed by the Holder to the Company
under the Promissory Note, with the Promissory Note deemed paid by Holder to
the
extent of and with respect to such amount, and if the amount due from the
Company to the Holder in connection with the maturity of this Debenture is
equal
to or greater than the outstanding amount owed under the Promissory Note, the
Company shall cancel and deem the Promissory Note as paid in full in connection
with the application of the amount owed by the Holder to the Company under
Promissory Note against the amount otherwise owed by the Company to the Holder
hereunder. The Company shall immediately pay in cash to the Holder
any remaining amount owed by the Company to the Holder in connection with the
maturity of this Debenture as described herein, after the application of the
outstanding amount owed under the Promissory Note, if any, to such
obligation.
ARTICLE
3
CONVERSION
OF DEBENTURE
SECTION
3.1 Conversion;
Conversion
Price; Valuation Event.
At
the
option of the Holder, this Debenture may be converted, either in whole or in
part, up to the full Principal Amount hereof into Common Shares (calculated
as
to each such conversion to the nearest 1/100th of a share), at any time and
from
time to time on any Business Day, subject to compliance with Section 3.2. The
number of Common Shares into which this Debenture may be converted is equal
to
the dollar amount of the Debenture being converted divided by the Conversion
Price. The “Conversion
Price” shall be equal to the lesser of (i) $1.00, or (ii) 80% of the
average of the 3 lowest Volume Weighted Average Prices during the 20 Trading
Days prior to Holder’s election to convert (the percentage figure being a “Discount Multiplier”). The
Company reserves the right to increase the number of Trading Days in clause
(ii)
above, as it deems appropriate.
TWH
JAN
Initials
Initials
Page
5
If
the
Holder elects to convert a portion of the Debenture and, on the day that the
election is made, the Volume Weighted Average Price is below $0.20, the Company
shall have the right to prepay that portion of the Debenture that Holder elected
to convert, plus any accrued and unpaid interest, at 150% of such amount. In
the
event that the Company elects to prepay that portion of the Debenture, Holder
shall have the right to withdraw its Conversion Notice.
Notwithstanding
the foregoing, prior to the conversion by Holder of any Principal Amount of
this
Debenture that is represented by all or a portion of the principal amount
outstanding under the Promissory Note and has not otherwise been advanced in
cash to the Company prior to such conversion, the Holder shall prepay such
portion of the outstanding principal amount of the Promissory Note that is
represented by such conversion under this Debenture, such that prior to the
conversion of the principal amount of this Debenture, the Holder shall have
paid
an amount to the Company in cash equal to the portion of the principal amount
of
this Debenture that is to be so converted.
SECTION
3.2 Exercise
of Conversion
Privilege. (a) Conversion of this Debenture may be exercised
on any Business Day by the Holder by telecopying an executed and completed
Conversion Notice to the Company. Each date on which a Conversion
Notice is telecopied to the Company in accordance with the provisions of this
Section 3.2 shall constitute a Conversion Date. The Company shall
convert this Debenture and issue the Common Stock Issued at Conversion in the
manner provided below in this Section 3.2, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date
at
the time specified in the Conversion Notice. The Conversion Notice
also shall state the name or names (with addresses) of the persons who are
to
become the holders of the Common Stock Issued at Conversion in connection with
such conversion. As promptly as practicable after the receipt of the Conversion
Notice as aforesaid, but in any event not more than two (2) Business Days after
the Company’s receipt of such Conversion Notice, the Company shall (i) issue the
Common Stock Issued at Conversion in accordance with the provisions of this
Article 3 and (ii) cause to be mailed for delivery by overnight courier (x)
a
certificate or certificate(s) representing the number of Common Shares to which
the Holder is entitled by virtue of such conversion and (y) cash, as provided
in
Section 3.3, in respect of any fraction of a Common Share deliverable upon
such
conversion. Such conversion shall be deemed to have been effected at
the time at which the Conversion Notice indicates, and at such time the rights
of the Holder of this Debenture, as such (except if and to the extent that
any
Principal Amount thereof remains unconverted), shall cease and the Person and
Persons in whose name or names the Common Stock Issued at Conversion shall
be
issuable shall be deemed to have become the holder or holders of record of
the
Common Shares represented thereby, and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest
with
such Person or Persons. The Conversion Notice shall constitute a
contract between the Holder and the Company, whereby the Holder shall be deemed
to subscribe for the number of Common Shares which it will be entitled to
receive upon such conversion and, in payment and satisfaction of such
subscription (and for any cash adjustment to which it is entitled pursuant
to
Section 3.4), to surrender this Debenture and to release the Company from all
liability thereon (except if and to the extent that any Principal Amount thereof
remains unconverted). No cash payment aggregating less than $1.00
shall be required to be given unless specifically requested by the
Holder.
TWH
JAN
Initials
Initials
Page
6
(b) If,
at
any time after the date of this Debenture, (i) the Company challenges, disputes
or denies the right of the Holder hereof to effect the conversion of this
Debenture into Common Shares or otherwise dishonors or rejects any Conversion
Notice delivered in accordance with this Section 3.2 or (ii) any third party
who
is not and has never been an Affiliate of the Holder commences any lawsuit
or
legal proceeding or otherwise asserts any claim before any court or public
or
governmental authority which seeks to challenge, deny, enjoin, limit, modify,
delay or dispute the right of the Holder hereof to effect the conversion of
this
Debenture into Common Shares, then the Holder shall have the right, but not
the
obligation, by written notice to the Company, to require the Company to promptly
redeem this Debenture for cash at one hundred fifty percent (150%) of the
Principal Amount thereof, together with all accrued and unpaid interest thereon
to the date of redemption. Under any of the circumstances set forth
above, the Company shall be responsible for the payment of all costs and
expenses of the Holder, including reasonable legal fees and expenses, as and
when incurred in defending itself in any such action or pursuing its rights
hereunder (in addition to any other rights of the Holder).
(c) The
Holder shall be entitled to exercise its conversion privilege notwithstanding
the commencement of any case under the Bankruptcy Code. In the event
the Company is a debtor under the Bankruptcy Code, the Company hereby waives
to
the fullest extent permitted any rights to relief it may have under 11 U.S.C.
§
362 in respect of the Holder’s conversion privilege. The Company
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. § 362 in respect of the conversion of this
Debenture. The Company agrees, without cost or expense to the Holder,
to take or consent to any and all action necessary to effectuate relief under
11
U.S.C. § 362.
SECTION
3.3 Fractional
Shares. No fractional Common Shares or scrip representing
fractional Common Shares shall be delivered upon conversion of this
Debenture. Instead of any fractional Common Shares which otherwise
would be delivered upon conversion of this Debenture, the Company shall pay
a
cash adjustment in respect of such fraction in an amount equal to the same
fraction multiplied by the Current Market Price on the Conversion
Date. No cash payment of less than $1.00 shall be required to be
given unless specifically requested by the Holder.
SECTION
3.4 Adjustments. The
Conversion Price and the number of shares deliverable upon conversion of this
Debenture are subject to adjustment from time to time as follows:
(i) Reclassification,
Etc. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another Person
(where the Company is not the survivor or where there is a change in or
distribution with respect to the Common Stock of the Company), sell, convey,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another Person, or effectuate a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
the
Company is disposed of (each, a “Fundamental Corporate
Change”) and, pursuant to the terms of such Fundamental Corporate Change,
shares of common stock of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights)
TWH
JAN
Initials
Initials
Page
7
in
addition to or in lieu of common stock of the successor or acquiring corporation
(“Other Property”) are
to be received by or distributed to the holders of Common Stock of the Company,
then the Holder of this Debenture shall have the right thereafter, at its sole
option, to (x) require the Company to prepay this Debenture for cash at one
hundred fifty percent (150%) of the Principal Amount thereof, together with
all
accrued and unpaid interest thereon to the date of prepayment, (y) receive
the number of shares of common stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and Other Property as
is
receivable upon or as a result of such Fundamental
Corporate Change by a holder of the number of shares of Common Stock into which
the outstanding portion of this Debenture may be converted at the Conversion
Price applicable immediately prior to such Fundamental Corporate Change or
(z) require the Company, or such successor, resulting or purchasing
corporation, as the case may be, to, without benefit of any additional
consideration therefor, execute and deliver to the Holder a debenture with
substantial identical rights, privileges, powers, restrictions and other terms
as this Debenture in an amount equal to the amount outstanding under this
Debenture immediately prior to such Fundamental Corporate Change. For
purposes hereof, “common stock
of the successor or acquiring corporation” shall include stock of such
corporation of any class which is not preferred as to dividends or assets over
any other class of stock of such corporation and which is not subject to
prepayment and shall also include any evidences of indebtedness, shares of
stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe
for
or purchase any such stock. The foregoing provisions shall similarly
apply to successive Fundamental Corporate Changes.
SECTION
3.5 Certain
Conversion
Limits.
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, as set forth on the applicable Conversion
Notice, 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 warrants to purchase shares of
the
Company’s Common Stock) beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 3.5, 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 3.5 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 such Holder, and the submission of a
Conversion Notice shall be deemed to be such Holder’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.
TWH
JAN
Initials
Initials
Page
8
To
ensure compliance with this restriction, each Holder will be deemed to represent
to the Company each time it delivers a Conversion Notice that such Conversion
Notice 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 3.5, in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number
of
outstanding shares of Common Stock provided to the Holder in writing by the
Company after Holder makes such request or in the event that the Company files,
any of the following with the Securities and Exchange Commission, 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) 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 on the records
of
the Company as of the date of the request. 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 3.5 may be waived by such Holder, at the election of such Holder, upon
not less than 61 days’ prior notice to the Company, to, at the sole discretion
of the Holder, either change the Beneficial Ownership Limitation to (i) 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 the
Debenture held by the Holder and the provisions of this Section 3.5 shall
continue to apply, or (ii) remove any Beneficial Ownership Limitation under
this
Debenture. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms
of
this Section 3.5 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. If any court of competent
jurisdiction shall determine that the foregoing limitation is ineffective to
prevent a Holder from being deemed the beneficial owner of more than 9.99%
of
the then outstanding shares of Common Stock, then the Company shall prepay
such
portion of this Debenture as shall cause such Holder not to be deemed the
beneficial owner of more than 9.99% of the then outstanding shares of Common
Stock. Upon such determination by a court of competent jurisdiction,
the Holder shall have no interest in or rights under such portion of the
Debenture. Any and all interest paid on or prior to the date of such
determination shall be deemed interest paid on the remaining portion of this
Debenture held by the Holder. Such prepayment shall be for cash at a
prepayment price of one hundred fifty percent (150%) of the Principal Amount
thereof, together with all accrued and unpaid interest thereon to the date
of
prepayment. The limitations contained in this paragraph shall apply
to a successor holder of this Debenture.
TWH
JAN
Initials
Initials
Page
9
SECTION
3.6 Surrender
of
Debentures. Upon any redemption of this Debenture pursuant to
Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to Section 2.4, the Holder
shall either deliver this Debenture by hand to the Company at its principal
executive offices or surrender the same to the Company at such address by
nationally recognized overnight courier. Payment of the redemption
price or the amount due on maturity specified in Section 2.4, shall be made
by
the Company to the Holder against receipt of this Debenture (as provided in
this
Section 3.5) by wire transfer of immediately available funds to such account(s)
as the Holder shall specify by written notice to the Company. If
payment of such redemption price is not made in full by the redemption date,
or
the amount due on maturity is not paid in full by the Maturity Date, the Holder
shall again have the right to convert this Debenture as provided in Article
3
hereof or to declare an Event of Default.
ARTICLE
4
STATUS;
RESTRICTIONS ON TRANSFER
SECTION
4.1 Status
of
Debenture. This Debenture constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms
subject, as to enforceability, to general principles of equity and to principles
of bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors’ rights and remedies
generally.
SECTION
4.2 Restrictions
on
Transfer. This Debenture, and any Common Shares deliverable
upon the conversion hereof, have not been registered under the Securities
Act. The Holder by accepting this Debenture agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and
upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Debenture or such shares may be sold pursuant to an exemption from
registration under the Securities Act, provided that the Company will not
require opinions of counsel for transactions involving transfers to Affiliates
of the Holder or pursuant to Rule 144 promulgated by the SEC under the
Securities Act, except in unusual circumstances, or (ii) a registration
statement relating to this Debenture or such shares has been filed by the
Company and declared effective by the SEC.
Each
certificate for shares of Common Stock deliverable hereunder shall bear a legend
as follows unless and until such securities have been sold pursuant to an
effective registration statement under the Securities Act:
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”). The
securities may not be offered for sale, sold or otherwise transferred except
(i)
pursuant to an effective registration statement under the Securities Act or
(ii)
pursuant to an exemption from registration under the Securities Act in respect
of which the issuer of this certificate has received an opinion of counsel
satisfactory to the issuer of this certificate to such effect. Copies
of the agreement covering both the purchase of the securities and restrictions
on their transfer may be obtained at no cost by written request made by the
holder of record of this certificate to the Secretary of the issuer of this
certificate at the principal executive offices of the issuer of this
certificate.”
TWH
JAN
Initials
Initials
Page
10
ARTICLE
5
COVENANTS
SECTION
5.1 Conversion. The
Company shall cause the transfer agent, not later than two (2) Business Days
after the Company’s receipt of a Conversion Notice, to issue and deliver to the
Holder the requisite shares of Common Stock Issued at Conversion.
SECTION
5.2 Notice
of
Default. If any one or more events occur which constitute or
which, with notice, lapse of time, or both, would constitute an Event of
Default, the Company shall forthwith give notice to the Holder, specifying
the
nature and status of the Event of Default or such other event(s), as the case
may be.
SECTION
5.3 Payment
of
Obligations. So long as this Debenture shall be outstanding,
the Company shall pay, extend, or discharge at or before maturity, all its
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings.
SECTION
5.4 Compliance
with
Laws. So long as this Debenture shall be outstanding, the
Company shall comply with all applicable laws, ordinances, rules, regulations
and requirements of governmental authorities, except for such noncompliance
which would not have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of operations of the
Company and the Subsidiaries.
SECTION
5.5 Inspection
of Property,
Books and Records. So long as this Debenture shall be
outstanding, the Company shall keep proper books of record and account in which
full, true and correct entries shall be made of all material dealings and
transactions in relation to its business and activities and shall permit
representatives of the Holder at the Holder’s expense to visit and inspect any
of its respective properties, to examine and make abstracts from any of its
respective books and records, not reasonably deemed confidential by the Company,
and to discuss its respective affairs, finances and accounts with its respective
officers and independent public accountants, all at such reasonable times and
as
often as may reasonably be desired.
SECTION
5.6 Reservation
of Stock
Issuable Upon Conversion. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of this Debenture,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of this Debenture; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of this Debenture, in addition to such other remedies
as shall be available to the holder of this Debenture, the Company will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number
of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval to file
an
amendment to the charter of the Company.
TWH
JAN
Initials
Initials
Page
11
ARTICLE
6
EVENTS
OF DEFAULT; REMEDIES
SECTION
6.1 Events
of
Default. “Event of Default” wherever
used herein means any one of the following events:
(i) the
Company shall default in the payment of principal of or interest on this
Debenture as and when the same shall be due and payable and, in the case of
an
interest payment default, such default shall continue for five (5) Business
Days
after the date such interest payment was due, or the Company shall fail to
perform or observe any other covenant, agreement, term, provision, undertaking
or commitment under this Debenture or the Securities Purchase Agreement and
such
default shall continue for a period of ten (10) Business Days after the delivery
to the Company of written notice that the Company is in default hereunder or
thereunder;
(ii) any
of
the representations, warranties, or covenants made by the Company herein, in
the
Securities Purchase Agreement or in any certificate or financial or other
written statements heretofore or hereafter furnished by or on behalf of the
Company in connection with the execution and delivery of this Debenture or
the
Securities Purchase Agreement shall be false or misleading in a material respect
on the Closing Date;
(iii) under
the
laws of any jurisdiction not otherwise covered by clauses (iv) and (v) below,
the Company or any Subsidiary (A) becomes insolvent or generally not able to
pay
its debts as they become due, (B) admits in writing its inability to pay its
debts generally or makes a general assignment for the benefit of creditors,
(C)
institutes or has instituted against it any proceeding seeking (x) to adjudicate
it a bankrupt or insolvent, (y) liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency, reorganization or relief
of
debtors including any plan of compromise or arrangement or other corporate
proceeding involving or affecting its creditors or (z) the entry of an order
for
relief or the appointment of a receiver, trustee or other similar person for
it
or for any substantial part of its properties and assets, and in the case of
any
such official proceeding instituted against it (but not instituted by it),
either the proceeding remains undismissed or unstayed for a period of sixty
(60)
calendar days, or any of the actions sought in such proceeding (including the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial
part
of its properties and assets) occurs or (D) takes any corporate action to
authorize any of the above actions;
(iv) the
entry
of a decree or order by a court having jurisdiction in the premises adjudging
the Company or any Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under the Bankruptcy Code or any other
applicable Federal or state law, or appointing a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Company or of any
substantial part of its property, or ordering the winding-up or liquidation
of
its affairs, and any such decree or order continues and is unstayed and in
effect for a period of sixty (60) calendar days;
Page
12
(v) the
institution by the Company or any Subsidiary of proceedings to be adjudicated
a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under the Bankruptcy Code or any
other applicable federal or state law, or the consent by it to the filing of
any
such petition or to the appointment of a receiver, liquidator, assignee, trustee
or sequestrator (or other similar official) of the Company or of any substantial
part of its property, or the making by it of an assignment for the benefit
of
creditors, or the admission by it in writing of its inability to pay its debts
generally as and when they become due, or the taking of corporate action by
the
Company in furtherance of any such action;
(vi) a
final
judgment or final judgments for the payment of money shall have been entered
by
any court or courts of competent jurisdiction against the Company and remains
undischarged for a period (during which execution shall be effectively stayed)
of thirty (30) days, provided that the
aggregate amount of all such judgments at any time outstanding (to the extent
not paid or to be paid, as evidenced by a written communication to that effect
from the applicable insurer, by insurance) exceeds One Hundred Thousand Dollars
($100,000);
(vii) it
becomes unlawful for the Company to perform or comply with its obligations
under
this Debenture or the Securities Purchase Agreement in any respect;
(viii) the
Common Shares shall no longer be traded in the over the counter market via
the
“pink sheets” or not otherwise be listed for trading on the NASDAQ
OTCBB (the “Trading
Market” or, to the extent the Company becomes eligible to list its Common
Stock on any other national security exchange or quotation system, upon official
notice of listing on any such exchange or system, as the case may be, it shall
be the “Trading Market”) or suspended from trading on the Trading Market, and
shall not be reinstated, relisted or such suspension lifted, as the case may
be,
within five (5) days;
(ix) the
Company shall fail to timely file all reports required to be filed by it with
the Commission (as defined in the Securities Purchase Agreement) pursuant to
Section 13 or 15(d) of the Exchange Act (as defined in the Securities Purchase
Agreement), or otherwise required by the Exchange Act;
(x) the
Company shall default (giving effect to any applicable grace period) in the
payment of principal or interest as and when the same shall become due and
payable, under any indebtedness, individually or in the aggregate, of more
than
One Hundred Thousand Dollars ($100,000); or
(xi) the
Common Stock shall trade on the Trading Market at a price per share that is
$0.02 per share or lower at any time during the term of this Debenture (as adjusted for any stock splits,
stock
dividends, combinations, subdivisions, recapitalizations or the
like).
TWH
JAN
Initials
Initials
Page
13
SECTION
6.2 Acceleration
of Maturity;
Rescission and Annulment. If an Event of Default occurs and is
continuing, provided however, that once an Event of Default occurs as described
in clause (xi) of Section 6.1, such Event of Default will not be cured by the
subsequent trading of the Common Stock at a price greater than that specified
in
such clause, then and in every such case the Holder may, in Xxxxxx’s sole and
absolute discretion, by a notice in writing to the Company, rescind any
outstanding Conversion Notice and declare that any or all amounts owing or
otherwise outstanding under this Debenture are immediately due and payable
and
upon any such declaration this Debenture or such portion thereof, as applicable,
shall become immediately due and payable in cash at a price of one hundred
fifty
percent (150%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of payment; provided, however,
in the case
of any Event of Default described in clause (xi) of Section 6.1 such amount
shall become immediately due and payable in cash at a price of one hundred
ten
percent (110%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of payment; provided further, in
the case of any Event of Default described in clauses (iii), (iv), (v) or (vii)
of Section 6.1, all amounts owing or otherwise outstanding under this Debenture
automatically shall become immediately due and payable without the necessity
of
any notice or declaration as aforesaid. In the event that the Company
is obligated to pay any amount to the Holder in connection with an acceleration
of the maturity of this Debenture as set forth herein, the Company shall first
apply against such amount an amount equal to the outstanding amount owed by
the
Holder to the Company under the Promissory Note, if any, and the amount
otherwise owed by the Company to the Holder in connection with an acceleration
of the maturity of this Debenture shall be reduced by the outstanding amount
owed by the Holder to the Company under the Promissory Note, with the Promissory
Note deemed paid by Holder to the extent of and with respect to such amount,
and
if the amount due from the Company to the Holder in connection with an
acceleration of the maturity of this Debenture is equal to or greater than
the
outstanding amount owed under the Promissory Note, the Company shall cancel
and
deem the Promissory Note as paid in full in connection with the application
of
the amount owed by the Holder to the Company under Promissory Note against
the
amount otherwise owed by the Company to the Holder hereunder. The
Company shall immediately pay in cash to the Holder any remaining amount owed
by
the Company to the Holder in connection with the acceleration of the maturity
of
this Debenture as described herein, after the application of the outstanding
amount owed under the Promissory Note, if any, to such obligation.
SECTION
6.3 Late
Payment
Penalty. If any portion of the principal of or interest on
this Debenture shall not be paid within ten (10) days of when it is due, the
Discount Multiplier under this Debenture shall decrease by one percentage point
(1%) for all conversions of this Debenture thereafter.
SECTION
6.4 Maximum
Interest
Rate. Notwithstanding anything herein to the contrary, if at any
time the applicable interest rate as provided for herein shall exceed the
maximum lawful rate which may be contracted for, charged, taken or received
by
the Holder in accordance with any applicable law (the “Maximum Rate”), the rate of
interest applicable to this Debenture shall be limited to the Maximum
Rate. To the greatest extent permitted under applicable law, the
Company hereby waives and agrees not to allege or claim that any provisions
of
this Debenture could give rise to or result in any actual or potential violation
of any applicable usury laws.
SECTION
6.5 Remedies
Not
Waived. No course of dealing between the Company and the
Holder or any delay in exercising any rights hereunder shall operate as a waiver
by the Holder.
TWH
JAN
Initials
Initials
Page
14
SECTION
6.6 Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for a breach of its obligations under this Debenture will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Debenture, that the Holder shall be entitled
to all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Debenture and to enforce specifically
the terms and provisions thereof, without the necessity of showing economic
loss
and without any bond or other security being required.
SECTION
6.7 Payment
of Certain Amounts. Whenever pursuant to this Debenture the Company
is required to pay an amount in excess of the Principal Amount plus accrued
and
unpaid interest, the Company and the Holder agree that the actual damages to
the
Holder from the receipt of cash payment on this Debenture may be difficult
to
determine and the amount to be so paid by the Company represents stipulated
damages and not a penalty and is intended to compensate the Holder in part
for
loss of the opportunity to convert this Debenture and to earn a return from
the
sale of shares of Common Stock acquired upon conversion of this Debenture at
a
price in excess of that price paid for such shares pursuant to this Debenture.
The Company and the Holder hereby agree that such amount of stipulated damages
is not disproportionate to the possible loss to the Holder from the receipt
of a
cash payment without the opportunity to convert this Debenture into shares
of
Common Stock.
ARTICLE
7
MISCELLANEOUS
SECTION
7.1 Notice
of Certain
Events. In the case of the occurrence of any event described
in Section 3.4 of this Debenture, the Company shall cause to be mailed to the
Holder of this Debenture at its last address as it appears in the Company’s
security registry, at least twenty (20) days prior to the applicable record,
effective or expiration date hereinafter specified (or, if such twenty (20)
days’ notice is not possible, at the earliest possible date prior to any such
record, effective or expiration date), a notice thereof, including, if
applicable, a statement of (y) the date on which a record is to be taken for
the
purpose of such dividend, distribution, issuance or granting of rights, options
or warrants, or if a record is not to be taken, the date as of which the holders
of record of Common Stock to be entitled to such dividend, distribution,
issuance or granting of rights, options or warrants are to be determined or
(z)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective, and
the
date as of which it is expected that holders of record of Common Stock will
be
entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.
SECTION
7.2 Register. The
Company shall keep at its principal office a register in which the Company
shall
provide for the registration of this Debenture. Upon any transfer of
this Debenture in accordance with Articles 2 and 4 hereof, the Company shall
register such transfer on the Debenture register.
TWH
JAN
Initials
Initials
Page
15
SECTION
7.3 Withholding. To
the extent required by applicable law, the Company may withhold amounts for
or
on account of any taxes imposed or levied by or on behalf of any taxing
authority in the United States having jurisdiction over the Company from any
payments made pursuant to this Debenture.
SECTION
7.4 Transmittal
of
Notices. Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted hereunder shall
be in writing and shall be delivered personally, or sent by telecopier machine
or by a nationally recognized overnight courier service, and shall be deemed
given when so delivered personally, or by telecopier machine or overnight
courier service as follows:
(1)
If to the Company, to:
000
XX
0xx
Xxxxxx, Xxxxx X
Delray
Beach, Florida 33483
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2)
If to the Holder, to:
Golden
Gate Investors, Inc.
0000
Xxxxxxxx Xxxxxx, Xxxxx 000
La
Jolla,
California 92037
Telephone:
000-000-0000
Facsimile:
000-000-0000
Each
of
the Holder or the Company may change the foregoing address by notice given
pursuant to this Section 7.4.
SECTION
7.5 Attorneys’
Fees. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Debenture, or any judgment based on
this
Debenture, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement
for
all reasonable attorneys' fees and all reasonable costs, including but not
limited to service of process, filing fees, court and court reporter costs,
investigative costs, expert witness fees, and the cost of any bonds, whether
taxable or not, and that such reimbursement shall be included in any judgment
or
final order issued in that proceeding. The "prevailing party" means
the party determined by the court to most nearly prevail and not necessarily
the
one in whose favor a judgment is rendered.
SECTION
7.6 Governing
Law. This Debenture shall be governed by, and construed in
accordance with, the laws of the State of California (without giving effect
to
conflicts of laws principles). With respect to any suit, action or
proceedings relating to this Debenture, the Company irrevocably submits to
the
exclusive jurisdiction of the courts of the State of California sitting in
San
Diego and the United States District Court located in the City of San Diego
and
hereby waives, to the fullest extent permitted by applicable law, any claim
that
any such suit, action or proceeding has been brought in an inconvenient
forum. Subject to applicable law, the Company agrees that final
judgment against it in any legal action or proceeding arising out of or relating
to this Debenture shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which judgment shall be conclusive evidence thereof and the
amount of its indebtedness, or by such other means provided by law.
TWH
JAN
Initials
Initials
Page
16
SECTION
7.7 Waiver
of Jury Trial. To the fullest extent permitted by law, each of the
parties hereto hereby knowingly, voluntarily and intentionally waives its
respective rights to a jury trial of any claim or cause of action based upon
or
arising out of this Debenture or any other document or any dealings between
them
relating to the subject matter of this Debenture and other
documents. Each party hereto (i) certifies that neither of their
respective representatives, agents or attorneys has represented, expressly
or
otherwise, that such party would not, in the event of litigation, seek to
enforce the foregoing waivers and (ii) acknowledges that it has been induced
to
enter into this Debenture by, among other things, the mutual waivers and
certifications herein.
SECTION
7.8 Headings. The
headings of the Articles and Sections of this Debenture are inserted for
convenience only and do not constitute a part of this Debenture.
SECTION
7.9 Payment
Dates. Whenever any payment hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day.
SECTION
7.10 Binding
Effect. Each Holder by accepting this Xxxxxxxxx agrees to be
bound by and comply with the terms and provisions of this
Debenture.
SECTION
7.11 No Stockholder
Rights. Except as otherwise provided herein, this Debenture
shall not entitle the Holder to any of the rights of a stockholder of the
Company, including, without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings
of
stockholders or any other proceedings of the Company, unless and to the extent
converted into shares of Common Stock in accordance with the terms
hereof.
[REMAINDER
OF PAGE INTENTIONALLY BLANK]
TWH
JAN
Initials
Initials
Page
17
SECTION
7.12 Facsimile
Execution. Facsimile execution of this Debenture shall be
deemed original.
IN
WITNESS WHEREOF, the Company has caused this Debenture to be signed by its
duly
authorized officer on the date of this Debenture.
By: /s/
Xxx
Xxxxxxx
Name: Xxx
Xxxxxxx
Title:
CFO
TWH
JAN
Initials
Initials
Page
18
EXHIBIT A
DEBENTURE
CONVERSION
NOTICE
000
XX
0xx
Xxxxxx, Xxxxx X
Delray
Beach, Florida 33483
Facsimile:
000-000-0000
The
undersigned owner of the Convertible Debenture due December ___, 2011 (the
“Debenture”) issued by
Celsius Holdings, Inc. (the “Company”) hereby irrevocably
exercises its option to convert $__________ Principal Amount of the Debenture
into shares of Common Stock in accordance with the terms of the
Debenture. The undersigned hereby instructs the Company to convert
the portion of the Debenture specified above into shares of Common Stock Issued
at Conversion in accordance with the provisions of Article 3 of the
Debenture. The undersigned directs that the Common Stock and
certificates therefor deliverable upon conversion, the Debenture reissued in
the
Principal Amount not being surrendered for conversion hereby, [the check or
shares of Common Stock in payment of the accrued and unpaid interest thereon
to
the date of this Notice,] together with any check in payment for fractional
Common Stock, be registered in the name of and/or delivered to the undersigned
unless a different name has been indicated below. All capitalized
terms used and not defined herein have the respective meanings assigned to
them
in the Debenture. The conversion pursuant hereto shall be deemed to
have been effected at the date and time specified below, and at such time the
rights of the undersigned as a Holder of the Principal Amount of the Debenture
set forth above shall cease and the Person or Persons in whose name or names
the
Common Stock Issued at Conversion shall be registered shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby
and all voting and other rights associated with the beneficial ownership of
such
Common Shares shall at such time vest with such Person or Persons.
Date
and
time: __________________
______________________________
By:
___________________________
Title:
_________________________
Fill
in
for registration of Debenture:
Please
print name and address
(including
ZIP code number):
A-1