ADVENTURE ENERGY, INC. Secured Convertible Debenture Due: June 24, 2010
Exhibit
10.13
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.
ADVE-1
|
$50,000
|
Due:
June 24, 2010
This
Secured Convertible Debenture (the “Debenture”) is issued
by ADVENTURE ENERGY,
INC., a
Florida corporation (the “Company”), to Atlas Capital Partners, LLC.
(the “Holder”), pursuant to
that certain Debenture Securities Purchase Agreement (the “Debenture Securities
Purchase Agreement”) dated September 24, 2009.
FOR VALUE RECEIVED, the
Company hereby promises to pay to the Holder or its successors and assigns the
principal sum of Fifty Thousand Dollars ($50,000) together with accrued but
unpaid interest on or before June 24, 2010 (the “Maturity Date”) in
accordance with the following terms:
Section
1. General
Terms
(a)Interest. Interest shall accrue on the
outstanding principal balance hereof at an annual rate equal to seven percent
(7%). 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 shall be paid on the Maturity Date (or sooner as provided herein) to
the Holder or its assignee in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of Debentures in
cash.
(b) Security. This Debenture is secured by a Pledge
and Escrow Agreement (the “Pledge
Agreement”) dated
September 24, 2009 among the Company, the Holder and the Escrow Agent, and a
Security Agreement (the “Security
Agreement”) dated
September 24, 2009 between the Company and the Holder.
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;
(ii) The Company or any subsidiary of the
Company shall commence, or there shall be commenced against the Company or any
subsidiary of the Company under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Company or any
subsidiary of 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 any subsidiary of the Company or
there is commenced against the Company or any subsidiary of the Company any such
bankruptcy, insolvency or other proceeding which remains undismissed for a
period of 45 days; or the Company or any subsidiary of 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 or any
subsidiary of the Company 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 Company or any subsidiary of the Company makes a general assignment
for the benefit of creditors; or the Company or any subsidiary of 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 or any subsidiary
of 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 or any
subsidiary of the Company 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 Company or any subsidiary of the
Company for the purpose of effecting any of the foregoing;
(iii) The Company or any subsidiary of the
Company 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 Company or any
subsidiary of the Company in an amount exceeding $50,000, 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 any of (a) the American Stock
Exchange, (b) New York Stock Exchange, (c) the Nasdaq National Market, (d) the
Nasdaq Capital Market, or (e) the NASD OTC Bulletin Board (“OTC”) (each, a “Primary
Market”) and shall not
again be quoted or listed for trading on any Primary Market within five (5)
Trading Days of such delisting;
(v) The Company or any subsidiary of the
Company shall be a party to any Change of Control Transaction (as defined in
Section
6);
(vi) The Company 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
of even date herewith between the Company 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 Company shall fail for any reason
to deliver the Common Stock to a Holder prior to the fifth (5th) Trading Day after a Conversion
Date;
(ix) The Company 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) Upon
written request by the Holder, the Company shall fail to provide proof to the
Holder within three (3) business days that it has complied with each of the
covenants made in Section 4(d) of the Debenture Securities Purchase
Agreement;
(xi) The Company 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 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 Debenture 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 Company. If an Event of Default shall occur, at the sole
option of the Holder, the Conversion Price shall be reduced to the lesser of
$0.01 or the Volume Weighted Average Price of the Common Stock during the ten
(10) trading days immediately preceding the Conversion Date as quoted by
Bloomberg, LP (the “Market
Conversion Price”), and
any principal and interest owing under the Debenture at the time of an Event of
Default shall be increased by 150% of such amounts. 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 Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such 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.
Redemptions.
Company’s
Optional Cash Redemption. The Company at its option shall have the right
to redeem (“Optional
Redemption”) in cash a portion of the amounts outstanding under this
Debenture prior to the Maturity Date provided that as of the date
of the Holder’s receipt of a Redemption Notice (as defined herein) (i) the
Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is
less than the Fixed Conversion Price, and (ii) no Event of Default has occurred.
The Company shall pay an amount equal to the principal amount being redeemed
plus a redemption premium (“Redemption Premium”)
equal to ten percent (10%) of the principal amount being redeemed (collectively
referred to as the “Redemption Amount”).
The Redemption Premium is only applicable to an Optional Redemption. In order to
make a redemption, the Company 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. Notwithstanding the
foregoing, the Company shall not redeem less than the full outstanding owing
under the Debenture at the time of Optional Redemption. After receipt
of the Redemption Notice the Holder shall have three (3) business days to elect
to such portion of this Debenture, specified in the Redemption Notice subject to
the limitations set forth in Section 4(b). On the fourth
(4th)
business day after the Redemption Notice, the Company 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.
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 Company
shall deliver Common Stock 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 Primary Market; or (3) the Company has
failed to timely satisfy a conversion; then, at the option of the Holder, the
Company, 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
divided by the applicable Conversion Price, and multiplied by the highest
Closing Bid Price of the stock from date of the conversion notice till the date
that such cash payment is made.
Further,
if the Company shall not have delivered any cash due in respect of conversion of
this Debenture 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) The Holder shall effect
conversions by delivering to the Company a completed notice in the form attached
hereto as Exhibit B (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 Company 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 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.
(iv) Upon
receipt of a Conversion Notice the Transfer Agent shall within three (3) Trading
Days thereafter (i) issue and surrender to a common carrier for overnight
delivery to the address as specified in the Conversion Notice a certificate,
registered in the name of the Buyer or its designees, for the number of shares
of Common Stock to which the Buyer shall be entitled as set forth in the
Conversion Notice (ii) provided the Transfer Agent is participating in The Depository Trust
Company Fast Automated Securities Transfer Program, upon the request of
the Buyers, credit such aggregate number of shares of Common Stock to which the
Buyers shall be entitled to the Buyer’s or their designees’ balance account with
DTC through its Deposit Withdrawal At Custodian (“DWAC”) system
provided the Buyer causes its bank or broker to initiate the DWAC
transaction.
(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 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 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 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(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 Company. 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 the lower of $0.25 per share (the
“Fixed
Conversion Price”) or (b)
seventy percent (70%) of the average of the lowest two (2) Market
Conversion Prices. The Fixed Conversion Price and the Market Conversion Price
are collectively referred to as the “Conversion
Price.” The Conversion
Price may be adjusted pursuant to the other terms of this
Debenture.
(ii) If the Company, 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 Company, then the
Fixed 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 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 Fixed
Conversion Price, then the Fixed 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 Fixed 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 Fixed Conversion Price
pursuant to this Section, if any such right, option or warrant shall expire and
shall not have been exercised, the Fixed 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 Fixed Conversion Price made pursuant to the provisions of
this Section after the issuance of such rights or warrants) had the adjustment
of the Fixed 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 Company 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 Fixed 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 Fixed Conversion
Price, such issuance shall be deemed to have occurred for less than the Fixed
Conversion Price), then, at the sole option of the Holder, the Fixed 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 Company 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 of Excluded Securities.
(v) If the Company, 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 Fixed
Conversion Price at which this Debenture shall thereafter be convertible shall
be determined by multiplying the Fixed 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
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
reclassification or share exchange would have been entitled, or (B) require the
Company 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) Whenever the Conversion Price is
adjusted pursuant to Section
4 hereof, the Company
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.
(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; or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall
cause to be mailed to the Holder at its last address as it shall appear upon the
stock books of the Company, 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.
(ix) In case of any (1) merger
or consolidation of the Company or any subsidiary of the Company with or into
another Person, or (2) sale by the Company or any subsidiary of the Company of
more than one-half of the assets of the Company 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 Company 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 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 promptly reserve a sufficient number of
shares of Common Stock to comply with such requirement.
(ii) All calculations under this
Section
4 shall be rounded up to
the nearest $0.0001 or whole share.
(iii) 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 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 Company as to
reservation of such shares set forth in this Debenture or in the Transaction
Documents) be issuable (taking into account the adjustments and restrictions set
forth herein) upon the conversion of the outstanding principal amount of this
Debenture and payment of interest hereunder. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly 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.
(iv) 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 Closing Bid Price 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.
(v) The issuance of shares of the Common
Stock on conversion of this Debenture shall be made without charge to the
Holder.
(vi) 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 Company 's failure to deliver the 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.
(vii) In addition to any other
rights available to the Holder, if the Company 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 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 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 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 Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.
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, to:
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▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇
▇▇▇,
▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Phone:
▇▇▇-▇▇▇-▇▇▇▇
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Fax:
▇▇▇-▇▇▇-▇▇▇▇_
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If
to the Holder:
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Atlas
Capital Partners, LLC.
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▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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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:
“Approved Stock Plan”
means a stock option plan that has been approved by the Board of Directors of
the Company prior to the date of the Securities Purchase Agreement, pursuant to
which the Company’s securities may be issued only to any employee, officer or
director for services provided to the Company.
“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 Company, by
contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of the Company (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 Company 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 Company or any subsidiary of the Company in one or a series of
related transactions with or into another entity, or (d) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c).
“Closing Bid Price”
means the price per share in the last reported trade of the Common Stock on a
Primary Market 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 $0.001, of the Company 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 Company 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.
“Excluded Securities”
means, (a) shares issued or deemed to have been issued by the Company pursuant
to an Approved Stock Plan (b) shares of Common Stock issued or deemed to be
issued by the Company upon the conversion, exchange or exercise of any right,
option, obligation or security outstanding on the date prior to date of the
Securities Purchase Agreement, provided that the terms of such right, option,
obligation or security are not amended or otherwise modified on or after the
date of the Securities Purchase Agreement, and provided that the conversion
price, exchange price, exercise price or other purchase price is not reduced,
adjusted or otherwise modified and the number of shares of Common Stock issued
or issuable is not increased (whether by operation of, or in accordance with,
the relevant governing documents or otherwise) on or after the date of the
Securities Purchase Agreement, and (c) the shares of Common Stock issued or
deemed to be issued by the Company upon conversion of this
Debenture.
“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 Primary 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 Debenture Securities Purchase Agreement or any other
agreement delivered in connection with the Debenture Securities Purchase
Agreement, including, without limitation, the Pledge Agreement, the 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”.
Section
7.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, 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 Company. 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 Company 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 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
9. 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
10. No indebtedness of the Company 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 Company 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 Company under
this Debenture.
Section
11. 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. Each of the parties consents to the
jurisdiction of the Superior Courts of the State of California and the
U.S. District Court for the District of the State of California 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 Company fails to strictly comply
with the terms of this Debenture, then the Company 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 Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
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. 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
17. 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
Company has caused this Secured Convertible Debenture to be duly executed by a
duly authorized officer as of the date set forth above.
|
By:
|
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
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Name:▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
||
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Title:President
|
||
EXHIBIT
A
REDEMPTION
NOTICE
|
Redemption
Date: _____________
|
Redemption
Amount: _____________
|
|
Settlement
in Common Stock
|
||
|
Redemption
Conversion 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:
|
||
|
Broker
DTC Participant Code:
|
||
|
Account
Number:
|
||
|
Settlement
in Cash
|
|
|
Redemption
Premium:
|
$
_______________________________________________
|
|
Total
Cash Settlement:
|
$
_______________________________________________
|
|
Notification
of Settlement Option
|
|
|
o Settlement in Common
Stock
|
o Settlement in
Cash
|
|
By:
|
|||
|
Its:
|
|||
|
**THIS
REDEMPTION NOTICE MUST BE SIGNED & RETURNED VIA FACSIMILE TO THE
HOLDER AT (▇▇▇) ▇▇▇-▇▇▇▇ NO LATER THAN 5:00 N.Y.C. TIME ON THE DAY PRIOR
TO THE REDEMPTION 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 ADVENTURE ENERGY, 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:
|
|
|
Authorized
Signature:
|
________________________________________________
|
|
Name:
|
________________________________________________
|
|
Title:
|
________________________________________________
|
|
Broker
DTC Participant Code:
|
|
|
Account
Number:
|
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