EXHIBIT 10.8
THIS SECURED DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE
(COLLECTIVELY, THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED
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STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR
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SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION
D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND THE COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH
INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE
AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE
MADE EXCEPT IN COMPLIANCE WITH THE ACT.
SECURED DEBENTURE
INTREPID TECHNOLOGY & RESOURCES, INC.
5% SECURED CONVERTIBLE DEBENTURE
OCTOBER 13, 2007
No. ___ US$450,000
This Secured Debenture (the "Debenture") is issued on October 13, 2004 (the
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"Closing Date") by Intrepid Technology & Resources, Inc., an Idaho corporation
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(the "Company"), to Cornell Capital Partners, LP (together with its permitted
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successors and assigns, the "Holder") pursuant to exemptions from registration
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under the Securities Act of 1933, as amended.
ARTICLE I.
Section 1.01 PRINCIPAL AND INTEREST. For value received, the Company
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hereby promises to pay to the order of the Holder on October 13, 2005 in lawful
money of the United States of America and in immediately available funds the
principal sum of Four Hundred Fifty Thousand U.S. Dollars (US$450,000), together
with interest on the unpaid principal of this Debenture at the rate of five
percent (5%) per year (computed on the basis of a 365-day year and the actual
days elapsed) from the date of this Debenture until paid. At the Company's
option, the entire principal amount and all accrued interest shall be either (a)
paid to the Holder on the third (3rd) year anniversary from the date hereof or
(b) converted in accordance with Section 1.02
herein provided, however, that in no event shall the Holder be entitled to
convert this Debenture for a number of shares of Common Stock in excess of that
number of shares of Common Stock which, upon giving effect to such conversion,
would cause the aggregate number of shares of Common Stock beneficially owned by
the Holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such conversion.
Section 1.02 OPTIONAL CONVERSION. The Holder is entitled, at its
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option, to convert, and sell on the same day, at any time and from time to time,
until payment in full of this Debenture, all or any part of the principal amount
of the Debenture, plus accrued interest, into shares (the "Conversion Shares")
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of the Company's common stock, par value US$0.005 per share ("Common Stock"), at
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the price per share (the "Conversion Price") equal to the lesser of (a) an
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amount equal to one hundred twenty percent (120%) of the volume weighted average
price (the "VWAP") of the Common Stock as listed on a Principal Market (as
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defined herein), as quoted by Bloomberg L.P. (the "Fixed Price"), on the date
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hereof, or (b) an amount equal to eighty percent (80%) of the average of the
three (3) lowest VWAPs of the Company's Common Stock, as quoted by Bloomberg,
LP, for the five (5) trading days immediately preceding the Conversion Date (as
defined herein). Subparagraphs (a) and (b) above are individually referred to
as a "Conversion Price". As used herein, "Principal Market" shall mean The
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National Association of Securities Dealers Inc.'s Over-The-Counter Bulletin
Board, Nasdaq SmallCap Market, or American Stock Exchange. If the Common Stock
is not traded on a Principal Market, the Closing Bid Price and/or the VWAP shall
mean, the reported Closing Bid Price or the VWAP for the Common Stock, as
furnished by the National Association of Securities Dealers, Inc., for the
applicable periods. No fraction of shares 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. To convert this Debenture, the Holder
hereof shall deliver written notice thereof, substantially in the form of
Exhibit "A" to this Debenture, with appropriate insertions (the "Conversion
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Notice"), to the Company at its address as set forth herein. The date upon
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which the conversion shall be effective (the "Conversion Date") shall be deemed
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to be the date set forth in the Conversion Notice.
Section 1.03 RESERVATION OF COMMON STOCK. The Company shall reserve
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and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of this Debenture, such
number of shares of Common Stock as shall from time to time be sufficient to
effect such conversion, based upon the Conversion Price. If at any time the
Company does not have a sufficient number of Conversion Shares authorized and
available, then the Company shall call and hold a special meeting of its
stockholders within thirty (30) days of that time for the sole purpose of
increasing the number of authorized shares of Common Stock.
Section 1.04 RIGHT OF REDEMPTION. The Company at its option shall have
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the right to redeem, with three (3) business days advance written notice (the
"Redemption Notice"), a portion or all outstanding convertible debenture. The
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redemption price shall be one hundred twenty percent (120%) of the amount
redeemed plus accrued interest.
In the event the Company exercises a redemption of either all or a portion
the Convertible Debenture, the Holder shall receive a warrant to purchase fifty
thousand (50,000) shares of the Company's Common Stock for every One Hundred
Thousand U.S. Dollars (US$100,000)
2
redeemed, pro rata (the "Warrant"). The Warrant shall be exercisable on a "cash
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basis" and have an exercise price equal to the Fixed Price (as defined herein).
The Warrant shall have "piggy-back" and demand registration rights and shall
survive for two (2) years from the Closing Date.
Section 1.05 REGISTRATION RIGHTS. The Company is obligated to register
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the resale of the Conversion Shares under the Securities Act of 1933, as
amended, pursuant to the terms of a Registration Rights Agreement, between the
Company and the Holder of even date herewith (the "Investor Registration Rights
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Agreement").
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Section 1.06 INTEREST PAYMENTS. The interest so payable will be paid
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at the time of maturity or conversion to the person in whose name this Debenture
is registered. At the time such interest is payable, the Holder, in its sole
discretion, may elect to receive the interest in cash (via wire transfer or
certified funds) or in the form of Common Stock. In the event of default, as
described in Article III Section 3.01 hereunder, the Holder may elect that the
interest be paid in cash (via wire transfer or certified funds) or in the form
of Common Stock. If paid in the form of Common Stock, the amount of stock to be
issued will be calculated as follows: the value of the stock shall be the
Closing Bid Price on: (i) the date the interest payment is due; or (ii) if the
interest payment is not made when due, the date the interest payment is made. A
number of shares of Common Stock with a value equal to the amount of interest
due shall be issued. No fractional shares will be issued; therefore, in the
event that the value of the Common Stock per share does not equal the total
interest due, the Company will pay the balance in cash.
Section 1.07 PAYING AGENT AND REGISTRAR. Initially, the Company will
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act as paying agent and registrar. The Company may change any paying agent,
registrar, or Company-registrar by giving the Holder not less than ten (10)
business days' written notice of its election to do so, specifying the name,
address, telephone number and facsimile number of the paying agent or registrar.
The Company may act in any such capacity.
Section 1.08 SECURED NATURE OF DEBENTURE. This Debenture is secured by
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all of the assets and property of the Company as set forth on Exhibit A to the
Security Agreement dated the date hereof between the Company and the Holder (the
"Security Agreement"). As set forth in the Security Agreement, Holder's
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security interest shall terminate upon the occurrence of an Expiration Event as
defined in the Security Agreement.
ARTICLE II.
Section 2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may not
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be amended. Notwithstanding the above, without the consent of the Holder, the
Debenture may be amended to cure any ambiguity, defect or inconsistency, or to
provide for assumption of the Company obligations to the Holder.
ARTICLE III.
Section 3.01 EVENTS OF DEFAULT. An Event of Default is defined as
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follows: (a) failure by the Company to pay amounts due hereunder within fifteen
(15) days of the date of maturity of this Debenture; (b) failure by the Company
to comply with the terms of the Irrevocable Transfer Agent Instructions attached
to the Securities Purchase Agreement; (c) failure by the Company's transfer
agent to issue freely tradeable Common Stock to the Holder within five (5) days
3
of the Company's receipt of the attached Notice of Conversion from Holder; (d)
failure by the Company for ten (10) days after notice to it to comply with any
of its other agreements in the Debenture; (e) events of bankruptcy or
insolvency; (f) a breach by the Company of its obligations under the Securities
Purchase Agreement or the Investor Registration Rights Agreement which is not
cured by the Company within ten (10) days after receipt of written notice
thereof. Upon the occurrence of an Event of Default, the Holder may, in its sole
discretion, accelerate full repayment of all debentures outstanding and accrued
interest thereon or may, notwithstanding any limitations contained in this
Debenture and/or the Securities Purchase Agreement dated the date hereof between
the Company and Cornell Capital Partners, L.P. (the "Securities Purchase
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Agreement"), convert all debentures outstanding and accrued interest thereon
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into shares of Common Stock pursuant to Section 1.02 herein.
Section 3.02 FAILURE TO ISSUE UNRESTRICTED COMMON STOCK. As indicated
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in Article III Section 3.01, a breach by the Company of its obligations under
the Investor Registration Rights Agreement shall be deemed an Event of Default,
which if not cured within ten (10) days, shall entitle the Holder to accelerate
full repayment of all debentures outstanding and accrued interest thereon or,
notwithstanding any limitations contained in this Debenture and/or the
Securities Purchase Agreement, to convert all debentures outstanding and accrued
interest thereon into shares of Common Stock pursuant to Section 1.02 herein.
The Company acknowledges that failure to honor a Notice of Conversion shall
cause irreparable harm to the Holder.
ARTICLE IV.
Section 4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole
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or in part, may be converted at any time following the Closing Date, into shares
of Common Stock at a price equal to the Conversion Price as described in Section
1.02 above.
Section 4.02 RE-ISSUANCE OF DEBENTURE. When the Holder elects to
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convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
Section 4.03 TERMINATION OF CONVERSION RIGHTS. The Holder's right to
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convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on the date that is the third (3rd) year anniversary from the
date hereof and this Debenture shall be automatically converted on that date in
accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of Common Stock and amount of interest shall be issued to the
Holder.
ARTICLE V.
Section 5.01 ANTI-DILUTION. In the event that the Company shall at any
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time subdivide the outstanding shares of Common Stock, or shall issue a stock
dividend on the outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
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Section 5.02 CONSENT OF HOLDER TO SELL CAPITAL STOCK OR GRANT SECURITY
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INTERESTS. Except for the Standby Equity Distribution Agreement dated the date
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hereof between the Company and Cornell Capital Partners, LP, so long as any of
the principal of or interest on this Debenture remains unpaid and unconverted,
the Company shall not, without the prior consent of the Holder, issue or sell
(i) any Common Stock or Preferred Stock without consideration or for a
consideration per share less than its fair market value determined immediately
prior to its issuance, (ii) issue or sell any Preferred Stock, warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Stock without consideration or for a
consideration per share less than such Common Stock's fair market value
determined immediately prior to its issuance, (iii) enter into any security
instrument granting the holder a security interest in any of the assets of the
Company, or (iv) file any registration statement on Form S-8.
ARTICLE VI.
Section 6.01 NOTICE. Notices regarding this Debenture shall be sent to
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the parties at the following addresses, unless a party notifies the other
parties, in writing, of a change of address:
If to the Company, to: Intrepid Technology & Resources, Inc.
501 West Broadway - Suite 200
Idaho Falls, ID 83402
Attention: Dr. Dennis D. Keiser
Telephone: (208) 529-5337
Facsimile: (208) 529-1014
With a copy to: Kirkpatrick & Lockhart LLP
201 South Biscayne Boulevard - Suite 2000
Miami, FL 33131-2399
Attention: Clayton E. Parker, Esq.
Telephone: (305) 539-3300
Facsimile: (305) 358-7095
If to the Holder: Cornell Capital Partners, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07303
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
With a copy to: David Gonzalez, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
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Section 6.02 GOVERNING LAW. This Debenture shall be deemed to be made
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under and shall be construed in accordance with the laws of the State of New
Jersey without giving effect to the principals of conflict of laws thereof.
Each of the parties consents to the jurisdiction of the U.S. District Court
sitting in the District of the State of New Jersey or the state courts of the
State of New Jersey sitting in Hudson County, New Jersey in connection with any
dispute arising under this Debenture and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
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conveniens to the bringing of any such proceeding in such jurisdictions.
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Section 6.03 SEVERABILITY. The invalidity of any of the provisions of
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this Debenture shall not invalidate or otherwise affect any of the other
provisions of this Debenture, which shall remain in full force and effect.
Section 6.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture
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represents the entire agreement between the parties hereto with respect to the
subject matter hereof and there are no representations, warranties or
commitments, except as set forth herein. This Debenture may be amended only by
an instrument in writing executed by the parties hereto.
Section 6.05 COUNTERPARTS. This Debenture may be executed in multiple
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counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Company
as executed this Debenture as of the date first written above.
INTREPID TECHNOLOGY & RESOURCES, INC.
By: /s/ Dr. Dennis D. Keiser
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Name: Dr. Dennis D. Keiser
Title: President & CEO
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EXHIBIT "A"
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NOTICE OF CONVERSION
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(TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE DEBENTURE)
TO:
The undersigned hereby irrevocably elects to convert US$_________________
of the principal amount of the above Debenture into Shares of Common Stock of
Intrepid Technology & Resources, Inc., according to the conditions stated
therein, as of the Conversion Date written below.
CONVERSION DATE:
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APPLICABLE CONVERSION PRICE:
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SIGNATURE:
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NAME:
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ADDRESS:
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AMOUNT TO BE CONVERTED: US$
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AMOUNT OF DEBENTURE
UNCONVERTED: US$
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CONVERSION PRICE PER SHARE: US$
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NUMBER OF SHARES OF COMMON
STOCK TO BE ISSUED:
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PLEASE ISSUE THE SHARES OF
COMMON STOCK IN THE FOLLOWING
NAME AND TO THE FOLLOWING
ADDRESS:
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ISSUE TO:
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AUTHORIZED SIGNATURE:
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NAME:
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TITLE:
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PHONE NUMBER:
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BROKER DTC PARTICIPANT CODE:
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ACCOUNT NUMBER:
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A-1