Dated: June 7, 2006
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
No. CCP-1 $5,500,000
HUGO INTERNATIONAL TELECOM, INC.
Secured Convertible Debenture
Due: June 7, 2009
This Secured Convertible Debenture (the "Debenture") is issued by HUGO
INTERNATIONAL TELECOM, INC., a Delaware corporation (the "Obligor"), to CORNELL
CAPITAL PARTNERS, LP (the "Holder"), pursuant to that certain Securities
Purchase Agreement (the "Securities Purchase Agreement") dated June 7, 2006.
FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or its
successors and assigns the principal sum of Five Million Five Hundred Thousand
Dollars ($5,500,000) together with accrued but unpaid interest on or before June
7, 2009 (the "Maturity Date") in accordance with the following terms:
Interest. Interest shall accrue on the outstanding principal balance hereof
at an annual rate equal to five percent (5%). Interest shall be calculated on
the basis of a 365-day year and the actual number of days elapsed, to the extent
permitted by applicable law. Interest hereunder will be paid to the Holder or
its assignee (as defined in Section 6) in whose name this Debenture is
registered on the records of the Obligor regarding registration and transfers of
Debentures (the "Debenture Register").
Right of Redemption. The Obligor at its option shall have the right to
redeem a portion or all amounts outstanding under this Debenture prior to the
Maturity Date provided that the Closing Bid Price of the of the Obligor's Common
Stock, as reported by Bloomberg, LP, is less than the Conversion Price at the
time of the Redemption Notice (as defined herein). The Obligor shall pay an
amount equal to the principal amount being redeemed plus a redemption premium
("Redemption Premium") equal to twenty percent (20%) of the principal amount
being redeemed, and accrued interest, (collectively referred to as the
"Redemption Amount"). In order to make a redemption, the Obligor shall first
provide written notice to the Holder of its intention to make a redemption (the
"Redemption Notice") setting forth the amount of principal it desires to redeem.
After receipt of the Redemption Notice the Holder shall have three (3) business
days to elect to convert all or any portion of this Debenture, subject to the
limitations set forth in Section 4(b)(i). On the fourth (4th) business day after
the Redemption Notice, the Obligor shall deliver to the Holder the Redemption
Amount with respect to the principal amount redeemed after giving effect to
conversions effected during the three (3) business day period.
Security Agreements. This Debenture is secured by a Pledge and Escrow
Agreement (the "Pledge Agreement") dated June 7, 2006 among the Obligor, the
Holder, the Escrow Agent, and an Insider Pledge and Escrow Agreement ("Insider
Pledge Agreement") dated June 7, 2006 among the Obligor, the Holder, Mean Green
BioFuels, Inc., and the Escrow Agent, a Security Agreement (the "Security
Agreement") dated June 7, 2006 herewith between the Obligor and the Holder, a
Security Agreement (the "Mean Green Security Agreement") dated June 7, 2006
herewith between Mean Green BioFuels, Inc. and the Holder, and a Security
Agreement (the "Mean Green BioDiesel Security Agreement") dated June 7, 2006
herewith between Mean Green BioDiesel #1, Inc. and the Holder.
This Debenture is subject to the following additional provisions:
Section 1. 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 made for such
registration of transfer or exchange.
Section 2. Events of Default.
(a) An "Event of Default", wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) Any default in the payment of the principal of, interest on or other
charges in respect of this Debenture, free of any claim of
subordination, as and when the same shall become due and payable
(whether upon an redemption pursuant to a Put Notice, a Conversion
Date or the Maturity Date or by acceleration or otherwise);
(ii) The Obligor or any subsidiary of the Obligor shall commence, or there
shall be commenced against the Obligor or any subsidiary of the
Obligor under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Obligor or any
subsidiary of the Obligor commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the
Obligor or any subsidiary of the Obligor or there is commenced against
the Obligor or any subsidiary of the Obligor any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period
of 61 days; or the Obligor or any subsidiary of the Obligor is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Obligor
or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or
any substantial part of its property which continues undischarged or
unstayed for a period of sixty one (61) days; or the Obligor or any
subsidiary of the Obligor makes a general assignment for the benefit
of creditors; or the Obligor or any subsidiary of the Obligor shall
fail to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or the Obligor
or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of
its debts; or the Obligor or any subsidiary of the Obligor shall by
any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other
action is taken by the Obligor or any subsidiary of the Obligor for
the purpose of effecting any of the foregoing;
(iii) The Obligor or any subsidiary of the Obligor shall default in any of
its obligations under any other debenture or any mortgage, credit
agreement or other facility, indenture agreement, factoring agreement
or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement of the
Obligor or any subsidiary of the Obligor in an amount exceeding
$100,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or
being declared due and payable prior to the date on which it would
otherwise become due and payable;
(iv) The Common Stock shall cease to be quoted for trading or listing for
trading on either the Nasdaq OTC Bulletin Board ("OTC"), or if then
listed on Nasdaq Capital Market, New York Stock Exchange, American
Stock Exchange or the Nasdaq National Market (each, a "Subsequent
Market") shall cease to be quoted for trading or listing on such
Subsequent Market and shall not again be quoted or listed for trading
thereon within five (5) Trading Days of such delisting;
(v) The Obligor or any subsidiary of the Obligor shall be a party to any
Change of Control Transaction (as defined in Section 6);
(vi) The Obligor shall fail to file the Underlying Shares Registration
Statement (as defined in Section 6) with the Commission (as defined in
Section 6), or the Underlying Shares Registration Statement shall not
have been declared effective by the Commission, in each case within
the time periods set forth in the Investor Registration Rights
Agreement ("Registration Rights Agreement") dated June 7, 2006 between
the Obligor and the Holder;
(vii) If the effectiveness of the Underlying Shares Registration Statement
lapses for any reason or the Holder shall not be permitted to resell
the shares of Common Stock underlying this Debenture under the
Underlying Shares Registration Statement, in either case, for more
than five (5) consecutive Trading Days or an aggregate of eight
Trading Days (which need not be consecutive Trading Days);
(viii) The Obligor shall fail for any reason to deliver Common Stock
certificates to a Holder prior to the fifth (5th) Trading Day after a
Conversion Date (or a Put Date if the Obligor indicated that such put
was to be settled in shares of Common Stock) or the Obligor shall
provide notice to the Holder, including by way of public announcement,
at any time, of its intention not to comply with requests for
conversions (or settlements of puts in shares of Common Stock) of this
Debenture in accordance with the terms hereof;
(ix) The Obligor shall fail for any reason to deliver the payment in cash
pursuant to a Buy-In (as defined herein) within three (3) days after
notice is claimed delivered hereunder;
(x) The Obligor shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach or
default of any provision of this Debenture (except as may be covered
by Section 2(a)(i) through 2(a)(ix) hereof) or any Transaction
Document (as defined in Section 6) which is not cured with in the time
prescribed, or an Event of Default under any other debenture issued to
the Holder in connection with the Securities Purchase Agreement shall
occur;
(b) During the time that any portion of this Debenture is outstanding, if any
Event of Default has occurred, the full principal amount of this Debenture,
together with interest and other amounts owing in respect thereof, to the
date of acceleration shall become at the Holder's election, immediately due
and payable in cash, provided however, the Holder may request (but shall
have no obligation to request) payment of such amounts in Common Stock of
the Obligor. In addition to any other remedies, upon an Event of Default,
the Holder may require the Obligor to redeem all or any portion of this
Debenture by delivering a Put Notice, or a series of Put Notices to the
Obligor pursuant to Section 3 without taking into account the Maximum Put
Amount limitation. Furthermore, in addition to any other remedies, the
Holder shall have the right (but not the obligation) to convert this
Debenture at any time after (x) an Event of Default or (y) the Maturity
Date at the Conversion Price then in-effect. The Holder need not provide
and the Obligor 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
declaration may be rescinded and annulled by ▇▇▇▇▇▇ at any time prior to
payment hereunder. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon. Upon an
Event of Default, notwithstanding any other provision of this Debenture or
any Transaction Document, the Holder shall have no obligation to comply
with or adhere to any limitations, if any, on the conversion of this
Debenture or the sale of the Underlying Shares.
Section 3. ▇▇▇▇▇▇'s Put Right.
(a) Holder Right. Beginning on the earlier of (i) the effective date of the
Underlying Shares Registration Statement or (ii) October 1, 2006, the
Holder shall have the right to put to the Obligor up to $550,000 of the
remaining principal amount of the Debenture (the "Maximum Put Amount") per
calendar month by transmitting a copy of a Put Notice in the form attached
hereto as Exhibit A (the "Put Notice") requiring the Obligor to repay (as
set forth below in Section 3(b) hereof) the principal amount set forth in
the Put Notice (the "Put Amount").
(b) Obligor's Settlement Options. The Obligor has the option, in its sole
discretion, to settle Put Notices by (i) paying the Holder cash in an
amount equal to the Put Amount plus the Redemption Premium, or (ii) issuing
the Holder shares of Common Stock (the "Put Shares") equal to the Put
Amount divided by a price (the "Market Price") equal to 90% of the lowest
daily Volume Weighted Average Price of the Common Stock during the thirty
(30) trading days immediately preceding the date the Holder delivers the
Put Notice as quoted by Bloomberg, LP provided that the Underlying Shares
Registration Statement is effective and no Event of Default has occurred.
(c) Put Notice Procedures.
(i) The Holder shall transmit via facsimile (or other delivery) each Put
Notice for receipt on or prior to 5:00 pm New York City time at least
one Business Day prior to the date chosen by the Holder as the date of
such put (the "Put Date").
(ii) On or prior to 5:00 pm New York City time on the Put Date, the Obligor
shall return a copy of the Put Notice via facsimile (or other
delivery) to the Holder, which Put Notice shall note the Obligor's
choice of settlement options with respect to such Put Notice and shall
be signed by an officer of the Obligor.
(iii) The Obligor shall settle all Put Notices within 5 Trading Days of the
Put Date.
(iv) Settlement of Put Notice in shares of Common Stock. In the event that
the Obligor chooses (if available) to settle a Put Notice in shares of
Common Stock pursuant to option (ii) of Section 3(b), upon notice to
the Holder of such selection, the Put Notice shall effectively be
treated the same as a Conversion Notice with the Put Date equating to
the Conversion Date and the Market Price equating to the Conversion
Price. The limitations on Conversions set forth in Section 4(b) hereof
shall also apply to any Put Notice. In the event that the Obligor
fails to notify the Holder of its election of settlement options in
accordance with Section 3(c)(ii) hereof, then if applicable, the
Obligor hereby designates all such Put Notices to automatically be
settled in shares of Common Stock.
Section 4. Conversion.
(a) Conversion at Option of Holder.
(i) This Debenture shall be convertible into shares of Common Stock at the
option of the Holder, in whole or in part at any time and from time to
time, after the Original Issue Date (as defined in Section 6) (subject
to the limitations on conversion set forth in Section 4(b) hereof).
The number of shares of Common Stock issuable upon a conversion
hereunder equals the quotient obtained by dividing (x) the outstanding
amount of this Debenture to be converted by (y) the Conversion Price
(as defined in Section 4(c)(i)). The Obligor shall deliver Common
Stock certificates to the Holder prior to the Fifth (5th) Trading Day
after a Conversion Date.
(ii) Notwithstanding anything to the contrary contained herein, if on any
Conversion Date: (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as
treasury stock, is insufficient to pay principal and interest
hereunder in shares of Common Stock; (2) the Common Stock is not
listed or quoted for trading on the OTC or on a Subsequent Market; (3)
the Obligor has failed to timely satisfy its conversion; or (4) the
issuance of such shares of Common Stock would result in a violation of
Section 4(b), then, at the option of the Holder, the Obligor, in lieu
of delivering shares of Common Stock pursuant to Section 4(a)(i),
shall deliver, within three (3) Trading Days of each applicable
Conversion Date, an amount in cash equal to the product of the
outstanding principal amount to be converted plus any interest due
therein divided by the Conversion Price, chosen by the Holder, and
multiplied by the highest closing price of the stock from date of the
conversion notice till the date that such cash payment is made.
Further, if the Obligor shall not have delivered any cash due in
respect of conversion of this Debenture or as payment of interest
thereon by the fifth (5th) Trading Day after the Conversion Date, the
Holder may, by notice to the Obligor, require the Obligor to issue
shares of Common Stock pursuant to Section 4(c), except that for such
purpose the Conversion Price applicable thereto shall be the lesser of
the Conversion Price on the Conversion Date and the Conversion Price
on the date of such Holder demand. Any such shares will be subject to
the provisions of this Section.
(iii) The Holder shall effect conversions by delivering to the Obligor a
completed notice in the form attached hereto as Exhibit A (a
"Conversion Notice"). The date on which a Conversion Notice is
delivered is the "Conversion Date." Unless the Holder is converting
the entire principal amount outstanding under this Debenture, the
Holder is not required to physically surrender this Debenture to the
Obligor in order to effect conversions. Conversions hereunder shall
have the effect of lowering the outstanding principal amount of this
Debenture plus all accrued and unpaid interest thereon in an amount
equal to the applicable conversion. The Holder and the Obligor shall
maintain records showing the principal amount converted and the date
of such conversions. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the
absence of manifest error.
(b) Certain Conversion Restrictions.
(i) A Holder may not convert this Debenture or receive shares of Common
Stock as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of interest on, this
Debenture held by such Holder after application of this Section. Since
the Holder will not be obligated to report to the Obligor the number
of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the issuance
of shares of Common Stock in excess of 4.99% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular
conversion hereunder and to the extent that the Holder determines that
the limitation contained in this Section applies, the determination of
which portion of the principal amount of this Debenture is convertible
shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of
this Debenture that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in the
issuance in excess of the permitted amount hereunder, the Obligor
shall notify the Holder of this fact and shall honor the conversion
for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section
4(a)(i) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal
amount to the Holder. The provisions of this Section may be waived by
a Holder (but only as to itself and not to any other Holder) upon not
less than 65 days prior notice to the Obligor. Other Holders shall be
unaffected by any such waiver.
(c) Conversion Price and Adjustments to Conversion Price.
(i) The conversion price in effect on any Conversion Date shall be equal
to $3.00 per share (the "Conversion Price") The Conversion Price may
be adjusted pursuant to the other terms of this Debenture.
(ii) If the Obligor, at any time while this Debenture is outstanding, shall
(a) pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or
(d) issue by reclassification of shares of the Common Stock any shares
of capital stock of the Obligor, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of
shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Obligor, at any time while this Debenture is outstanding,
shall issue rights, options or warrants to all holders of Common Stock
(and not to the Holder) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Conversion
Price, then the Conversion Price shall be multiplied by a fraction, of
which the denominator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants (plus the number of additional
shares of Common Stock offered for subscription or purchase), and of
which the numerator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants, plus the number of shares which
the aggregate offering price of the total number of shares so offered
would purchase at the Conversion Price. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
However, upon the expiration of any such right, option or warrant to
purchase shares of the Common Stock the issuance of which resulted in
an adjustment in the Conversion Price pursuant to this Section, if any
such right, option or warrant shall expire and shall not have been
exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any
other adjustments in the Conversion Price made pursuant to the
provisions of this Section after the issuance of such rights or
warrants) had the adjustment of the Conversion Price made upon the
issuance of such rights, options or warrants been made on the basis of
offering for subscription or purchase only that number of shares of
the Common Stock actually purchased upon the exercise of such rights,
options or warrants actually exercised.
(iv) If the Obligor or any subsidiary thereof, as applicable, at any time
while this Debenture is outstanding, shall issue shares of Common
Stock or rights, warrants, options or other securities or debt that
are convertible into or exchangeable for shares of Common Stock
("Common Stock Equivalents") entitling any Person to acquire shares of
Common Stock, at a price per share less than the Conversion Price (if
the holder of the Common Stock or Common Stock Equivalent so issued
shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares
of Common Stock at a price per share which is less than the Conversion
Price, such issuance shall be deemed to have occurred for less than
the Conversion Price), then, at the sole option of the Holder, the
Conversion Price shall be adjusted to mirror the conversion, exchange
or purchase price for such Common Stock or Common Stock Equivalents
(including any reset provisions thereof) at issue. Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Obligor shall notify the Holder in writing, no later
than one (1) business day following the issuance of any Common Stock
or Common Stock Equivalent subject to this Section, indicating therein
the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms. No adjustment under
this Section shall be made as a result of issuances and exercises of
options to purchase shares of Common Stock issued for compensatory
purposes pursuant to any of the Obligor's stock option or stock
purchase plans.
(v) If the Obligor, at any time while this Debenture is outstanding, shall
distribute to all holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the
Conversion Price at which this Debenture shall thereafter be
convertible shall be determined by multiplying the Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the Closing Bid Price determined as of
the record date mentioned above, and of which the numerator shall be
such Closing Bid Price on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the
Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided
to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
(vi) In case of any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder shall have the right
thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and
any other amounts then owing hereunder in respect of this Debenture
into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common Stock
following such reclassification or share exchange, and the Holder of
this Debenture shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common
Stock of the Obligor into which the then outstanding principal amount,
together with all accrued but unpaid interest and any other amounts
then owing hereunder in respect of this Debenture could have been
converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Obligor to prepay the
outstanding principal amount of this Debenture, plus all interest and
other amounts due and payable thereon. The entire prepayment price
shall be paid in cash. This provision shall similarly apply to
successive reclassifications or share exchanges.
(vii) The Obligor shall at all times reserve and keep available out of its
authorized Common Stock the full number of shares of Common Stock
issuable upon conversion of all outstanding amounts under this
Debenture; and within three (3) Business Days following the receipt by
the Obligor of a Holder's notice that such minimum number of
Underlying Shares is not so reserved, the Obligor shall promptly
reserve a sufficient number of shares of Common Stock to comply with
such requirement.
(viii) All calculations under this Section 4 shall be rounded up to the
nearest $0.001 or whole share.
(ix) Whenever the Conversion Price is adjusted pursuant to Section 4
hereof, the Obligor shall promptly mail 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.
(x) If (A) the Obligor shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Obligor shall declare a
special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Obligor 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; (D) the
approval of any stockholders of the Obligor shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Obligor is a party, any sale or
transfer of all or substantially all of the assets of the Obligor, of
any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; or (E) the Obligor shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Obligor; then, in each case, the
Obligor shall cause to be filed at each office or agency maintained
for the purpose of conversion of this Debenture, and shall cause to be
mailed to the Holder at its last address as it shall appear upon the
stock books of the Obligor, at least twenty (20) calendar days prior
to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the
holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of
the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity
of the corporate action required to be specified in such notice. The
Holder is entitled to convert this Debenture during the 20-day
calendar period commencing the date of such notice to the effective
date of the event triggering such notice.
(xi) In case of any (1) merger or consolidation of the Obligor or any
subsidiary of the Obligor with or into another Person, or (2) sale by
the Obligor or any subsidiary of the Obligor of more than one-half of
the assets of the Obligor in one or a series of related transactions,
a Holder shall have the right to (A) exercise any rights under Section
2(b), (B) convert the aggregate amount of this Debenture then
outstanding into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common
Stock following such merger, consolidation or sale, and such Holder
shall be entitled upon such event or series of related events to
receive such amount of securities, cash and property as the shares of
Common Stock into which such aggregate principal amount of this
Debenture could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (C) in the case of
a merger or consolidation, require the surviving entity to issue to
the Holder a convertible Debenture with a principal amount equal to
the aggregate principal amount of this Debenture then held by such
Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible Debenture shall have
terms identical (including with respect to conversion) to the terms of
this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of this Debenture set forth herein and the
agreements pursuant to which this Debentures were issued. In the case
of clause (C), the conversion price applicable for the newly issued
shares of convertible preferred stock or convertible Debentures shall
be based upon the amount of securities, cash and property that each
share of Common Stock would receive in such transaction and the
Conversion Price in effect immediately prior to the effectiveness or
closing date for such transaction. The terms of any such merger, sale
or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set
forth in this Section upon any conversion or redemption following such
event. This provision shall similarly apply to successive such events.
(d) Other Provisions.
(i) The Obligor covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock
solely for the purpose of issuance upon conversion of this Debenture
and payment of interest on this Debenture, each as herein provided,
free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder, not less than such number of
shares of the Common Stock as shall (subject to any additional
requirements of the Obligor as to reservation of such shares set forth
in this Debenture) be issuable (taking into account the adjustments
and restrictions of Sections 2(b) and 3(c)) upon the conversion of the
outstanding principal amount of this Debenture and payment of interest
hereunder. The Obligor covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Underlying Shares Registration Statement has been declared effective
under the Securities Act, registered for public sale in accordance
with such Underlying Shares Registration Statement.
(ii) Upon a conversion hereunder the Obligor shall not be required to issue
stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Closing Bid Price at
such time. If the Obligor elects not, or is unable, to make such a
cash payment, the Holder shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(iii) The issuance of certificates for shares of the Common Stock on
conversion of this Debenture shall be made without charge to the
Holder thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate,
provided that the Obligor shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than
that of the Holder of such Debenture so converted and the Obligor
shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have
paid to the Obligor the amount of such tax or shall have established
to the satisfaction of the Obligor that such tax has been paid.
(iv) Nothing herein shall limit a Holder's right to pursue actual damages
or declare an Event of Default pursuant to Section 2 herein for the
Obligor 's failure to deliver certificates representing shares of
Common Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief, in each case without
the need to post a bond or provide other security. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce
damages pursuant to any other Section hereof or under applicable law.
(v) In addition to any other rights available to the Holder, if the
Obligor fails to deliver to the Holder such certificate or
certificates pursuant to Section 4(a)(i) by the fifth (5th) Trading
Day after the Conversion Date, and if after such fifth (5th) Trading
Day the Holder purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of
the Underlying Shares which the Holder anticipated receiving upon such
conversion (a "Buy-In"), then the Obligor shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the market price of the Common
Stock at the time of the sale giving rise to such purchase obligation
and (B) at the option of the Holder, either reissue a Debenture in the
principal amount equal to the principal amount of the attempted
conversion or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Obligor timely complied with
its delivery requirements under Section 4(a)(i). For example, if the
Holder purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of
Debentures with respect to which the market price of the Underlying
Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Obligor shall be
required to pay the Holder $1,000. The Holder shall provide the
Obligor written notice indicating the amounts payable to the Holder in
respect of the Buy-In.
Section 5. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms hereof must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) trading day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Hugo International Telecom, Inc.
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Executive Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Sonageri & Fallon
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Holder:
Cornell Capital Partners, LP
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▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) business days prior to the effectiveness of such
change. Written confirmation of receipt (i) given by the recipient of such
notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
Section 6. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Change of Control Transaction" means the occurrence of (a) 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 Obligor,
by contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of the Obligor (except that the acquisition of voting securities by
the Holder shall not constitute a Change of Control Transaction for purposes
hereof), (b) a replacement at one time or over time of more than one-half of the
members of the board of directors of the Obligor 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), (c) the merger, consolidation or sale of fifty percent (50%) or more of
the assets of the Obligor or any subsidiary of the Obligor in one or a series of
related transactions with or into another entity, or (d) the execution by the
Obligor of an agreement to which the Obligor is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c).
"Closing Bid Price" means the price per share in the last reported trade of
the Common Stock on the OTC or on the exchange which the Common Stock is then
listed as quoted by Bloomberg, LP.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.001, of the Obligor and
stock of any other class into which such shares may hereafter be changed or
reclassified.
"Conversion Date" shall mean the date upon which the Holder gives the
Obligor notice of their intention to effectuate a conversion of this Debenture
into shares of the Company's Common Stock as outlined herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trading Day" means a day on which the shares of Common Stock are quoted on
the OTC or quoted or traded on such Subsequent Market on which the shares of
Common Stock are then quoted or listed; provided, that in the event that the
shares of Common Stock are not listed or quoted, then Trading Day shall mean a
Business Day.
"Transaction Documents" means the Securities Purchase Agreement or any
other agreement delivered in connection with the Securities Purchase Agreement,
including, without limitation, the Pledge Agreement, the Insider Pledge
Agreement, the Security Agreement, the Mean Green Security Agreement, the Mean
Green BioDiesel Security Agreement, the Irrevocable Transfer Agent Instructions,
and the Registration Rights Agreement.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of this Debenture or as payment of interest in accordance with the
terms hereof.
"Underlying Shares Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a "selling stockholder" thereunder.
Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligations of the Obligor, which are
absolute and unconditional, to pay the principal of, interest and other charges
(if any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Obligor. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Obligor shall not and shall cause their subsidiaries not to,
without the consent of the Holder, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock or other equity securities other than as to
the Underlying Shares to the extent permitted or required under the Transaction
Documents; or (iii) enter into any agreement with respect to any of the
foregoing.
Section 8. This Debenture shall not entitle the Holder to any of the rights
of a stockholder of the Obligor, 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 Obligor,
unless and to the extent converted into shares of Common Stock in accordance
with the terms hereof.
Section 9. If this Debenture is mutilated, lost, stolen or destroyed, the
Obligor shall execute and deliver, in exchange and substitution for and upon
cancellation of the 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, and indemnity, if requested, all reasonably satisfactory to
the Obligor.
Section 10. No indebtedness of the Obligor is senior to this Debenture in
right of payment, whether with respect to interest, damages or upon liquidation
or dissolution or otherwise. Without the Holder's consent, the Obligor will not
and will not permit any of their subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits there from that is senior in
any respect to the obligations of the Obligor under this Debenture.
Section 11. This Debenture shall be governed by and construed in accordance
with the laws of the State of New Jersey, without giving effect to conflicts of
laws thereof. Each of the parties consents to the jurisdiction of the Superior
Courts of the State of New Jersey sitting in ▇▇▇▇▇▇ County, New Jersey and the
U.S. District Court for the District of New Jersey sitting in Newark, New Jersey
in connection with any dispute arising under this Debenture and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens to the bringing of any such proceeding in such
jurisdictions.
Section 12. If the Obligor fails to strictly comply with the terms of this
Debenture, then the Obligor shall reimburse the Holder promptly for all fees,
costs and expenses, including, without limitation, attorneys' fees and expenses
incurred by the Holder in any action in connection with this Debenture,
including, without limitation, those incurred: (i) during any workout, attempted
workout, and/or in connection with the rendering of legal advice as to the
Holder's rights, remedies and obligations, (ii) collecting any sums which become
due to the Holder, (iii) defending or prosecuting any proceeding or any
counterclaim to any proceeding or appeal; or (iv) the protection, preservation
or enforcement of any rights or remedies of the Holder.
Section 13. Any waiver by 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 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 must be in writing.
Section 14. 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 shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Obligor 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 Obligor 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 Obligor (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.
Section 15. 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.
Section 16. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS
AGREEMENT.
IN WITNESS WHEREOF, the Obligor has caused this Secured Convertible
Debenture to be duly executed by a duly authorized officer as of the date set
forth above.
COMPANY:
HUGO INTERNATIONAL TELECOM, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
EXHIBIT A
PUT NOTICE
Put Date: Put Amount: $
---------------------- ----------------------
Settlement in Common Stock
Market Price: $
-------------------
Number of shares of Common
Stock to be issued: -------------------
Please issue the shares of Common Stock in the following name and to the
following address:
Issue to: Cornell Capital Partners, LP
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▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Broker DTC Participant Code: 0158
Account Number: 622 000 07
Settlement in Cash
Put Amount: $
------------------
Redemption Premium: $
------------------
Total: $
------------------
Notification of Settlement Option
Settlement in Common Stock Settlement in Cash
----------------------------------
(company name)
By:
Its:
**THIS PUT NOTICE MUST BE SIGNED & RETURNED VIA FACSIMILE TO THE HOLDER NO LATER
THAN 5:00 N.Y.C. TIME ON THE PUT DATE**
EXHIBIT B
CONVERSION NOTICE
(To be executed by the Holder in order to Convert the Debenture)
TO:
The undersigned hereby irrevocably elects to convert $______________ of the
principal amount of the above Debenture into Shares of Common Stock of HUGO
INTERNATIONAL TELECOM, INC., according to the conditions stated therein, as of
the Conversion Date written below.
Conversion Date:
----------------------------
Amount to be converted:
$
----------------------------
Conversion Price: $
----------------------------
Number of shares of Common
Stock to be issued: ----------------------------
Amount of Debenture
Unconverted: $
----------------------------
Please issue the shares of Common Stock in the following name and to the
following address:
Issue to: Cornell Capital Partners, LP
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▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Authorized Signature:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Broker DTC Participant Code: 0158
Account Number: 622 000 07