DEBENTURE
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D ("REGULATION D") PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY, ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No. ___________ U.S.$______
Issuance Date: March ___, 2010
ENVIRONMENTAL SOLUTIONS WORLDWIDE, INC.
9% CONVERTIBLE DEBENTURE DUE March __, 2013
THIS 9% CONVERTIBLE DEBENTURE, issued this ____ day of March, 2010, is
one of the duly authorized issue of 9% Convertible Debentures (including all 9%
Convertible Debentures issued in exchange, transfer or replacement hereof, this
"DEBENTURE") of Environmental Solutions Worldwide, Inc., a corporation duly
organized and existing under the law of the State of Florida (the "COMPANY"),
designated as its 9% Convertible Debentures Due March ___, 2013, in an aggregate
principal amount of up to U.S.$3,000,000 (collectively, the "DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to _________________,
the registered holder hereof (the "HOLDER"), the principal sum of $_______, on
or prior to March ___, 2013 (the "MATURITY DATE"), and to pay interest on the
principal sum outstanding from time to time at the end of the calendar quarter
following the yearly anniversary of the issuance date set forth above (the
"ISSUANCE DATE") of this Debenture (each an "INTEREST PAYMENT DATE"), commencing
March __, 2011, up to and including the Maturity Date, at the rate of 9% per
annum, and shall be computed on the basis of a 365-day year and actual days
elapsed (depending upon the subscription date). Accrual of interest on this
Debenture shall commence on the Issuance Date and shall continue to accrue until
the next Interest Payment Date. The interest so payable will be paid on each
Interest Payment Date to the person in whose name this Debenture (or one or more
predecessor Debentures) is registered on the records of the Company regarding
registration and transfers of the Debentures (the "DEBENTURE REGISTER") on the
first business day immediately prior to such Interest Payment Date.
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Notwithstanding the foregoing, the Company upon Notice to the Holder may elect
to forego paying interest until such time as this Debenture matures, is
converted or redeemed, as the case may be. All accrued and unpaid interest shall
bear interest at the same rate of 9% per annum until the date of payment. The
principal of this Debenture is payable in coin or currency of the United States
of America as at the time of payment is legal tender for public and private
debts or, AT THE OPTION OF THE HOLDER, in shares of Common Stock, par value
$0.001 per share (the "COMMON STOCK"), under the same conversion formula as
stated herein at the address of the Holder last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time. The Debenture Register shall represent the record of ownership and right
to receive principal and interest payments on this Debenture. Interest and
principal shall be payable only to the registered Holder as reflected in the
Debenture Register. AT THE OPTION OF THE HOLDER (as provided for in Section 3),
interest on the within Debenture will be payable in cash or shares of Common
Stock under the conversion formulas as stated herein. The right to receive
principal and interest payments under this Debenture shall be transferable only
through an appropriate entry in the Debenture Register as provided herein.
This Debenture is subject to the following additional provisions:
1. DEBENTURES. The Debentures are exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holders surrendering the same, but shall not be issuable in denominations less
than integral multiples of ten thousand dollars ($10,000). No service charge
will be made for such registration of transfer or exchange.
2. TRANSFER. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred,
assigned or exchanged only in compliance with the Securities Act of 1933, as
amended (the "SECURITIES ACT"), including Regulation D promulgated under the
Securities Act. Any Holder of this Debenture, by acceptance hereof, agrees to
the representations, warranties and covenants herein. Prior to due presentment
to the Company for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered on
the Company's 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.
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3. CONVERSION; OTHER AGREEMENTS. The record Holders of this Debenture shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. The record Holder of this Debenture shall be entitled, at
the option of the Holder, to convert any or all of the aggregate principal and
accrued and unpaid interest of Debentures held by such Holder, at any time after
the date of issuance of this Debenture, at the office of the Company, into that
number of fully-paid and non-assessable shares of Common Stock of the Company
calculated in accordance with the following formula (the "CONVERSION RATE"): The
number of shares of Common Stock to be issuable upon conversion of any principal
amount shall be determined by dividing (x) the principal amount of this
Debenture to be converted by (y) the Fixed Conversion Price (as defined herein).
The number of shares of Common Stock to be issuable upon conversion of any
accrued and unpaid interest amount on this Debenture shall be determined by
dividing (x) accrued and unpaid interest to be converted by (y) the Fixed
Conversion Price. The term "FIXED CONVERSION PRICE" means $0.50, subject to
adjustment as provided herein.
(b) MECHANICS OF CONVERSION. In order to convert Debentures into shares of
Common Stock, the Holder shall surrender the certificate or certificates
therefor, duly endorsed, by either overnight courier or 2-day courier, to the
office of the Company, and shall give written notice to the Company at such
office with a copy to Chief Financial (Accounting) Officer, tel 905-695-4142,
facsimile 905-695-5013, that such Holder elects to convert the same, the amount
of principal and/or interest of the Debentures to be so converted and a
calculation of the number of shares of Common Stock to be issued upon
conversion; PROVIDED, HOWEVER, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless either the certificates evidencing such Debentures are delivered to the
Company, or the Holder notifies the Company that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the Company
to indemnify the Company from any loss incurred by it in connection with such
certificates.
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The Company shall issue and deliver to the Holder within five (5)
business days after delivery to the Company of such Debenture certificates, or
such agreement and indemnification, at the address of the Holder on the books of
the Company, a certificate or certificates for the number of shares of Common
Stock to which the Holder shall be entitled as aforesaid. The date on which
notice of conversion is given (the "DATE OF Conversion") shall be deemed to be
the date such notice of conversion is received by the Company; PROVIDED, that
the original Debentures to be converted are received by the Company within five
(5) business days thereafter, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date. If the original Debentures to be converted are not received by the Company
within five (5) business days after the Date of Conversion, the notice of
conversion shall become null and void.
Following conversion of a Debenture, or a portion thereof, the
principal and, upon payment thereof, the interest owed on that Debenture or
portion of the Debenture so converted, will be deemed paid for the portion so
converted and satisfied, and such Debenture or portion thereof will no longer be
outstanding. If this Debenture should be converted in part only, the Company
shall promptly, upon surrender of this Debenture, execute and deliver a new
Debenture. Whenever the Company is required to issue a new Debenture pursuant to
the terms of this Debenture, such new Debenture (i) shall be of like tenor with
this Debenture, (ii) shall represent, as indicated on the face of such new
Debenture, the principal amount remaining outstanding, (iii) shall have an
issuance date, as indicated on the face of such new Debenture, which is the same
as the Issuance Date of this Debenture, (iv) shall have the same rights and
conditions as this Debenture, and (v) shall represent the proportionate amount
of accrued interest on the principal amount and interest of this Debenture that
correspond to the principal of the new Debenture, from the Issuance Date.
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(c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Debentures, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding Debentures. The Company shall use its best
efforts to insure that all shares of Common Stock to be issued upon conversion
of this Debenture will be validly authorized and reserved for issuance and, if
and when this Debenture is converted in whole or in part the shares of Common
Stock issued will be duly and validly issued, fully paid, nonassessable, without
any personal liability attaching to the ownership thereof, and will not be
issued in violation of any preemptive or other rights of shareholders.
(d) MANDATORY PAYMENT OR CONVERSION ON MATURITY DATE. Each Holder of a Debenture
outstanding on the Maturity Date, shall have the right to payment of all
principal (and any accrued and unpaid interest thereon) on this Debenture paid
to such Holder in cash or in immediately available funds or, at the option of
each Holder of a Debenture, in shares of Common Stock computed in accordance
with Section 3 above. On the Maturity Date, the Company shall pay to the Holder
an amount in cash, in immediately available funds OR, AT THE OPTION OF EACH
HOLDER OF A DEBENTURE, in shares of Common Stock computed in accordance with
Section 3 above an amount equal to the then outstanding principal amount (and
any accrued and unpaid interest thereon) on this Debenture.
(e) MANDATORY CONVERSION PRIOR TO MATURITY DATE. The Debenture has a mandatory
conversion requirement in accordance with Section 3 above in the event a
majority of the Company's currently issued and outstanding 9% Convertible
Debentures as issued and reflected on Exhibit D (the "Other Debentures") annexed
to the Security Subscription Agreement acting individually and not as a group
elect to convert said Other Debentures into Common Stock of the Company in
accordance with the terms of said Debentures. For the avoidance of doubt,
majority of outstanding Debentures for the mandatory conversion prior to
maturity shall be determined based upon monetary amount of outstanding Other
Debentures and not the number of holders.
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(f) ADJUSTMENT TO CONVERSION PRICE. If, prior to the conversion of all of the
Debentures, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend or other similar event, then the Fixed Conversion
Price shall be proportionately reduced. If prior to conversion of all the
Debentures, the number of outstanding shares of Common Stock is decreased by a
reverse stock split, combination or reclassification of shares, or other similar
event, the Fixed Conversion Price shall be proportionately increased.
(g) NO CHARGES OR TAXES. The issuance of certificates for shares of Common Stock
upon conversion of this Debenture shall be made without charge to Holder or the
purchaser of any issuance tax in respect thereof or other cost incurred by the
Company in connection with such conversion and the related issuance of shares of
Common Stock issuable upon conversion.
(h) NO INTERFERENCE. The Company shall not close its books against the transfer
of this Debenture or of any shares of Common Stock issued or issuable upon the
conversion of this Debenture in any manner which interferes with the timely
conversion of this Debenture.
(i) ASSISTANCE. The Company shall assist and cooperate with any reasonable
request by the Holder or any purchaser which is required to make any
governmental filings or obtain any governmental approvals prior to or in
connection with any conversion of this Debenture.
(j) CONTINGENT CONVERSION. Notwithstanding any other provision hereof, if a
conversion of any portion of this Debenture is to be made in connection with a
public offering or sale of the Company (pursuant to a merger, sale of stock or
otherwise), such exercise may at the election of the Holder be conditioned upon
the consummation of such transaction, in which case such exercise shall not be
deemed to be effective until immediately prior to consummation of such
transaction.
(k) CERTAIN ACTIONS. The Company shall take all such actions as may be necessary
to ensure that all shares of Common Stock that may be issued without violation
by the Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange or quotation system upon which
shares of Common Stock or other securities constituting securities that may be
issuable upon conversion of this Debenture may be listed or quoted (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance). The Company will use its best efforts to cause the
shares of Common Stock issued upon conversion of this Debenture, immediately
upon such conversion, to be listed on any domestic national securities exchange
or quotation system upon which shares of Common Stock or other securities
issuable upon conversion of this Debenture are listed or quoted at the time of
such exercise. The Company shall use its best efforts to maintain its current
listing/quotation of its Common Stock on the Over-The-Counter-Bulletin-Board
quotation system.
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(l) NON-CIRCUMVENTION. The Company shall not, and shall not permit its
subsidiaries to, directly or indirectly, by any action avoid or seek to avoid
the observance or performance of any terms of this Debenture or impair or
diminish its value, but shall at all times in good faith assist in carrying out
of all such terms of this Debenture.
(m) AUTHORITY. The Company warrants and represents that: (i) it has all
requisite corporate power and authority to enter into and perform its
obligations under this Debenture and to issue and deliver the Debenture to the
Holder; (ii) the execution, delivery, and performance by the Company of its
obligations under this Debenture, including the issuance and delivery of the
Debenture to the Holder, have been duly authorized by all necessary corporate
action on the part of the Company; and (iii) this Debenture has been duly
executed and delivered by the Company and is a legal, valid and binding
obligation of the Company and is enforceable against the Company in accordance
with its terms.
(n) GOVERNMENTAL ACTIONS. Without limiting the generality of the foregoing, the
Company shall obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Debenture.
(o) REGISTRATION RIGHTS. The Holder shall have the registration rights for the
shares of Common Stock underlying the Debenture as set forth in the Registration
Rights Agreement of even date with the original issue date of this Debenture.
4. REDEMPTION.
(a) RIGHT TO REDEEM. Except as provided in Sections 4(b) and (d) herein, the
Company may at its sole option elect to redeem this Debenture in accordance with
Section 4(c).
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(b) RIGHT TO REDEEM ON CONVERSION. The Company shall not have the right, after
receipt of a notice of conversion pursuant to Section 3, to redeem in whole or
in part any Debentures submitted for conversion. If the Company wishes to redeem
some, but not all, of the Debentures previously submitted for conversion, the
Company shall notify the Holder on five (5) days written notice, and it will be
the option of the Holder to elect to have the Debenture redeemed.
(c) MECHANICS OF REDEMPTION ON CONVERSION. The Company shall effect each such
redemption by giving notice of its election to redeem, by facsimile to Holder.
Such redemption notice shall indicate whether the Company will redeem all or
part of the Debentures. The Company shall not be entitled to send any notice of
redemption and begin the redemption procedure unless it has the full amount of
the redemption price, in cash, available in a demand or other immediately
available account in a bank or similar financial institution on the date the
redemption notice is sent to Holder.
(d) MECHANICS OF CONVERSION ON REDEMPTION. The Holder may within three (3)
business days of receipt of the Notice of Redemption elect to send Notice of
Conversion to the Company should Holder wish for the Debenture to be converted
rather than redeemed by the Company. The Company warrants and represents that it
will honor the Notice of Conversion as received by Holder.
(e) REDEMPTION PRICE. The redemption price per Debenture shall equal one hundred
and ten percent (110%) multiplied by the then outstanding principal amount plus
unpaid interest to the date of redemption.
The redemption price shall be paid in cash to the Holder of Debentures
redeemed within ten (10) business days of the delivery of the notice of such
redemption to such Holder; PROVIDED, HOWEVER, that the Company shall not be
obligated to deliver any portion of such redemption price unless either the
certificates evidencing the Debentures redeemed are delivered to the Company, or
the Holder notifies the Company that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates.
5. NO IMPAIRMENT. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is 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, or Common Stock herein
prescribed. This Debenture and all other Debentures now and hereafter issued of
similar terms are direct obligations of the Company.
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6. TERMINATION. After this Debenture shall have been surrendered for conversion
as herein provided or notice of redemption shall have been given by the Company
pursuant to Section 4(c) herein, this Debenture shall no longer be deemed to be
outstanding and all rights with respect to this Debenture, including, without
limitation, the right to receive interest hereon and the principal hereof, shall
forthwith terminate, except, as applicable, the right of the Holder hereof to
receive shares of Common Stock in exchange therefor or the right to be paid
principal and interest pursuant to the provisions of Section 4. Notwithstanding
anything to the contrary herein, if the Holder or the Company, as applicable, is
converting less than the outstanding principal amount and/or less than the
amount of unpaid interest accrued thereon, then the rights and obligations under
this Debenture shall terminate only with respect to the principal and/or
interest being so converted.
7. COSTS AND EXPENSES. The Company agrees to pay all costs and expenses,
including reasonable attorney's fees, which may be incurred by the Holder in
collecting any amount due under this Debenture.
8. EVENTS OF DEFAULT; REMEDIES. If one or more of the following described
"EVENTS OF DEFAULT" shall occur:
(a) The Company shall default in the payment of principal or interest on these
Debentures; or
(b) Any of the representations or warranties made by the Company herein, or in
any certificate or financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company or any of its subsidiaries in
connection with the execution and delivery of this Debenture shall be false or
misleading in a any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any material respect, any
other covenant, term, provision, condition, agreement or obligation of the
Company under this Debenture, Registration Rights Agreement or the Subscription
Agreement of even date with the original issue date of this Debenture and such
failure shall continue uncured for a period of fifteen (15) business days after
notice from Holder of such failure; or
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(d) The Company or any of its subsidiaries 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; or
(e) A trustee, liquidator or receiver shall be appointed for the Company, any of
its subsidiaries or for a substantial part of their respective property or
business without their consent and shall not be discharged within forty five
(45) business days after such appointment; or
(f) 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 or any of
its subsidiaries and shall not be dismissed within forty five (45) business days
thereafter; or
(g) 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 or any of its subsidiaries
and, if instituted against the Company or any of its subsidiaries shall not be
dismissed within forty five (45) business days after such instruction or if the
Company or any of its subsidiaries 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 proceeding; or
(h) The Company's Common Stock shall not be traded on an exchange or quotation
system such as the Over the Counter Bulletin Board market; or
(i) Cessation by the Company or any of its subsidiaries of doing business in the
ordinary course; or
(j) A material adverse change to the Company's or any of its subsidiaries
business condition (financial or otherwise), earnings, properties, prospects or
results of operations of the Company or any of its subsidiaries taken as a
whole.
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Then, or at any time thereafter, and in each and every such case,
unless such Event or Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the principal (and
any accrued interest) amount of this Debenture shall become immediately due and
payable, without presentment, demand protest or notice of any kind, all of which
are hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately,
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
9. MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL, ETC.
(a) CHANGE OF CONTROL. Each of the following events shall constitute a "CHANGE
OF CONTROL":
(i) the consolidation, merger or other business combination (including, without
limitation, a reorganization or recapitalization) of the Company with or into
another person or entity (other than (A) a consolidation, merger or other
business combination (including, without limitation, reorganization or
recapitalization) in which holders of the Company's voting power immediately
prior to the transaction continue after the transaction to hold, directly or
indirectly, the voting power of the surviving entity or entities necessary to
elect a majority of the members of the board of directors (or their equivalent
if other than a corporation) of such entity or entities, or (B) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company);
(ii) the sale or transfer of all or substantially all of the Company's or its
subsidiaries' assets (as determined on a consolidated basis); or
(iii) a purchase, tender or exchange offer made to and accepted by the holders
of more than the 50% of the outstanding shares of Common Stock.
No later than 15 days prior to the consummation of a Change of Control
the Company shall deliver written notice thereof via facsimile and overnight
courier to the Holder (a "CHANGE OF CONTROL NOTICE"). Notwithstanding anything
herein to the contrary, (x) no Change of Control Notice shall be made prior to
the public announcement of a Change of Control and (y) no Change of Control
Notice shall be made prior to the public announcement of the Change of Control
described in (a)(iii) above as long as the terms of the underlying Change of
Control transaction will permit the Holder to participate in such transaction on
the same per share terms as the other participating holders of Common Stock in
the event the Holder elects to convert all or a portion of this Debenture into
Common Stock as herein provided. Notwithstanding anything herein to the
contrary, the Change of Control Notice shall be delivered no later than the date
of the events described in (x) and (y) of the preceding sentence.
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(b) ASSUMPTION. Prior to the consummation of any Change of Control, the Company
will secure from any person or entity purchasing the Company's assets or Common
Stock or any successor resulting from such Change of Control (in each case, an
"ACQUIRING ENTITY") a written agreement (in form and substance satisfactory to
the holders of Debentures representing at least a majority of the aggregate
principal amount of the Debentures then outstanding) to deliver to each holder
of Debentures in exchange for such Debentures, a security of the Acquiring
Entity evidenced by a written instrument substantially similar in form and
substance to the Debentures, including, without limitation, having a principal
amount and interest rate equal to the principal amounts and the interest rates
of the Debentures held by such holder, and satisfactory to the holders of
Debentures representing at least a majority of the aggregate principal amount of
the Debentures then outstanding. In the event that an Acquiring Entity is
directly or indirectly controlled by a company or entity whose common stock or
similar equity interest is listed, designated or quoted on a securities exchange
or trading market, the holders of Debentures representing at least a majority of
the aggregate principal amount of the Debentures then outstanding may elect to
treat such person or entity as the Acquiring Entity for purposes of this Section
9(b).
(c) OTHER CORPORATE EVENTS. Prior to the consummation of any recapitalization,
reorganization, consolidation, merger, spin-off or other business combination
(other than a Change of Control) pursuant to which holders of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for Common Stock (a "CORPORATE EVENT"), the Company shall make appropriate
provision to insure that the Holder will thereafter have the right to receive
upon a conversion of this Debenture, (i) in addition to the shares of Common
Stock receivable upon such conversion, such securities or other assets to which
the Holder would have been entitled with respect to such shares of Common Stock
had such shares of Common Stock been held by the Holder upon the consummation of
such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise
receivable upon such conversion, such securities or other assets received by the
holders of Common Stock in connection with the consummation of such Corporate
Event in such amounts as the Holder would have been entitled to receive had this
Debenture initially been issued with conversion rights for the form of such
consideration (as opposed to shares of Common Stock) at a conversion rate for
such consideration commensurate with the Conversion Rates. Provision made
pursuant to the preceding sentence shall be in a form and substance satisfactory
to the holders of Debentures representing at least a majority of the aggregate
principal amount of the Debentures then outstanding.
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10. LOST OR DESTROYED DEBENTURE. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a 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 thereof, and indemnity and bond, if
requested, all reasonably satisfactory to the Company.
11. GOVERNING LAW. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws.
12. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day" shall
mean any day on which banks are generally open for business in the State of New
York, USA and excluding any Saturday and Sunday.
13. NOTICES. Any notice, demand or request required or permitted to be given by
either the Company or the Holder pursuant to the terms of this Debenture shall
be in writing and shall be deemed given when delivered personally, or by
facsimile (with a hard copy to follow by two day courier), addressed to the
Company _______________________________________, or the Holder c/o
____________________________, or such other addresses as a party may request by
notifying the other in writing.
14. WAIVER. Any waiver by the Company or the Holder hereof of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder hereof 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 and signed by such party against whom such waiver is sought
to be enforced.
15. NOTICES OF CERTAIN ACTIONS. In case at any time the Company shall propose
to:
(a) pay any dividend or make any distribution on shares of Common Stock in
shares of Common Stock or equivalents thereto or make any other distribution; or
(b) issue any rights, warrants or other Common Stock to all holders of Common
Stock entitling them to purchase any additional shares of Common Stock or any
other rights, debentures, warrants or other Common Stock; or
(c) effect any reclassification or change of outstanding shares of Common Stock,
or any consolidation, merger, sale, lease or conveyance of property, described
in Sections 3 or 9 hereof; or
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(d) effect any liquidation, dissolution or winding-up of the Company; or
(e) take any other action which would cause an adjustment to the Fixed
Conversion Price;
(f) effect an action deemed Other Corporate Events under Section 9(c); or
(g) provide to its shareholders any information which is regularly provided to
shareholders,
then, and in any one or more of such cases (a) through (g), the Company
shall, subject to any other Sections of this Debenture, give written notice
thereof, by certified mail, postage prepaid, to the Holder at the Holder's
address as it shall appear in the Debenture Register, mailed at least fifteen
(15) days prior to (i) the date as of which the holders of record of shares of
securities to be entitled to receive any such dividend, distribution, rights,
debentures, warrants or other securities are to be determined, (ii) the date on
which any such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up, or (iii) the date of such other action which would
require an adjustment to the Fixed Conversion Price. In the case of subsection
(g) above, written notice to the Holder may be given by regular mail.
16. UNENFORCEABLE PROVISIONS. 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.
17. RESTRICTION ON REDEMPTION AND DIVIDENDS. Until all of the Debentures as
issued by the Company and outstanding as of the original issue date of this
Debenture have been converted, redeemed or otherwise satisfied in accordance
with their terms, the Company shall not, directly or indirectly, (A) repurchase,
redeem, or declare or pay any cash dividend or distribution on, the Common Stock
or (B) distribute any material property or assets of any kind to holders of the
Common Stock in respect of the Common Stock.
18. RANK. Obligations under this Debenture, including payments of principal and
interest and other payments due under this Debenture, shall rank pari passu with
all Other Debentures.
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19. VOTE TO ISSUE, OR CHANGE THE TERMS OF, DEBENTURES. The affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting of
the holders of Debentures representing not less than a majority of the aggregate
principal amount of the then outstanding Debentures shall be required for any
change or amendment to this Debenture or the Other Debentures; PROVIDED, that
the Holder of this Debenture may waive any term or provision of this Debenture
without such vote or written consent. Notwithstanding the foregoing, should an
affirmative vote or written consent be sought to change or amend the terms of
the Company's then outstanding Debentures, said change can not have an adverse
effect to the Holder unless the individual Holder consents to same.
20. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Debenture is
placed in the hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding or the Holder otherwise takes action to
collect amounts due under this Debenture or to enforce the provisions of this
Debenture or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Debenture, then the Company shall pay the
reasonable costs incurred by the Holder for such collection, enforcement or
action or in connection with such bankruptcy, reorganization, receivership or
other proceeding, including, but not limited to, reasonable attorneys' fees and
disbursements.
21. CONSTRUCTION; HEADINGS. This Debenture shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any person as
the drafter hereof. The headings of this Debenture are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Debenture.
22. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Debenture shall be cumulative and in
addition to all other remedies available under this Debenture and any of the
other Transaction Documents (as defined in the Subscription Agreement), at law
or in equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the Holder's right to pursue actual
damages for any failure by the Company to comply with the terms of this
Debenture. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
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23. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Debenture and
the Subscription Agreement.
24. FURTHER ACKNOWLEDGEMENT. The Company will, at the time of each conversion of
this Debenture, upon the request of the Holder hereof, acknowledge in writing
its continuing obligation to afford to such Holder all rights (including,
without limitation, any rights to registration, pursuant to the Registration
Rights Agreement, of the shares of Common Stock issued upon such conversion) to
which such Holder shall continue to be entitled after such conversion in
accordance with its terms of this Debenture; PROVIDED, that if the Holder of
this Debenture shall fail to make any such requests, such failure shall not
affect the continuing obligation of the Company to afford such rights to such
Holder.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by an officer thereof duly authorized.
Environmental Solutions Worldwide, Inc.
By:
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Title:
-16-
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 Environmental
Solutions Worldwide, Inc. (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
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Principal Amount of Debentures to be Converted
Payment of Interest in Kind [ ] Yes
[ ] No
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Interest Accrued on Account of Conversion at Issue
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Number of shares of Common Stock to be Issued
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Signature
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Name
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Address