which the Company has consented, the Company and any agent of the Company may treat the
Person in whose name this Debenture is duly registered on the Company's books and records of
outstanding debt securities and obligations (“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 be overdue, and neither the Company nor any such agent shall be affected by notice to
the contrary.
2.
Conversion at Holder’s Option; Redemption at Company’s Option.
a.
The Holder is entitled to, at any time or from time to time, convert the
Conversion Amount (as defined below) into Conversion Shares, at a conversion price for each
share of Common Stock (the “Conversion Price”) equal to either: (i) if no Event of Default (as
defined herein) has occurred and the date of conversion is prior to the date that is one hundred
eighty (180) calendar days after the Issuance Date, $0.12, or (ii) if an Event of Default has
occurred or the date of conversion is on or after the date that is one hundred eighty (180)
calendar days after the Issuance Date, the lesser of (a) $0.12 or (b) Seventy percent (70%) of the
second lowest traded price (as reported by Bloomberg LP) of the Common Stock for the twenty
(20) Trading Days immediately preceding the date of the date of conversion of the Debentures
(for clarification purposes, if the lowest traded price during the applicable period is equal to the
second lowest traded price during the applicable period, then such lowest traded price shall still
be utilized for purposes of this calculation), provided, further, that if either the Company is not
DWAC Operational at the time of conversion or the Common Stock is traded on the OTC Pink
(“OTCP”) at the time of conversion, then Seventy percent (70%) shall automatically adjust to
Sixty percent (60%) of the second lowest traded price (as reported by Bloomberg LP) of the
Common Stock for the twenty (20) Trading Days immediately preceding the date of conversion
of the Debentures (for clarification purposes, if the lowest traded price during the applicable
period is equal to the second lowest traded price during the applicable period, then such lowest
traded price shall still be utilized for purposes of this calculation), subject in each case to
equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar
events. The Company shall issue irrevocable instructions to its Transfer Agent regarding
conversions such that the transfer agent shall be authorized and instructed to issue Conversion
Shares upon its receipt of a Notice of Conversion without further approval or authorization from
the Company. For purposes of this Debenture, the “Conversion Amount” shall mean the sum of
(A) all or any portion of the outstanding Principal Amount of this Debenture, as designated by
the Holder upon exercise of its right of conversion plus (B) any interest, pursuant to Section 10
or otherwise, that has accrued on the portion of the Principal Amount that has been designated
for payment pursuant to (A).
Conversion shall be effectuated by delivering by facsimile, email or other delivery
method to the Transfer Agent of the completed form of conversion notice attached hereto as
Annex A (the “Notice of Conversion”), executed by the Holder of the Debenture evidencing
such Holder's intention to convert this Debenture or a specified portion hereof. No fractional
shares of Common Stock or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share. The Holder may,
at its election, deliver a Notice of Conversion to either the Company or the Transfer Agent. The
date on which notice of conversion is given (the “Conversion Date”) shall be deemed to be the
date on which the Company or the Transfer Agent, as the case may be, receives by fax, email or
other means of delivery used by the Holder the Notice of Conversion (such receipt being
2
evidenced by electronic confirmation of delivery by facsimile or email or confirmation of
delivery by such other delivery method used by the Holder). Delivery of a Notice of Conversion
to the Transfer Agent may be given by the Holder by facsimile, or by delivery to the Transfer
Agent at the address set forth in the Transfer Agent Instruction Letter (or such other contact
facsimile number, email or street address as may be designated by the Transfer Agent to the
Holder). Delivery of a Notice of Conversion to the Company shall be given by the Holder
pursuant to the notice provisions set forth in Section 10 of the Agreement. The Conversion
Shares must be delivered to the Holder within two (2) business days from the date of delivery of
the Notice of Conversion to the Transfer Agent or Company, as the case may be. Conversion
shares shall be delivered by DWAC so long as the Company is then DWAC Operational, unless
the Holder expressly requests delivery in certificated form or the Conversion Shares are in the
form of Restricted Stock and are required to bear a restrictive legended. Conversion Shares shall
be deemed delivered (i) if delivered by DWAC, upon deposit into the Holder’s brokerage
account, or (ii) if delivered in certificated form, upon the Holder’s actual receipt of the
Conversion Shares in certificated form at the address specified by the Holder in the Notice of
Conversion, as confirmed by written receipt. All expenses incurred by Holder, for the issuance
and clearing of the Common Stock into which this Debenture is convertible into, shall
immediately and automatically be added to the balance of the Debenture at such time as the
expenses are incurred by Holder.
If at any time the Conversion Price as determined hereunder for any conversion
would be less than the par value of the Common Stock, then at the sole discretion of the Holder,
the Conversion Price hereunder may equal such par value for such conversion and the
Conversion Amount for such conversion may be increased to include Additional Principal,
where “Additional Principal” means such additional amount to be added to the Conversion
Amount to the extent necessary to cause the number of conversion shares issuable upon such
conversion to equal the same number of conversion shares as would have been issued had the
Conversion Price not been adjusted by the Holder to the par value price.
Notwithstanding the foregoing, unless the Holder delivers to the Company written
notice at least sixty-one (61) days prior to the effective date of such notice that the provisions of
this paragraph (the “Limitation on Ownership”) shall be adjusted to 9.99% with respect to the
Holder, in no event shall a holder of Debentures have the right to convert Debentures into, nor
shall the Company issue to such Holder, shares of Common Stock to the extent that such
conversion would result in the Holder and its affiliates together beneficially owning more than
4.99% of the then issued and outstanding shares of Common Stock. For purposes hereof,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act
and Regulation 13D-G under the Exchange Act.
b.
So long as no Event of Default (as defined in Section 10) shall have
occurred and be continuing (whether such Event of Default has been declared by the Holder)
(unless the Holder consents to such redemption notwithstanding such Event of Default, as
described in clause (v), below), the Company may at its option call for redemption all or part of
the Debentures, with the exception of any portion thereof which is the subject of a previously-
delivered Notice of Conversion, prior to the Maturity Date, as follows:
(i)
The Debentures called for redemption shall be redeemable by the
Company, upon not more than two (2) days written notice, for an amount (the “Redemption
3
Price”) equal to: (i) if the Redemption Date (as defined below) is ninety (90) calendar days or
less from the date of issuance of this Debenture, One Hundred Ten percent (110%) of the sum of
the Principal Amount so redeemed plus accrued interest, if any; (ii) if the Redemption Date is
greater than or equal to ninety-one (91) calendar days from the date of issuance of this Debenture
and less than or equal to one hundred twenty (120) calendar days from the date of issuance of
this Debenture, One Hundred Twenty percent (120%) of the sum of the Principal Amount so
redeemed plus accrued interest, if any; (iii) if the Redemption Date is greater than or equal to one
hundred twenty one (121) calendar days from the date of issuance of this Debenture and less than
or equal to one hundred eighty (180) calendar days from the date of issuance of this Debenture,
One Hundred Thirty percent (130%) of the sum of the Principal Amount so redeemed plus
accrued interest, if any; and (iv) if either (1) the Debentures are in default but the Holder
consents to the redemption notwithstanding such default or (2) the Redemption Date is greater
than or equal to one hundred eighty one (181) calendar days from the date of issuance of this
Debenture, One Hundred Forty percent (140%) of the sum of the Principal Amount so redeemed
plus accrued interest, if any. The date upon which the Debentures are redeemed and paid shall
be referred to as the “Redemption Date” (and, in the case of multiple redemptions of less than the
entire outstanding Principal Amount, each such date shall be a Redemption Date with respect to
the corresponding redemption).
(ii)
If fewer than all outstanding Debentures are to be redeemed and are held
by different investors, then all Debentures shall be partially redeemed on a pro rata basis.
(iii) [Reserved]
(iv)
On the Redemption Date, the Company shall cause the Holders whose
Debentures have been presented for redemption to be issued payment of the Redemption Price.
In the case of a partial redemption, the Company shall also issue new Debentures to the Holders
for the Principal Amount remaining outstanding after the Redemption Date promptly after the
Holders’ presentation of the Debentures called for redemption.
(v)
To effect a redemption the Company shall provide a written notice to the
Holder(s) not more than two (2) days prior to the Redemption Date (the “Redemption Notice”),
setting forth the following:
1.
the Redemption Date;
2.
the Redemption Price;
3.
the aggregate Principal Amount of the Debentures being called for
redemption;
4.
a statement instructing the Holders to surrender their Debentures
for redemption and payment of the Redemption Price, including
the name and address of the Company or, if applicable, the paying
agent of the Company, where Debentures are to be surrendered for
redemption;
4
5.
a statement advising the Holders that the Debentures (or, in the
case of a partial redemption, that portion of the Principal Amount
being called for redemption) as of the Redemption Date will cease
to be convertible into Common Stock as of the Redemption Date;
and
6.
in the case of a partial redemption, a statement advising the
Holders that after the Redemption Date a substitute Debenture will
be issued by the Company after deduction the portion thereof
called for redemption, at no cost to the Holder, if the Holder so
requests.
Notwithstanding the foregoing, in the event the Company issues a Redemption Notice but fails to
fund the redemption on the Redemption Date, then such Redemption Notice shall be null and
void, and (i) the Holder(s) shall be entitled to convert the Debentures previously the subject of
the Redemption Notice, and (ii) the Company may not redeem such Debentures for at least thirty
(30) days following the intended Redemption Date that was voided, and the Company shall be
required to pay to the Holder(s) the Redemption Price simultaneously with the issuance of a
Redemption Notice in connection with any subsequent redemption pursued by the Company.
3.
Unless demand has otherwise been made by the Holder in writing for payment in
cash as provided hereunder, and so long as no Event of Default shall exist (whether or not notice
thereof has been delivered by the Holder to the Company), any Debentures not previously
tendered to the Company for conversion as of the Maturity Date shall be deemed to have been
surrendered for conversion, without further action of any kind by the Company or any of its
agents, employees or representatives, as of the Maturity Date at the Conversion Price applicable
on the Maturity Date (“Mandatory Conversion”).
4.
No provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional to convert this Debenture into Common Stock, at
the time, place, and rate herein prescribed. This Debenture is a direct obligation of the
Company.
5.
If the Company (a) merges or consolidates with another corporation or business
entity and the Company is not the surviving entity or (b) sells or transfers all or substantially all
of its assets to another Person and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a condition of such
merger, consolidation, sale or transfer, the Company and any such successor, purchaser or
transferee will agree that this Debenture may thereafter be converted on the terms and subject to
the conditions set forth above into the kind and amount of stock, securities or property receivable
upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may
be practicable. In the event of any (i) proposed merger or consolidation where the Company is
not the surviving entity or (ii) sale or transfer of all or substantially all of the assets of the
Company (in either such case, a “Sale”), the Holder shall have the right to convert by delivering
a Notice of Conversion to the Company within fifteen (15) days of receipt of notice of such Sale
from the Company.
5
6.
If, at any time while any portion of this Debenture remains outstanding, the
Company effectuates a stock split or reverse stock split of its Common Stock or issues a dividend
on its Common Stock consisting of shares of Common Stock or otherwise recapitalizes its
Common Stock, the Conversion Price shall be equitably adjusted to reflect such action. By way
of illustration, and not in limitation, of the foregoing (i) if the Company effectuates a 2:1 split of
its Common Stock, thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such split, the Conversion Price shall be deemed to be one-half of
what it had been calculated to be immediately prior to such split; (ii) if the Company effectuates
a 1:10 reverse split of its Common Stock, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such reverse split, the Conversion Price shall
be deemed to be the amount of such Conversion Price calculated immediately prior to the record
date multiplied by 10; and (iii) if the Company declares a stock dividend of one share of
Common Stock for every 10 shares outstanding, thereafter, with respect to any conversion for
which the Company issues the shares after the record date of such dividend, the Conversion Price
shall be deemed to be the amount of such Conversion Price calculated immediately prior to such
record date multiplied by a fraction, of which the numerator is the number of shares for which a
dividend share will be issued and the denominator is such number of shares plus the dividend
share(s) issuable or issued thereon.
7.
All payments contemplated hereby to be made “in cash” shall be made by wire
transfer of immediately available funds in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private debts. All payments
of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated
hereby shall be made to the Holder to an account designated by the Holder to the Company and
if the Holder has not designated any such accounts at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to time; except that
the Holder may designate, by notice to the Company, a different delivery address for any one or
more specific payments or deliveries.
8.
The Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
being acquired for investment and that such Holder will not offer, sell or otherwise dispose of
this Debenture or the Shares of Common Stock issuable upon conversion thereof except in
compliance with the terms of the Securities Purchase Agreement and under circumstances which
will not result in a violation of the Securities Act or any applicable state Blue Sky or foreign laws
or similar laws relating to the sale of securities.
9.
This Debenture shall be governed by and construed in accordance with the laws
of the State of Nevada. Each of the parties consents to the exclusive jurisdiction and venue of
the state and/or federal courts located in Miami-Dade County, Florida in connection with any
dispute arising under this Agreement, and each waives any objection based on forum non
conveniens. This provision is intended to be a “mandatory” forum selection clause and
governed by and interpreted consistent with Florida law (Nevada law governing all other,
substantive matters). Each of the parties hereby consents to the exclusive jurisdiction and venue
of any state or federal court having its situs in Miami-Dade County, Florida, and each waives
any objection based on forum non conveniens. To the extent determined by such court, the
Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by
6
the Holder in enforcement of or protection of any of its rights under this Debenture or the
Securities Purchase Agreement.
10.
The following shall constitute an “Event of Default”:
a.
The Company fails in the payment of principal or interest (to the extent
that interest is imposed under this Section 10) on this Debenture as required to be paid in cash
hereunder, and payment shall not have been made for a period of five (5) business days
following the payment due date (as to which no further cure period shall apply); or
b.
Any of the representations or warranties made by the Company herein, in
the Securities Purchase Agreement or in any certificate or financial or other written statements
heretofore or hereafter furnished by the Company to the Holder in connection with the issuance
of this Debenture, shall be false or misleading (including without limitation by way of the
misstatement of a material fact or the omission of a material fact) in any material respect at the
time made (as to which no cure period shall apply); or
c.
The Company fails to remain listed on OTCP, OTCQB, or OTCQX, or a
more senior stock exchange any time from the date hereof to the Maturity Date for a period in
excess of five (5) Trading Days (as to which no further cure period shall apply); or
d.
The Company (i) fails to timely file required SEC reports when due
(including extensions), becomes, is deemed to be or asserts that it is a “shell company” at any
time for purposes of the 1933 Act, and Rule 144 promulgated thereunder or otherwise takes any
action, or refrains from taking any action, the result of which makes Rule 144 under the 1933
unavailable to the Holder for the sale of their Securities, (ii) fails to issue shares of Common
Stock to the Holder or to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this
Debenture, (iii) fails to transfer or to cause its Transfer Agent to transfer any certificate for
shares of Common Stock issued to the Holder upon conversion of this Debenture as and when
required by this Debenture and such transfer is otherwise lawful, (iv) fails to remove any
restrictive legend or to cause its Transfer Agent to transfer any certificate or any shares of
Common Stock issued to the Holder upon conversion of this Debenture as and when required by
the relevant Transaction Document(s) and such legend removal is otherwise lawful, or (v) the
Company fails to perform or observe any of its obligations under the Section 5 of the Agreement
or under the Transfer Agent Instruction Letter (no cure period shall apply in the case of clauses
(i) through (v) above, inclusive); or
e.
The Company fails to perform or observe, in any material respect (i) any
other covenant, term, provision, condition, agreement or obligation set forth in the Debenture,
(subject to a cure period of five (5) days other than in the case of a failure under Section 5
hereof, as to which no cure period shall apply), or (ii) any other covenant, term, provision,
condition, agreement or obligation of the Company set forth in the Securities Purchase
Agreement and such failure shall continue uncured for a period of either (1) three (3) days after
the occurrence of the Company’s failure under Section 4(d), (e) (except as described in Section
10(c) hereof, as to which Section 10(c) hereof shall control), (f), (g) or (h) of the Securities
Purchase Agreement, or (2) ten (10) days after the occurrence of the Company’s failure under
7
any other provision of the Securities Purchase Agreement not otherwise specifically addressed in
the Events of Default set forth in this Section 10; or
f.
The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business (as to which no
cure period shall apply); or
g.
A trustee, liquidator or receiver shall be appointed for the Company or for
a substantial part of its property or business without its consent and shall not be discharged
within sixty(60) days after such appointment (as to which no cure period shall apply); or
h.
Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole or any
substantial portion of the properties or assets of the Company and shall not be dismissed within
sixty (60) days thereafter (as to which no cure period shall apply); or
i.
Any money judgment, writ or warrant of attachment, or similar process
(including an arbitral determination), in excess of Fifty Thousand Dollars ($50,000) in the
aggregate shall be entered or filed against the Company or any of its properties or other assets (as
to which no cure period shall apply); or
j.
The occurrence of a breach or an event of default under the terms of any
indebtedness or financial instrument of the Company or any subsidiary (including but not limited
to any Subsidiary) of the Company in an aggregate amount in excess of Fifty Thousand Dollars
($50,000) or more which is not waived by the creditors under such indebtedness (as to which no
cure period shall apply); or
k.
Bankruptcy, reorganization, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such proceeding (as to which no
further cure period shall apply); or
l.
The issuance of an order, ruling, finding or similar adverse determination
the SEC, the Secretary of State of the State of Nevada or other applicable state of incorporatin of
the Company, the National Association of Securities Dealers, Inc. or any other securities
regulatory body (whether in the United States, Canada or elsewhere) having proper jurisdiction
that the Company and/or any of its past or present directors or officers have committed a material
violation of applicable securities laws or regulations (as to which no cure period shall apply); or
m.
The Company shall have its Common Stock suspended or delisted from a
national securities exchange or an electronic quotation service such as the OTCP, OTCQB, or
OTCQX for a period in excess of five (5) Trading Days (as to which no further cure period shall
apply); or
8
n.
Any of the following shall occur and be continuing: a breach or default by
any party under (a) any agreement identified by the Company in its SEC filings as a material
agreement or (b) any note or other form of indebtedness in favor of the Company representing
indebtedness of at least Fifty Thousand Dollars ($50,000.00), irrespective of whether such
breach or default was waived (as to which no cure period shall apply); or
o.
Notice of a Material Adverse Effect is provided by the Company or the
determination in good faith by the Holder that a Material Adverse Effect has occurred (as to
which no cure period shall apply); or
p.
The Company attempts to modify, amend, withdraw, rescind, disavow or
repudiate any part of the Irrevocable Instructions (as to which no cure period shall apply).
q.
Any attempt by the Company or its officers, directors, and/or affiliates to
transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Company
or its officers, directors, and/or affiliates of, material non-public information concerning the
Company, to the Holder or its successors and assigns, which is not immediately cured by
Company’s filing of a Form 8-K pursuant to Regulation FD on that same date.
r.
At any time while this Debenture is outstanding, the lowest traded price on
the OTCP, OTCQB, or OTCQX, or other applicable principal trading market for the Common
Stock, is equal to or less than$0.0001.
Then, or at any time thereafter, the Company shall immediately give
written notice of the occurrence of such Event of Default to the Holders of all Debentures then
outstanding, and in each and every such case, unless such Event of Default shall have been
waived in writing by a majority in interest of the Holders of the Debentures (which waiver shall
not be deemed to be a waiver of any subsequent default), then at the option of a majority in
interest of the Holders and in the discretion of a majority in interest of the Holders, take any or
all of the following actions: (i) pursue remedies against the Company in accordance with any of
the Holder’s rights, (ii) increase the interest rate applicable to the Debentures to the lesser of
eighteen percent (18%) per annum and the maximum interest rate allowable under applicable
law, (iii) in the case of an Event of Default under Section 10(e)(ii)(1) based on the Company’s
failure to be DWAC Operational, increase the Principal Amount to an amount equal to one
hundred ten percent (110%) of the then-outstanding Principal Amount, (iv) in the case of an
Event of Default under Section 10(d)(i), increase the Principal Amount to an amount equal to
one hundred twenty percent (120%) of the then-outstanding Principal Amount and an additional
ten percent (10%) discount shall be factored into the Conversion Price until this Debenture is no
longer outstanding, (v) in the case of an Event of Default under Section 10(d)(i) through (v),
increase the Principal Amount of the relevant Holder’s Debenture by One Thousand Dollars and
00/100 ($1,000.00) for each day the related failure continues, (vi) in the case of an Event of
Default under Section 10(d)(ii) through (v) arising from an untimely delivery to the Holder of
Conversion Shares or shares of Common Stock in de-legended form, if the lowest traded price of
the Common Stock on the Trading Day immediately prior to the actual date of delivery of
Conversion Shares or de-legended shares, as the case may be, is less than the lowest traded price
on the Trading Day immediately prior to the date when Conversion Shares or de-legended shares
were required to be delivered, increase the Principal Amount of the relevant Holder’s Debenture
9
by an amount per share equal to such difference, and (vii) following the expiration of the
applicable grace period (if any), at the option and discretion of the Holder, accelerate the full
indebtedness under this Debenture, in an amount equal to one hundred forty percent (140%) of
the outstanding Principal Amount and accrued and unpaid interest (the “Acceleration Amount”),
whereupon the Acceleration Amount shall be immediately due and payable, without
presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived,
anything contained herein, in the Securities Purchase Agreement or in any other note or
instruments to the contrary notwithstanding. In the case of an Event of Default under Section
10(d)(ii), the Holder may either (i) declare the Acceleration Amount to exclude the Conversion
Amount that is the subject of the Event of Default, in which case the Acceleration Amount shall
be based on the remaining Principal Amount and accrued interest (if any), in which case the
Company shall continue to be obligated to issue the Conversion Shares, or (ii) declare the
Acceleration Amount to include the Conversion Amount that is the subject of the Event of
Default, in which case the Acceleration Amount shall be based on the full Principal Amount,
including the Conversion Amount, and accrued interest (if any), whereupon the Notice of
Conversion shall be deemed withdrawn. At its option, the Holder may elect to convert the
Debenture pursuant to Section 2 notwithstanding the prior declaration of a default and
acceleration, in the sole discretion of such Holder. A majority in interest of the Holders may
immediately enforce any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by applicable law. Notwithstanding the foregoing, in the case of a
default under Section 10(d)(ii) through (iv), the Holder of the Debenture sought to be converted,
transferred or de-legended, as the case may be, acting singly, shall have the sole and absolute
discretion to increase the applicable interest rate on the Debentures held by such Holder and/or to
accelerate the Debenture(s) held by such Holder. The Company expressly acknowledges and
agrees that the Holder’s exercise of any or all of the remedies provided herein or under
applicable law, including without limitation the increase(s) in the Principal Amount and the
Acceleration Amount as may be declared in the case of a default, is reasonable and appropriate
due to the inability to define the financial hardship that the Company’s default would impose on
the Holders. To the extent that the Holder’s exercise of any of its remedies in the case of an
Event of Default shall be construed to exceed the maximum interest rate allowable under
applicable law, then such remedies shall be reduced to equal the maximum interest rate
allowable under applicable law
11.
Nothing contained in this Debenture shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or receive notice as a shareholder in
respect of any meeting of shareholders or any rights whatsoever as a shareholder of the
Company, unless and to the extent converted in accordance with the terms hereof.
12.
So long as this Debenture is outstanding, upon any issuance by the Company or
any of its subsidiaries of any security with any term more favorable to the holder of such security
or with a term in favor of the holder of such security that was not similarly provided to the
Holder in this Debenture, then the Company shall notify the Holder of such additional or more
favorable term and such term, at Holder’s option, shall become a part of the transaction
documents with the Holder. The types of terms contained in another security that may be more
favorable to the holder of such security include, but are not limited to, terms addressing
conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue
discounts, stock sale price, private placement price per share, and warrant coverage.
10
13.
This Debenture may be amended only by the written consent of the parties hereto.
Notwithstanding the foregoing, the Principal Amount of this Debenture shall automatically be
reduced by any and all Conversion Amounts (to the extent that the same relate to principal
hereof). In the absence of manifest error, the outstanding Principal Amount of the Debenture on
the Holder’s book and records shall be the correct amount.
14.
In the event of any inconsistency between the provisions of this Debenture and
the provisions of any other Transaction Document, the provisions of this Debenture shall prevail.
Without limiting the generality of the foregoing, in the event the Transfer Agent is not required
to transfer any Common Stock, issue Conversion Shares or de-legended shares of Restricted
Stock pursuant to the Transfer Agent Instruction Letter, this shall not operate as an excuse,
extension or waiver of the Company’s obligation to issue and deliver Conversion Shares or de-
legended Restricted Stock.
15.
The Company specifically acknowledges and agrees that in the event of a breach
or threatened breach by the Company of any provision hereof or of any other Transaction
Document, the Holder will be irreparably damaged, and that damages at law would be an
inadequate remedy if this Debenture or such other Transaction Document were not specifically
enforced. Therefore, in the event of a breach or threatened breach by the Company, the Holder
shall be entitled, in addition to all other rights and remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond or other security,
and/or to a decree for a specific performance of the provisions of this Debenture and the other
Transaction Documents.
16.
No waivers or consents in regard to any provision of this Debenture may be given
other than by an instrument in writing signed by the Holder.
17.
Each time, while this Debenture is outstanding, the Company enters into a Section
3(a)(9) transaction (including but not limited to the issuance of new promissory notes or
debentures, or of a replacement promissory note or debenture), or Section 3(a)(10) transaction, in
which any 3rd party has the right to convert monies owed to that 3rd party (or receive shares
pursuant to a settlement or otherwise) at a discount to market greater than the Conversion Price
in effect at that time (prior to all other applicable adjustments in this Debenture), then the
Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all
applicable adjustments in this Debenture) until this Debenture is no longer outstanding. Each
time, while this Debenture is outstanding, the Company enters into a Section 3(a)(9) transaction
(including but not limited to the issuance of new promissory notes or debentures, or of a
replacement promissory note or debenture), or Section 3(a)(10) transaction, in which any 3rd
party has a look back period greater than the look back period in effect under this Debenture at
that time, then the Holder’s look back period shall automatically be adjusted to such greater
number of days until this Debenture is no longer outstanding. The Company shall give written
notice to the Holder, with the adjusted Conversion Price and/or adjusted look back period (each
adjustment that is applicable due to the triggering event), within one (1) business day of an event
that requires any adjustment described in this section. So long as this Note is outstanding, the
Company shall not enter into any transaction or arrangement structured in accordance with,
based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities
Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”).
In the event that the Company does enter into, or makes any issuance of Common Stock related
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