EXHIBIT 10
FORM OF DEBENTURE
EXHIBIT A
to Securities Purchase Agreement
--------------------------------
Dated: July 29, 2004
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,
AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
No. __ $530,000.00
ENERGY & ENGINE TECHNOLOGY CORPORATION
7.0% CONVERTIBLE DEBENTURE
DUE JULY 29, 2005
THIS DEBENTURE is issued by Energy & Engine Technology Corporation, a Nevada
Corporation (the "Company"). This Debenture is designated as the Company's
7.0% Convertible Debenture, due July 29, 2005, in the aggregate principal
amount of Five Hundred Thirty Thousand Dollars ($530,000.00) (the
"Debenture").
FOR VALUE RECEIVED, the Company promises to pay to MERCATOR MOMENTUM FUND III,
L.P., a California limited partnership, or its registered assigns (the
"Holder"), the principal sum of $530,000.00, on or before July 29, 2005 or
such earlier date as the Debenture is required to be repaid as provided
hereunder (the "Maturity Date") and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture
at the rate of 7.0% per annum, with interest accruing commencing on the date
hereof and payable monthly on the first Business Day (as defined in Section 5
below) of each month (each an "Interest Payment Date").
Interest shall be calculated on the basis of a 360-day year and shall
accrue daily commencing on the Original Issue Date (as defined in Section 5)
until payment in full of the principal sum, together with all accrued and
unpaid interest and other amounts, which may become due hereunder, has been
made. Interest hereunder will be paid to the Person (as defined in Section 5)
in whose name this Debenture is registered on the records of the Company
regarding registration and transfers of Debentures (the "Debenture Register").
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
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requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement
(as defined in Section 5) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due presentment to the
Company for transfer of this Debenture, the Company and any agent of the
Company may treat the Person (as defined in Section 5) in whose name this
Debenture is duly registered on the Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Debenture is overdue, and neither the Company
nor any such agent shall be affected by notice to the contrary.
Section 3. 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 damages in respect of the Debenture, free of any claim of subordination,
as and when the same shall become due and payable (whether on a Conversion
Date or the Maturity Date or by acceleration or otherwise) which is not
cured within thirty (30) days after the date the payment became due and
payable;
(ii) the failure to file a Registration Statement with the
Commission within thirty (30) days of the Original Issue Date registering the
resale of the Underlying Shares;
(iii) the failure to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of this
Debenture, the Purchase Agreement or the Registration Rights Agreement, and
such failure or breach shall not have been remedied within thirty (30) days
after the date on which notice of such failure or breach shall have been
given;
(iv) any of the following which is not dismissed within 60 days,
the Company shall commence, or there shall be commenced against the Company a
case under any applicable bankruptcy or insolvency laws as now or hereafter in
effect or any successor thereto, or the Company 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 Company or there is
commenced against the Company, and any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or the Company
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company suffers any
appointment of any custodian or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of 60 days; or
the Company makes a general assignment for the benefit of creditors; or the
Company 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 Company shall
call a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Company shall by any act or
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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
Company for the purpose of effecting any of the foregoing;
(v) the Common Stock shall cease to be quoted for trading or
listed for trading on the National Association of Securities Dealers OTC
Bulletin Board ("OTC") or Nasdaq SmallCap Market, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a "Subsequent
Market") and shall not again be quoted or listed for trading thereon within
five (5) Trading Days;
(vi) the Company shall fail for any reason to deliver Common Stock
certificates to a Holder prior to the fifth Trading Day after a Conversion
Date pursuant to and in accordance with Section 4(b) or the Company 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 of the
Debenture in accordance with the terms hereof. If the Company's transfer agent
is not open for business during a Trading Day, such Trading Day shall not be
counted for purposes of determining the number of days for delivery of a
Common Stock certificate;
(vii) the Company shall fail for any reason to deliver the payment
in cash pursuant to a Buy-In (as defined herein) within ten Business Days
after notice is deemed delivered hereunder; or
(viii) the Company shall fail for any reason to cause the number of
authorized but unissued shares of its Common Stock to be increased to an
amount sufficient to enable the Company to comply with the reserve requirement
of Section 4(c)(v) within a period of sixty (60) days following its receipt of
any Holder's notice under Section 4(c)(v) that such reserve is not being
satisfied if, at the time of the notice, the number of authorized shares of
the Company's Common Stock is insufficient for this purpose.
(b) During the time that any portion of this Debenture is outstanding,
if any Event of Default pursuant to Section 3(a)(ii) or (v) occurs, then the
Conversion Price shall be reduced from 85% of the Market Price to 75% of the
Market Price, but in no event higher that the Ceiling Price or lower than the
Floor Price (as those terms are defined in Section 4(c)(i) and 5 below).
During the time that any portion of this Debenture is outstanding, if any
Event of Default pursuant to Section 3(a)(i),(iii),(iv), or (vi),(vii) or
(viii) occurs and is continuing, then the Conversion Price shall be reduced
from 85% of the Market Price to 75% of the Market Price, but in no event
higher that the Ceiling Price or lower than the Floor Price (as those terms
are defined in Section 4(c)(i) and 5 below). If an Event of Default under
Section 3(a)(ii) occurs and remains uncured, from and including the day
following the date on which such Event of Default occurs, until the date on
which the Company has cured such Event of Default, the Company shall pay
liquidated damages to Holder equal to one percent (1.00%) of the principal
amount of the Debenture for each complete month or partial month (pro rated)
during which such situation exists. Any amounts to be paid as liquidated
damages shall be paid in cash monthly in arrears on or before the 30th day
following the end of the month or partial month to which they relate.
The Holder need not provide and the Company hereby waives any present-
ment, 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 Holder at
any time prior to payment hereunder. No such rescission or annulment shall
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affect any subsequent Event of Default or impair any right consequent
thereon.
Section 4. Conversion.
(a) (i) Conversion at Option of Holder.
(A) 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 (subject to the limitations
on conversion set forth in Section 4(a)(ii) hereof). The number of shares of
Common Stock issuable upon a conversion hereunder equals the quotient obtained
by dividing (x) the outstanding principal amount of this Debenture to be
converted by (y) the Conversion Price (as defined in Section 4(c)(i)).
(B) Reserved.
(C) The Holder shall effect conversions by simultaneously
delivering to the Company a completed notice in the form attached hereto as
Exhibit A (a "Conversion Notice"), including a completed Conversion Schedule
in the form of Schedule I to the Conversion Notice (on each Conversion Date,
the "Conversion Schedule"). The Conversion Schedule shall set forth the
remaining principal amount of this Debenture and all accrued and unpaid
interest thereon subsequent to the conversion at issue. 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
Company in order to effect conversions. Subject to Section 4(b), each
Conversion Notice, once given, shall be irrevocable. 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, which shall be evidenced by entries set forth in
the Conversion Schedule. The Holder and the Company 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.
(ii) Certain Conversion Restrictions.
(A) A Holder may not convert the 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 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of, and payment of interest on, the
Debenture held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company 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 9.999% 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 the Debenture is convertible shall be
the responsibility and obligation of the Holder. If the Holder has delivered
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a Conversion Notice for a principal amount of the 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 Company 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(b) 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 Company. Other Holders
shall be unaffected by any such waiver.
(b) (i) Reserved.
(ii) Nothing herein shall limit a Holder's right to pursue actual
damages or declare an Event of Default pursuant to Section 3 herein for the
Company'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. 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. Further, if the
Company shall not have delivered any cash due in respect of conversion of the
Debenture or as payment of interest thereon by the fifth (5th) Trading Day
after the Conversion Date, the Holder may, by notice to the Company, require
the Company 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) In addition to any other rights available to the Holder, if
the Company fails to deliver to the Holder any certificate or certificates
representing shares of Common Stock upon conversion within the period
specified herein 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 Company 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 Company timely complied with its
delivery requirements. If the Company's transfer agent is not open for
business during a Trading Day, such Trading Day shall not be counted for
purposes of determining the number of days for delivery of a Common Stock
certificate. 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 Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company
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written notice indicating the amounts payable to the Holder in respect of the
Buy-In. Notwithstanding anything contained herein to the contrary, if a Holder
requires the Company to make payment in respect of a Buy-In for the failure to
timely deliver certificates hereunder and the Company timely pays in full such
payment, the Company shall not be required to pay such Holder any damages
under Section 4(b)(ii) in respect of the certificates resulting in such Buy-In
which would represent a double recovery for harm for which the payments made
under this Section 4(b)(iii) compensated the Holder .
(c) (i) The "Conversion Price" shall be equal to Eighty-Five Percent
(85%) of the Market Price (as defined in Section 5 below) on the date of any
Conversion Notice, rounded to the nearest ▇▇▇▇▇, subject to adjustment as
described herein; provided, however, the Conversion Price shall in no event
be higher than the lower of (a) $0.39, or (b) the closing price of the Common
Stock on the Original Issue Date (the "Ceiling Price") nor shall such
Conversion Price be less than $0.10 per share (the "Floor Price"). In the
event that the Registration Statement has not been deemed effective by the SEC
within 120 days after filing, then the Conversion Price shall be reduced from
85% of the Market Price to 75% of the Market Price, but in no event higher
that the Ceiling Price or lower than the Floor Price.
(ii) If the Company, at any time while the Debenture is out-
standing 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 out-
standing 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 Company, then the
Initial 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 Company, at any time while the Debenture is out-
standing, 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 the 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 Per
Share Market Value determined as of the record date mentioned above, and of
which the numerator shall be such Per Share Market Value 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 out-
standing 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.
157
(iv) 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 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 only 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 the
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 Company
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 re-
classification or share exchange would have been entitled.
(v) The Company shall maintain a share reserve of not less than
105% of the shares of Common Stock issuable upon conversion of the Debenture;
and within five (5) Business Days following the receipt by the Company of a
Holder's notice that such minimum number of Underlying Shares is not so
reserved, the Company shall if there are sufficient authorized but unissued
shares promptly reserve a sufficient number of shares of Common Stock to
comply with such requirement. If there are not sufficient authorized but
unissued shares, the Company shall use its best efforts to call a special
shareholders' meeting within sixty (60) days of such notice to increase the
number of authorized shares of Common Stock.
(vi) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. No
adjustments in either the Conversion Price or the Initial Conversion Price
shall be required if such adjustment is less than $0.01, provided, however,
that any adjustments which by reason of this Section are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
(vii) Whenever either the Initial Conversion Price or the
Conversion Price is adjusted pursuant to this Section 4(c), the Company shall
promptly mail to the Holder a notice setting forth the Initial Conversion
Price or Conversion Price (as applicable) after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(viii) If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of the Debenture,
and shall cause to be mailed to the Holder at its last address as it shall
appear upon the stock books of the Company, at least ten (10) calendar days
prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the Common
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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 the Debenture during the ten (10) day calendar period
commencing the date of such notice to the effective date of the event
triggering such notice.
(ix) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half
1/2 of its assets in one or a series of related transactions, a Holder shall
have the right to (A) convert the aggregate principal amount of the 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 the Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (B) 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 the 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 the Debenture set forth herein and the agreements pursuant to which
the Debentures were issued. In the case of clause (B), 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) The Company 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 the Debenture and payment of
interest on the 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 Company as to reservation of
such shares set forth in the Debenture) be issuable (taking into account the
adjustments and restrictions of Section 4(b)) upon the conversion of the
outstanding principal amount of the Debenture and payment of interest here-
under. The Company 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 Registration Statement has been declared
effective under the Securities Act, registered for public sale in accordance
with such Registration Statement.
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(e) Upon a conversion hereunder the Company 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 Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the Holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the 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 Company shall not
be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion
in a name other than that of the Holder of such Debenture so converted and the
Company shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to the Company, at ▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇, or such other address
or facsimile number as the Company may specify for such purposes by notice to
the Holder delivered in accordance with this Section. Any and all notices or
other communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder, and, in the case of each Holder,
with a copy to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention ▇▇▇▇▇ ▇. ▇▇▇▇▇, Facsimile
No. (▇▇▇) ▇▇▇-▇▇▇▇. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 5:00 p.m.
(the recipient's time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (the
recipient's time) on any date and earlier than 11:59 p.m. (the recipient's
time) on such date, (iii) four (4) days after deposit in the United States
mail, (iv) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (v) upon actual receipt
by the party to whom such notice is required to be given.
Section 5. 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.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value per share, of
the Company and stock of any other class into which such shares may hereafter
be changed or reclassified.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Market Price" on any given date shall be the average of the lowest
three inter-day trading prices of the Company's Common Stock during the ten
(10) immediately preceding trading days (which may include trading days prior
to the Original Issue Date), provided, that such 10 trading day period shall
be extended by the number of trading days during such period on which (i)
trading in the Common Stock is suspended by, or not traded on, the OTC or a
subsequent market on which the common stock is then traded, or (ii) after the
date of Registration Statement for the underlying shares of Common Stock into
which this Debenture may be converted is declared effective by the SEC, the
prospectus included in the Registration Statement may not be used by the
Holder for resale of underlying shares of Common Stock, is suspended by, or
not traded on, the OTC or a subsequent market on which the Common Stock is
then listed, or (iii) after the date the Registration Statement is declared
effective by the SEC, the prospectus included in the Registration Statement
for the underlying shares may not be used by the Holder for the resale of
underlying shares of Common Stock (provided such inability to use the
prospectus is not (a) caused by the Holder or (b) as a result of the Company's
filing of post-effective amendments to the Registration Statement.
"Original Issue Date" shall mean the date of the first issuance of the
Debenture regardless of the number of transfers and regardless of the number
of instruments, which may be issued to evidence such Debenture.
"Per Share Market Value" means the price per share in the last reported
trade of the Common Stock on the OTC or on a Subsequent on which the Common
Stock is then listed.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means that Securities Purchase Agreement, dated July
29, 2004 to which the Company and the original Holder are parties, as amended,
modified or supplemented from time to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Original Issue Date, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"Registration Statement" means the registration statement to be filed by
the Company with the SEC pursuant to the Registration Rights Agreement.
"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.
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"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Debenture or as payment of interest in accordance with the
terms hereof.
Section 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligations of the Company, which are
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the Company. This
Debenture ranks pari passu with all other Debentures now or hereafter issued
under the terms set forth herein. As long as the Debenture is outstanding,
the Company shall not and shall cause their subsidiaries not to, without the
consent of the Holder, (i) amend its articles 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; or (iii) enter into
any agreement with respect to any of the foregoing.
Section 7. 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.
Section 8. If this Debenture is mutilated, lost, stolen or destroyed,
the Company 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 Company.
Section 9. 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 thereof. The Company and the Holder hereby irrevocably
submit to the exclusive jurisdiction of the state and federal courts sitting
in the City of Los Angeles, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waive, and agree not to assert in
any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or that such suit, action or proceeding
is improper. The Company hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by sending a copy thereof to the Company at the address in effect
for notices to them under this instrument and the Company agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party irrevocably
waives, to the fullest extent permitted by applicable law, any and all right
to trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
the Purchase Agreement or the Registration Rights Agreement, then the
prevailing party in such action or proceeding shall be reimbursed by the
other party for its attorneys fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such action or proceeding.
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Section 10. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
Section 11. 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 Company covenants (to the extent that it may lawfully do
so) that they shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this indenture, and
the Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impeded the execution of any power
herein granted to the Holder, but will suffer and permit the execution of
every such as though no such law has been enacted.
Section 12. 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.
IN WITNESS WHEREOF, each of the Company has caused this 7.0% Convertible
Debenture to be duly executed by a duly authorized officer as of the date
first above indicated.
ENERGY & ENGINE TECHNOLOGY CORPORATION
By:____________________________
Name:__________________________
Title:_________________________
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares
of common stock, $0.001 par value per share (the "Common Stock"), of Energy &
Engine Technology Corporation. (the "Company") according to the conditions
hereof, as of the date written below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations: _______________________________________
Date to Effect Conversion
_______________________________________
Principal Amount of Debentures to be
Converted
$__________ of Interest Accrued
on Account of
Conversion at Issue
Payment of Interest in Kind __Yes
__No
If yes, $ _______ of Interest
Accrued on
Account of
Conversion at
Issue
_______________________________________
Number of shares of Common Stock to be
Issued
_______________________________________
Applicable Conversion Price
________________________________________
Signature
________________________________________
Name
________________________________________
Address
164
Schedule 1
CONVERSION SCHEDULE
______________________________
7.0% Convertible Debenture due July ___, 2005, in the aggregate principal
amount of $______________ issued by _________________________. This
Conversion Schedule reflects conversions made under Section 4(a)(i) of the
above referenced Debenture.
Dated:
Aggregate Principal
Amount Remaining
Subsequent to
Date of Conversion Conversion
(or for first entry, Amount of (or original
Original Issue Date) Conversion Principal Amount) Company Attest
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