Exhibit 4.2
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NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
ORIGINAL ISSUE DATE: DECEMBER31, 2002
No. [ ] $[ ]
ELECTRIC FUEL CORPORATION
9% SECURED CONVERTIBLE DEBENTURE DUE JUNE30, 2005
THIS DEBENTURE is one of a series of duly authorized and issued debentures
of ELECTRIC FUEL CORPORATION, a corporation organized under the laws of Delaware
(the "COMPANY"), designated as its 9% Secured Convertible Debentures due June
30, 2005 in the aggregate principal amount of [ ] Dollars ($_________)
(collectively, the "DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to the order of [ ] or its
registered assigns (the "HOLDER") the principal sum of [ ] Dollars ($[ ]) and
any additional sums due pursuant to the terms hereof, on June 30, 2005, or such
earlier date as the Debentures are required or permitted to be repaid as
provided hereunder (the "MATURITY DATE"), and to pay interest to the Holder on
the principal amount of this Debenture in accordance with the provisions hereof.
This Debenture is subject to the following additional provisions.
1. Definitions. In addition to the terms defined elsewhere in this
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Debenture, capitalized terms that are not otherwise defined herein shall have
the meanings given to such terms in the Securities Purchase Agreement of even
date herewith to which the Company and the original Holder are parties (the
"PURCHASE AGREEMENT").
"AFFILIATE" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
"BANKRUPTCY EVENT" means any of the following events: (a) the Company or
any subsidiary thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or Liquidation or similar law of any jurisdiction
relating to the Company or any subsidiary thereof; (b) there is commenced
against the Company or any subsidiary thereof any such case or proceeding that
is not dismissed within 60 days after commencement; (c) the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the Company
or any subsidiary thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property that is not discharged or stayed
within 60 days; (e) the Company or any subsidiary thereof makes a general
assignment for the benefit of creditors; (f) the Company or any subsidiary
thereof fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; (g) the Company or any subsidiary
thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (h) the Company or any subsidiary
thereof, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.
"BLOOMBERG" means Bloomberg Financial L.P. (or its successor to reporting
stock prices).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other governmental action to
close.
"CLOSING DATE" shall have the meaning set forth in the Purchase Agreement.
"CLOSING PRICE" means, for any date, the price determined by the first of
the following clauses that applies: (a) if the Common Stock is then listed or
quoted on an Trading Market, the closing bid price per share of the Common Stock
for such date (or the nearest preceding date if there is no such price on such
date) on the Trading Market on which the Common Stock is then listed or quoted;
(b) if the Common Stock is not then listed or quoted on an Trading Market and
if prices for the Common Stock are then quoted on the OTC Bulletin Board, the
closing bid price per share of the Common Stock for such date (or the nearest
preceding date if there is no such price on such date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on an Trading Market
or the OTC Bulletin Board and if prices for the Common Stock are then reported
in the "Pink Sheets" published by the Pink Sheets LLC (formerly the National
Quotation Bureau Incorporated) (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by the Holder.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, $.01 par value per share,
and stock of any other class into which such shares may be reclassified.
"COMMON SHARE EQUIVALENTS" means any securities of the Company or any
Subsidiary (as defined in the Purchase Agreement) which entitle the holder
thereof to acquire Common Stock at any time, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
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any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.
"COMPANY REDEMPTION PRICE" means the sum of (i) the outstanding principal
amount of this Debenture plus (ii) all other amounts, interest and liquidated
damages due in respect of this Debentures.
"CONVERSION DATE" is the date specified in a Conversion Notice to effect
conversions of Debentures under Section 5(a)(i), which date may not be prior to
the date the Holder delivers such Conversion Notice. If no Conversion Date is
specified in a Conversion Notice, then the Conversion Date for such notice shall
be the date that such notice is deemed delivered hereunder.
"CONVERSION PRICE" means $.75 (subject to adjustment in accordance with
Section 5(d)).
"DISTRIBUTION" means, with respect to any Person, the declaration or
payment of any dividends by such Person, or the purchase, redemption, retirement
or other acquisition for value of any of its capital stock or other equity now
or hereafter outstanding, or the making of any distribution of assets to its
stockholders as such whether in cash, assets or in obligations of such Person,
or the allocation or other setting apart of any sum for the payment of any
dividend or distribution on, or for the purchase, redemption, retirement or
other acquisition of any shares of its capital stock, or the making of any other
distribution by reduction of capital or otherwise in respect of any shares of
its capital stock.
"INTEREST PAYMENT DATE" means each of March 31, June 30, September 30 and
December 31, except if such date is not a Trading Day, in which case such
Interest Payment Date shall be the next succeeding Trading Day.
"EFFECTIVE DATE" means the date that the initial Registration Statement is
first declared effective by the Securities and Exchange Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EQUITY CONDITIONS" means, with respect to a specified issuance of Common
Stock, that each of the following conditions is satisfied: (i) the number of
authorized but unissued and otherwise unreserved shares of Common Stock is
sufficient for such issuance; (ii) such shares of Common Stock are registered
for resale by the Holder pursuant to an effective registration statement, and
the prospectus thereunder is available for use by the Holder to sell such
shares, or all such shares may be sold by the Holder without volume restrictions
pursuant to Rule 144(k) under the Securities Act; (iii) the Common Stock is
listed or quoted (and is not suspended from trading) on a Trading Market and
such shares of Common Stock are approved for listing on such Trading Market upon
issuance; (iv) such issuance would be permitted in full without violating the
rules or regulations of the Trading Market on which such shares are listed or
quoted; (v) no Bankruptcy Event has occurred; (vii) the Company is not in
default with respect to any obligation hereunder or under any other Transaction
Document; or (ix) no Event of Default nor any event that with the passage of
time and without being cured would constitute an Event of Default which has
occurred and not been cured.
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"EVENT OF DEFAULT" means the occurrence of any one or more of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(i) any default in the payment of principal or liquidated damages in
respect of any Debentures, as and when the same becomes due and payable (whether
by acceleration or otherwise) or any default in the payment of interest in
respect of any Debentures, within five Trading Days of when the same becomes due
and payable;
(ii) any default in the payment of the Additional Payment (as hereinafter
defined) as and when the same becomes due and payable, within five Trading Days
of when the same becomes due and payable;
(iii) the Company or any Subsidiary defaults in any of its obligations
under any other debenture or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there
may be issued, or by which there may be secured or evidenced, any Indebtedness,
whether such Indebtedness now exists or is hereafter created, and such default
results in such Indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable;
(iv) a Bankruptcy Event;
(v) the Company shall fail for any reason to deliver certificates
representing Underlying Shares issuable upon a conversion hereunder that comply
with the provisions hereof prior to the fifth Trading Day after the Conversion
Date or the Company shall provide notice to any Holder, including by way of
public announcement, at any time, of its intention not to comply with requests
for conversion of Debentures in accordance with the terms hereof;
(vi) the Company shall fail for any reason to pay in full the amount of
cash due pursuant to a Buy-In within seven days after notice therefor is
delivered hereunder or shall fail to pay any liquidated damages due pursuant to
the Transaction Documents within seven days of the date of the request for such
payment;
(vii) the Company shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such Holder upon a
conversion hereunder;
(viii) a Fundamental Transaction with respect to the Company or its
subsidiaries;
(ix) the Registration Statement shall not have been declared effective by
the Commission on or prior to the 90th day after the Original Issue Date;
(x) during the Effectiveness Period (as defined in the Registration Rights
Agreement), the effectiveness of the Registration Statement lapses for any
reason or the Holder shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under the Registration Statement,
in either case, for more than five consecutive Trading Days or an aggregate of
eight Trading Days (which need not be consecutive Trading Days);
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(xi) an Event (as defined in the Registration Rights Agreement) shall not
have been cured to the satisfaction of the Holder prior to the expiration of ten
days from the Event Date (as defined in the Registration Rights Agreement)
relating thereto (other than an Event resulting from a failure of a Registration
Statement to be declared effective by the Commission on or prior to the 90th day
after the Original Issue Date, which shall be covered by clause (viii) above);
(xii) the Company defaults in the timely performance of any other
obligation under the Transaction Documents (including, without limitation, any
of the Security Agreements) and such default continues uncured for a period of
five Trading Days after the date on which written notice of such default is
first given to the Company by the Holder (it being understood that no prior
notice need be given in the case of a default that cannot reasonably be cured
within five Trading Days); and
(xiii) the Company or any Subsidiary takes (or agrees to take) any
Restricted Action in violation of this Debenture.
"FILING DATE" shall have the meaning set forth in the Registration Rights
Agreement.
"FUNDAMENTAL TRANSACTION" means any (i) merger or consolidation of the
Company with or into another Person, (ii) any sale of more than one-half of the
assets of the Company (on an as valued basis) in one or a series of related
transactions, (iii) any tender offer or exchange offer (whether by the Company
or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property.
"INDEBTEDNESS" shall mean the principal amount of, premium, if any, profit
participation, if any, and accrued and unpaid interest on and all other amounts
and costs payable in respect of (a) indebtedness for money borrowed from others;
(b) indebtedness guaranteed, directly or indirectly, in any manner, or in effect
guaranteed, directly or indirectly, in any manner through an agreement,
contingent or otherwise, to supply funds to, or in any other manner invest in
the debtor, or to purchase indebtedness, or to purchase and pay for property if
not delivered or pay for services if not performed, primarily for the purpose of
enabling the debtor to make payment of the indebtedness or to assure the owners
of the indebtedness against loss; (c) all indebtedness secured by any mortgage,
lien, pledge, charge or other encumbrance upon property owned by the Company;
(d) all indebtedness of such person created or arising under any conditional
sale, lease (intended primarily as a financing device) or other title retention
or security agreement with respect to property acquired by the Company even
though the rights and remedies of the seller, lessor or lender under such
agreement or lease in the event of a default may be limited to repossession or
sale of such property; (e); and (f) renewals, extensions and refundings of any
such indebtedness.
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"INTEREST SHARES" means the shares of Common Stock issued or issuable in
payment of accrued interest under Section 2.
"LIEN" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"LIQUIDATION" means for any Person, any liquidation, dissolution or
winding-up of such Person, whether voluntary or involuntary, by operation or law
or otherwise.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the sum of:
(i) the greater of (A) the principal amount of Debentures to be prepaid and, if
applicable, the Reinstated Principal (to the extent the Holder returns the
Underlying Shares subject to such Reinstated Principal), plus all accrued and
unpaid interest thereon, and (B) the principal amount of Debentures to be
prepaid and, if applicable, the Reinstated Principal (to the extent the Holder
returns the Underlying Shares subject to such Reinstated Principal), plus all
accrued and unpaid interest thereon, divided by the Conversion Price on the
Trading Day immediately preceding (x) the date of the Event of Default or (y)
the date the Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the Closing Price on (x) the date of the Event of Default or (y)
the date the Mandatory Prepayment Amount is paid in full, whichever is greater,
and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures.
"ORIGINAL ISSUE DATE" means the date of the first issuance of any
Debentures regardless of the number of transfers of any particular Debenture and
regardless of the number of certificates which may be issued to evidence such
Debentures.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened concerning the interpretation,
enforcement or defense of any transaction contemplated by any Transaction
Document (whether brought against a party hereto or such parties affiliates,
directors, officers, employees or agents).
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible, of the Company or
any of its subsidiaries, now or hereinafter acquired
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Original Issuance Date, to which the Company and the original
Holders are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"REGISTRATION STATEMENT" means a registration statement meeting the
requirements of the Registration Rights Agreement and covering the resale of,
among other things, all Underlying Shares by the Holders, who shall be named as
"selling stockholders" thereunder.
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"REINSTATED PRINCIPAL" means the principal amount of Debentures converted
during the ten Trading Days preceding the delivery of an Event of Default
Notice, for which the Company issued or was obligated to issue Underlying Shares
to the Holder.
"RESTRICTED ACTIONS" means the taking by Company or any of its subsidiaries
of any of the following actions"
(i) create, incur, assume or suffer to exist any Indebtedness, other
than Indebtedness reflected in the Company's most recent quarterly financial
statement that has been filed with the Commission prior to the Original Issuance
Date, or Indebtednessin the ordinary course of business consistent with past
practices; provided, however, that the Company may incur indebtedness to borrow
funds in an amount not to exceed $1,000,000 to be used solely in connection with
the operation of the zinc air battery business, which amount will be an
unsecured obligation of the Company; provided, further, that such lenders shall
have entered a subordination agreement with the holders of the Debentures in a
form agreed to by the holders of the Debentures;
(ii) create, incur, assume or suffer to exist any guaranty, provided,
that the Company may suffer to exist any existing guaranties for obligations of
Subsidiaries that it had entered into in the ordinary course of business
consistent with past practice;
(iii) create, incur, assume or suffer to exist any Lien, upon or with
respect to any interest in Property, except for Liens disclosed in the Purchase
Agreement or for Lienspursuant to the Debenture or for Liens incurred in
connection with the settlement with Yehuda Harats regarding assets of Electric
Fuel (E.F.L.) Ltd.;
(iii) create, incur, assume or suffer to exist any obligation as lessee for
the rental or hire of any Property, except leases existing on the Original
Issuance Date, and any extensions, supplements or renewals thereof;
(iv) make any loan or advance to any Person or any purchase or other
acquisition of any capital stock, assets, obligations or other securities of any
Person, or any capital contribution to, investment in, or other acquisition of
any interest in, any Person;
(v) make any Distribution, except that any subsidiary may make
Distributions to the Company;
(vi) make any capital expenditures, in any single or a series of related
transactions, during any year, exceeding $75,000;
(vii) sell, lease, assign, transfer or otherwise dispose of any of its now
owned or hereafter acquired Property (including, without limitation, shares of
stock and Indebtedness, receivables and leasehold interests), except in the
ordinary course of business consistent with past practices;
(viii) sell, lease, assign or otherwise dispose of any Property to any
Affiliate; (a) merge into or consolidate with or purchase or acquire Property
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from any Affiliate; or (b) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate (including, without
limitation, guaranties and assumption of obligations of any Affiliate); provided
that; any Affiliate who is an individual may serve as a director, officer or
employee of the Company or any subsidiary thereof and receive reasonable
compensation for his or her services in such capacity;
(ix) merge or consolidate with, or sell, assign, lease or otherwise dispose
of (whether in one transaction or in a series of related transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to,
any Person, or acquire all or substantially all of the assets or the business of
any Person (or enter into any agreement to do any of the foregoing);
(x) enter into any agreement with respect to any of the foregoing
provisions (i) through (ix).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENTS" means (i) the Security Agreement, dated as of the
Original Issuance Date, by and among the Company, the subsidiaries of the
Company party thereto and the holders of the Debentures and (ii) the
Intellectual Property Security Agreement, dated as of the Original Issuance
Date, by and among the Company, the subsidiaries of the Company party thereto
and the holders of the Debentures.
"TRADING DAY" means (i) a day on which the Common Stock is traded on an
Trading Market, or (ii) if the Common Stock is not listed on an Trading Market,
a day on which the Common Stock is traded in the over the counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over
the counter market as reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding its functions of reporting
prices); provided, that in the event that the Common Stock is not listed or
quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
business day.
"TRADING MARKET" means whichever of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market on which the Common Stock is then listed or quoted on the date in
question.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the Purchase
Agreement.
"UNDERLYING SHARES" means, collectively, the Common Stock issuable upon
conversion of Debentures and the Interest Shares in accordance with the terms
hereof.
"VWAP" means, with respect to any date of determination, the daily volume
weighted average price (as reported by Bloomberg using the VAP function) of the
Common Stock on such date of determination, or if there is no such price on such
date of determination, then the daily volume weighted average price on the date
nearest preceding such date.
"WARRANTS" shall have the meaning set forth in the Purchase Agreement.
2. Interest.
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(a) The Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture
(including any interest added to such principal in accordance with this
Section 2) at the rate of 9% per annum, payable in arrears on each Interest
Payment Date and on the Maturity Date; provided, that interest for the
first nine months following the Original Issuance Date shall be paid on the
Original Issuance Date by delivering to the Holder on such date such number
of shares of Common Sock (the "INTEREST SHARES") equal to the quotient
obtained by dividing the amount of such interest by the arithmetic average
of the VWAP for each of the five (5) Trading Days immediately preceding
(but not including) the Original Issuance Date. Interest shall be
calculated on the basis of a 360-day year and shall accrue daily commencing
on the Original Issue Date (regardless of the number of transfers of the
Debentures).
(b) Except as provided in Section 2(a), the Company shall pay interest
under this Debenture in cash. If the Company fails for any reason to pay
interest on the Interest Payment Date, the Holder may (but shall not be
required to) treat such interest as if it had been added to the principal
amount of this Debenture as of such Interest Payment Date.
(c) On each of the first three Interest Payment Dates, the Company
shall deliver to the Holder an amount (the "ADDITIONAL PAYMENT"), in cash,
equal to the product (if a positive number) of (x) the difference, if any,
between (i) the arithmetic average of the VWAP for each of the five (5)
Trading Days immediately preceding (but not including) the Original
Issuance Date and (ii) the arithmetic average of the VWAP for each of the
five (5) Trading Days immediately preceding (but not including) the
applicable Interest Payment Date times (y) the product of (i) .0225 times
(ii) the outstanding principal amount of this Debenture.
(d) If on any of the first three Interest Payment Dates, the Equity
Conditions are not satisfied with respect to the Interest Shares, then the
Holder, at its sole option, shall have the right to require the Company to
repurchase from the Holder a number of Interest Shares equal to 1/3 of the
Interest Shares delivered by the Company to such Holder at Closing for a
repurchase price equal to the cash amount of the interest due and payable
on such Interest Payment Date. The Holder may exercise this right by
delivering a put notice to the Company not more than 1 Trading Day
following the Interest Payment Date. The Holder shall not be obligated to
deliver the Interest Shares subject to the put notice at issue until such
time as payment of the put price shall have been received by such Holder.
(e) Any interest to be paid in cash hereunder that is not paid on the
Interest Payment Date and not added to the principal amount of the
Debenture shall continue to accrue and shall entail a late fee, which must
be paid in cash, at the rate of 12% per annum or the lesser rate permitted
by applicable law (such fees to accrue daily, from the date such interest
is due hereunder through and including the date of payment).
3. Registration of Debentures. The Company shall register the Debentures
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upon records to be maintained by the Company for that purpose (the "DEBENTURE
REGISTER") in the name of each record holder thereof from time to time. The
Company may deem and treat the registered Holder of this Debenture as the
absolute owner hereof for the purpose of any conversion hereof or any payment of
interest hereon, and for all other purposes, absent actual notice to the
contrary.
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4. Registration of Transfers and Exchanges. The Company shall register the
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transfer of any portion of this Debenture in the Debenture Register upon
surrender of this Debenture to the Company at its address for notice set forth
herein. Upon any such registration or transfer, a new debenture, in
substantially the form of this Debenture (any such new debenture, a "NEW
DEBENTURE"), evidencing the portion of this Debenture so transferred shall be
issued to the transferee and a New Debenture evidencing the remaining portion of
this Debenture not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Debenture by the transferee
thereof shall be deemed the acceptance by such transferee of all of the rights
and obligations of a holder of a Debenture. This Debenture is exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge or other fee will be imposed in connection with any such registration of
transfer or exchange. Transfers of this Debenture and the Underlying Shares are
governed by Section 4.1 of the Purchase Agreement.
5. Conversion.
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(a) At the Option of the Holder. All or any portion of the principal
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amount of this Debenture then outstanding (together with all accrued but unpaid
interest thereon) shall be convertible into Common Stock (subject to the
limitations set forth in Section 5(b)), at the option of the Holder, at any time
and from time to time from and after the Original Issue Date. Holders
shall effect conversions under this Section 5(a)(i) by delivering the Company
with a written notice in the form attached hereto as Exhibit A (a "CONVERSION
---------
NOTICE") together with a schedule in the form of Schedule 1 attached hereto (the
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"CONVERSION SCHEDULE"). The number of Underlying Shares issuable upon any
conversion hereunder shall (subject to the limitations of Section 5(b)) equal
the outstanding principal amount of this Debenture (plus all accrued but unpaid
interest thereon)to be converted divided by the Conversion Price.
(b) Certain Conversion Restrictions.
---------------------------------
(i) Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by a Holder upon any
conversion of Debentures (or otherwise in respect hereof) shall be limited
to the extent necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its affiliates and any other Persons whose
beneficial ownership of shares of Common Stock would be aggregated with
such Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock
issuable upon such conversion). For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. Each delivery of a
Conversion Notice hereunder will constitute a representation by the
applicable Holder that it has evaluated the limitation set forth in this
paragraph and determined that issuance of the full number of Underlying
Shares issuable in respect of such Conversion Notice does not violate the
restriction contained in this paragraph. By written notice to the Company,
the Holder may waive the provisions of this Section but (i) any such waiver
will not be effective until the 61st day after such notice is delivered to
the Company, and (ii) any such waiver will apply only to the Holder and not
to any other holder of Debentures. This provision shall not restrict the
number of shares of Common Stock which a Holder may receive or beneficially
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own in order to determine the amount of securities or other consideration
that such Holder may receive in the event of a merger, sale or other
business combination or reclassification involving the Company as
contemplated herein.
(ii) Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by a Holder upon any
conversion of Debentures (or otherwise in respect hereof) shall be limited
to the extent necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its affiliates and any other Persons whose
beneficial ownership of shares of Common Stock would be aggregated with
such Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 9.999% of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock
issuable upon such conversion). For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. Each delivery of a
Conversion Notice hereunder will constitute a representation by the
applicable Holder that it has evaluated the limitation set forth in this
paragraph and determined that issuance of the full number of Underlying
Shares issuable in respect of such Conversion Notice does not violate the
restriction contained in this paragraph. This provision shall not restrict
the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a merger, sale
or other business combination or reclassification involving the Company as
contemplated herein.
(c) Mechanics of Conversion.
-------------------------
(i) By the third Trading Day after each Conversion Date, the Company
shall issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate a certificate for the Underlying Shares issuable upon such
conversion which, unless required by the Purchase Agreement, shall be free
of all restrictive legends. The Holder, or any Person so designated by the
Holder to receive Underlying Shares, shall be deemed to have become the
holder of record of such Underlying Shares as of the Conversion Date. If
the Company's transfer agent is eligible to participate in the Depositary
Trust Corporation DWAC system and no legends are required to be included on
the certificates representing Underlying Shares pursuant to the Purchase
Agreement, the Company shall, upon request of the Holder, use its best
efforts to deliver Underlying Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.
(ii) To effect conversions hereunder, the Holder shall not be required
to physically surrender this Debenture unless the aggregate principal
amount represented by such Debenture is being converted, in which event,
the Holder shall deliver such Debenture promptly to the Company (it being
understood that such delivery is not a condition precedent to the Company's
obligations to deliver Underlying Shares upon such conversion). Conversions
hereunder shall have the effect of lowering the outstanding principal
amount represented by such Debenture in an amount equal to the applicable
conversion, which shall be evidenced by entries set forth in the Conversion
Schedule attached as Schedule I, which will be maintained by the Company
-----------
and the Holder.
-11-
(iii) The Company's obligations to issue and deliver Underlying Shares
upon conversion of this Debenture in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or
any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
such Underlying Shares.
(iv) If by the third Trading Day after a Conversion Date the Company
fails to deliver to the Holder such Underlying Shares in such amounts and
in the manner required pursuant to Section 5(a), then the Holder will have
the right to rescind such conversion.
(v) If by the third Trading Day after a Conversion Date the Company
fails to deliver to the Holder such Underlying Shares in such amounts and
in the manner required pursuant to this Section 5(c), and if after such
third Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Holder of the Underlying Shares which the Holder anticipated receiving
upon such conversion (a "BUY-IN"), then the Company shall: (A) pay in cash
to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the aggregate
number of Underlying Shares that the Company was required to deliver to the
Holder in connection with the conversion at issue by (2) the Closing Price
at the time of the obligation giving rise to such purchase obligation and
(B) at the option of the Holder, either reinstate the principal amount of
Debentures and equivalent number of Underlying Shares for which such
conversion was not timely honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its conversion and delivery obligations hereunder. For
example, if the Holder purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with a market price on the date of conversion
totaling $10,000, under clause (A) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.
(d) Adjustments to Conversion Price. The Conversion Price in effect on any
--------------------------------
Conversion Date shall be subject to adjustments in accordance with this Section
5(d):
(i) Stock Dividends and Splits. If the Company, at any time
--------------------------
while any Debentures are outstanding, (i) pays a stock dividend on its
shares of Common Stock or otherwise makes a distribution on any class of
capital stock that is payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, or (iii)
combines outstanding shares of Common Stock into a smaller number of
shares, then in each such case the Conversion Price shall be multiplied by
a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of
such subdivision or combination.
-12-
(ii) Additional Distributions. If the Company, at any time while any
-------------------------
Debentures are outstanding, shall distribute to all holders of shares of
Common Stock (and not to Holders) evidences of its indebtedness or assets
or rights or warrants to subscribe for or purchase any security, then in
each such case the Conversion Price at which the principal amount of
Debentures shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Closing
Price determined as of the record date mentioned above, and of which the
numerator shall be such Closing Price on such record date less the then
fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided to
the Holders of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned
above.
(iii) Calculations. All calculations under this Section 5 shall be
--------------
made to the nearest cent or the nearest 1/100th of a share, as the case may
be. The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an
issue or sale of Common Stock.
(iv) Notice of Adjustments. Whenever the Conversion Price is adjusted
-----------------------
pursuant to the terms hereof the Company shall promptly mail to each
Holder, a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
(e) Certain Fundamental Transactions. In case of any Fundamental
----------------------------------
Transaction, a Holder shall have the right to do any of the following: (1)
convert its Debentures into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of shares of Common
Stock following such Fundamental Transaction and such Holder shall be entitled
upon such Fundamental Transaction to receive such amount of securities, cash and
property as the shares of Common Stock into which such Debentures could
have been converted immediately prior to such Fundamental Transaction would have
been entitled, or (2)(x) require the surviving entity to issue debentures in
such principal amount equal to the principal amount of the Debentures held by
such Holder prior to such Fundamental Transaction, plus all other amounts owing
thereon, which newly issued debentures shall have identical terms to the terms
of the Debentures and shall be entitled to all of the rights and privileges of a
Holder set forth herein and the agreements pursuant to which the prepayment was
issued, and (y) simultaneously with the issuance of such convertible debentures
shall have the right to convert such shares only into shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
shares of Common Stock following such Fundamental Transaction (the conversion
price applicable for the newly issued convertible debentures shall be based upon
the amount of securities, cash and property that each Common Share would receive
in such Fundamental Transaction and the Conversion Price stated herein) or (3)
at the Holder's option and request, any successor to the Company or surviving
entity in such Fundamental Transaction shall either pay to the Holder the
greater of (A) the outstanding principal amount of the Debentures held by such
Holder plus all accrued and unpaid interest thereon, and (B) the principal
amount of the Debenture held by such Holder, plus all accrued and unpaid
interest thereon, divided by the Conversion Price on the Trading Day immediately
preceding (x) the date of prior to such Fundamental Transaction or (y) the date
the amount set forth in this section is paid in full, whichever is less,
multiplied by the Closing Price on (x) the date of the Fundamental Transaction
-13-
or (y) the date the amount set forth in this section is paid in full, whichever
is greater. Any Fundamental Transaction shall include such terms so as continue
to give the Holders the right to receive the securities, cash and property set
forth in this Section upon any conversion or redemption following such event.
This provision shall similarly apply to successive such Fundamental
Transactions. The rights set forth herein shall not alter the rights of a Holder
set forth elsewhere in this Debenture; provided, that a Holder may only exercise
the rights set forth herein with respect to a single event giving rise to such
rights.
(f) Reclassifications; Share Exchanges. In case of any reclassification of
-----------------------------------
the shares of Common Stock, or any compulsory share exchange pursuant to which
the shares of Common Stock are converted into other securities, cash or
property, the Holders of the Debentures then outstanding shall have the right
thereafter to convert such shares only into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
shares of Common Stock following such reclassification or share exchange,
and the Holders shall be entitled upon such event to receive such amount of
securities, cash or property as a holder of the number of shares of Common Stock
of the Company into which such shares of Debentures could have been converted
immediately prior to such reclassification or share exchange would have been
entitled. This provision shall similarly apply to successive reclassifications
or share exchanges.
(g) Notice of Corporate Events. If: (a) the Company shall declare a
-----------------------------
dividend (or any other distribution) on the Common Stock, (b) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (c) the Company shall authorize the granting to all holders of Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (d) the approval of any stockholders of the
Company shall be required in connection with any Fundamental Transaction,
or (e) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then the Company shall
file a press release or Current Report on Form 8-K to disclose such occurrence
and notify the Holders at their last addresses as they shall appear upon the
stock books of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which any such Fundamental Transaction is expected to become effective
-14-
or close, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities, cash
or other property deliverable upon any such Fundamental Transaction. Holders
are entitled to convert the outstanding principal amount of the Debentures
during the 10-day period commencing the date of such notice to the effective
date of the event triggering such notice.
(h) Reservation of Common Stock. The Company covenants that it will at all
----------------------------
times reserve and keep available out of its authorized and unissued shares of
Common Stock solely for the purpose of issuance upon conversion of Debentures,
each as herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holders, not less than such
number of shares of Common Stock as shall be issuable upon the conversion of
all outstanding principal amount of Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized and issued and fully paid and nonassessable.
(i) Fractional Shares. Upon a conversion hereunder the Company shall not be
-----------------
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Price on the applicable
Conversion Date. If any fraction of an Underlying Share would, except for the
provisions of this Section, be issuable upon a conversion hereunder, the Company
shall pay an amount in cash equal to the Conversion Price multiplied by such
fraction.
(j) Stamp Taxes. The issuance of certificates for Common Stock on
------------
conversion of principal amount of this Debenture shall be made without charge to
the Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate, provided that
the Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such Debentures so
converted.
(k) Notices. Any and all notices or other communications or deliveries to
-------
be provided by the Holders, including, without limitation, any Holder Conversion
Notice, shall be in writing and delivered personally, by facsimile or sent by a
nationally recognized overnight courier service, addressed to the attention of
the Chief Financial Officer of the Company addressed to Electric Fuel
Corporation, 632 Broadway, Suite 301, New York, NY 10012, fax: (212) 529-5800,
attention Chief Financial Officer and General Counsel, with a copy to Electric
Fuel (E.F.L.) Ltd., Western Industrial Zone, Beit Shemesh 99000, Israel,
Facsimile No.: 011-972-2-990-6688, Attn.: Chief Financial Officer and General
Counsel, or to such other address or facsimile number as shall be specified in
writing by the Company for such purpose. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
6:30 p.m. (New York City time)(with confirmation of transmission), (ii) the date
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section later than
6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date (with confirmation of transmission), (iii) upon receipt,
if sent by a nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given.
-15-
6. Prepayment.
----------
(a) Upon Event of Default. Upon the occurrence of a Event of Default, each
----------------------
Holder shall (in addition to all other rights it may have hereunder or under
applicable law), have the right, exercisable at the sole option of such Holder,
and by delivery of a written notice to the Company to require the Company (an
"EVENT OF DEFAULT NOTICE") to prepay all or a portion of the Debentures then
held by such Holder and, at the option of the Holder, all or a portion of the
Reinstated Principal, for an amount, in cash, equal to the Mandatory Prepayment
Amount. The Mandatory Prepayment Amount shall be due and payable within five
Trading Days of the date of the Event of Default Notice. For purposes of this
Section, principal amount of Debentures shall remain outstanding until such date
as the Holder shall have received Underlying Shares upon a conversion (or
attempted conversion) thereof that meets the requirements hereof.
Notwithstanding anything herein to the contrary, upon the occurrence of a
Bankruptcy Event, all outstanding principal and accrued but unpaid interest on
this Debenture shall immediately become due and payable in full in cash, without
any further action by the Holder, and the Company shall immediately be obligated
to pay the Mandatory Prepayment Amount pursuant to this paragraph as if the
Holder had delivered a Event of Default Notice immediately prior to the
occurrence of any such Event of Default. The Holder need not provide and the
Company hereby waives any presentment, demand, protest or other notice of any
kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by Holder at any time prior to payment hereunder. No such rescission
or annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
(b) At Company's Option. At any time after the Effective Date, the Company
--------------------
may deliver a notice to the Holders (an "OPTIONAL PREPAYMENT NOTICE" and the
date such notice is received by the Holders, the "OPTIONAL PREPAYMENT NOTICE
DATE") of its irrevocable election to prepay all, or any portion, of the then
aggregate amount of outstanding Debentures, for an amount, in cash, equal to the
Company Redemption Price. The Company Redemption Amount payable pursuant
to this Section 6(b) is due in full on the tenth Trading Day following the
Optional Prepayment Notice Date (the "OPTIONAL PREPAYMENT DATE"). The Company
may only deliver an Optional Prepayment Notice if each of the following shall be
true: (i) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Conversion Notices
prior to the Optional Prepayment Notice Date and (ii) the Equity Conditions
shall have been satisfied at all times from the Optional Prepayment Notice Date
to the Optional Prepayment Date. If any of the foregoing conditions shall cease
to be satisfied at any time during the required period, or if the Company shall
fail to pay the Optional Prepayment Amount in full by the Optional Prepayment
Date, then the Optional Prepayment Notice shall be null and void, ab initio, and
the Company may not deliver any subsequent Optional Prepayment Notices. The
Holder may convert any portion of this Debenture prior to the Optional
Prepayment Date. The Company covenants and agrees that it will honor all
Conversion Notices tendered from the time of delivery of the Optional Prepayment
Notice through the Optional Prepayment Date.
-16-
7. Ranking. This Debenture ranks pari passu to all other Debentures now or
-------
hereafter issued pursuant to the Transaction Documents. No Indebtedness of the
Company is senior to this Debenture in right of payment, whether with respect of
interest, damages or upon Liquidation or dissolution or otherwise.
8. Secured Obligations. The payment obligations under this Debenture are
--------------------
secured pursuant to the Security Agreements. Such agreements will terminate,
with respect to the Holder, upon the date on which all payments hereunder have
been made in full or the Debenture has otherwise been converted pursuant to the
terms hereof.
9. Restricted Actions. Neither the Company nor any subsidiary shall taken
-------------------
any Restricted Action without the prior written consent of the holders of the
Debentures.
10. Miscellaneous.
-------------
(a) This Debenture shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Debenture
may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Nothing in this Debenture shall be construed to give to any person
or corporation other than the Company and the Holder any legal or equitable
right, remedy or cause under this Debenture.
(c) All questions concerning the construction, validity, enforcement
and interpretation of this Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof. Each party
agrees that all Proceedings shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the
"NEW YORK COURTS"). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for any proceeding, and
hereby irrevocably waives, and agrees not to assert in any Proceeding, any
claim that it is not personally subject to the jurisdiction of any New York
Court or that a New York Court is an inconvenient forum for such
Proceeding. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by
mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Debenture and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
and all right to trial by jury in any legal Proceeding. If either party
shall commence a Proceeding, then the prevailing party in such Proceeding
shall be reimbursed by the other party for its attorney's fees and other
costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
(d) The headings herein are for convenience only, do not constitute a
part of this Debenture and shall not be deemed to limit or affect any of
the provisions hereof.
-17-
(e) In case any one or more of the provisions of this Debenture shall
be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Debenture shall not in any
way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Debenture.
(f) No provision of this Debenture may be waived or amended except in
a written instrument signed, in the case of an amendment, by the Company
and the Holder or, or, in the case of a waiver, by the Holder. No waiver of
any default with respect to any provision, condition or requirement of this
Debenture shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either
party to exercise any right hereunder in any manner impair the exercise of
any such right.
(g) If it shall be found that any interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due
hereunder shall be reduced to the maximum permitted rate of interest under
such law.
(h) Except pursuant to the terms of this Debenture, the outstanding
principal amount and interest under this Debenture may not be prepaid by
the Company without the prior written consent of the Holder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-18-
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
ELECTRIC FUEL CORPORATION
By:________________________________
Name:
Title:
-19-
EXHIBIT A
CONVERSION NOTICE
(To be Executed by the Registered Holder
in order to convert Debentures)
The undersigned hereby elects to convert the principal amount of
Debenture indicated below, into shares of Common Stock of Electric Fuel
Corporation as of the date written below. If shares are to be issued in the
name of a Person other than 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. All terms used in this notice shall have the meanings set forth
in the Debenture.
By the delivery of this Conversion Notice, the Holder represents and
warrants to the Company that its ownership of the shares of Common Stock does
not exceed the restrictions set forth in Sections 5(b) of the Debenture.
Conversion calculations:
------------------------------------------------------
Date to Effect Conversion
------------------------------------------------------
Principal amount of Debenture owned prior to conversion
------------------------------------------------------
Principal amount of Debenture to be Converted
------------------------------------------------------
Principal amount of Debenture remaining after
Conversion
------------------------------------------------------
Number of shares of Common Stock to be Issued
Conversion Price
-------------------------------------
Signature
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Name
----------------------------------------------
Address
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SCHEDULE 1
CONVERSION SCHEDULE
9% Secured Convertible Debenture, due June 30, 2005, in the aggregate principal
amount of $_______ issued by Electric Fuel Corporation. This Conversion
Schedule reflects conversions made under the above referenced Debenture.
Dated: December 31, 2002
Date of Conversion Amount of Conversion Aggregate Principal Amount Applicable Mandatory
Remaining Subsequent to Conversion Conversion Price Prepayment Amount
- ----------------------- ------------------------ ------------------------------------- ----------------------- --------------------