NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD 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.
GS CLEANTECH CORPORATION
AMENDED AND RESTATED SECURED CONVERTIBLE DEBENTURE
Principal Amount: $2,084,986
Original Issuance Date: February 8, 2006
Amended and Restated Debenture Issuance Date: January 10, 2008
FOR VALUE RECEIVED, GS CLEANTECH CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to the order of YA GLOBAL INVESTMENTS, L.P.
or registered assigns (the "Holder") the amount set out above as the Principal
Amount (as reduced pursuant to the terms hereof pursuant to redemption,
conversion or otherwise, the "Principal") when due, whether upon the Maturity
Date (as defined below), on any Installment Date with respect to the Installment
Amount due on such Installment Date (each, as defined herein), acceleration,
redemption or otherwise (in each case in accordance with the terms hereof) and
to pay interest ("Interest") on any outstanding Principal at the applicable
Interest Rate from the date set out above as the Amended and Restated Debenture
Issuance Date (the "Issuance Date") until the same becomes due and payable,
whether upon an Interest Date (as defined below), any Installment Date or the
Maturity Date or acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Amended and Restated Secured
Convertible Debenture (including all debentures issued in exchange, transfer or
replacement hereof, this "Debenture") is issued pursuant to the Restructuring
Agreement between the Holder and the Company of even date herewith (the
"Agreement") amends, supersedes, modifies and completely restates the Secured
Convertible Debenture, dated February 8, 2006 (the "Existing Debenture")
originally issued by GreenShift to the Holder in the original principal amount
of $1,900,000 and assumed by the Company as of July 1, 2006 and includes the
original principal amount plus accrued and unpaid interest of $184,986 for a
total Principal amount of $2,084,986. Certain capitalized terms used herein are
defined in Section 17.
(1) GENERAL TERMS
(a) Payment of Principal. On each Installment Date, the Company shall pay
to the Holder an amount equal to the Installment Amount due on such
Installment Date in accordance with Section 3. On the Maturity Date,
the Company shall pay to the Holder an amount in cash representing all
outstanding Principal, accrued and unpaid Interest. The "Maturity
Date" shall be December 31, 2011, as may be extended at the option of
the Holder (i) in the event that, and for so long as, an Event of
Default (as defined below) shall have occurred and be continuing on
the Maturity Date (as may be extended pursuant to this Section 1) or
any event shall have occurred and be continuing on the Maturity Date
(as may be extended pursuant to this Section 1) that with the passage
of time and the failure to cure would result in an Event of Default.
Other than as specifically permitted by this Debenture, the Company
may not prepay or redeem any portion of the outstanding Principal
without the prior written consent of the Holder.
(b) Interest. Interest shall accrue on the outstanding principal balance
hereof at an annual rate equal to ten percent (10%) ("Interest Rate").
Interest shall be calculated on the basis of a 365-day year and the
actual number of days elapsed, to the extent permitted by applicable
law. Interest hereunder shall be paid on monthly in arrears beginning
and on the first Installment Date and continuing until the Maturity
Date (or sooner as provided herein) to the Holder or its assignee in
whose name this Debenture is registered on the records of the Company
regarding registration and transfers of Debentures at the option of
the Company in cash, or, provided that the Equity Conditions are then
satisfied converted into Common Stock at the Installment Conversion
Price on the Trading Day immediately prior to the date paid.
(c) Security. The Debenture is secured by a pledge of assets and
guaranties as set forth in the Security Documents (as defined in the
Agreement).
(2) EVENTS OF DEFAULT.
(a) An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant
to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
(i) the Company's failure to pay to the Holder any amount of
Principal, Interest, or other amounts when and as due under this
Debenture (including, without limitation, the Company's failure
to pay any redemption payments or amounts hereunder) or any other
Transaction Document;
(ii) The Company or any subsidiary of the Company shall commence, or
there shall be commenced against the Company or any subsidiary of
the Company under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the
Company or any subsidiary of the Company commences any other
proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation
or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or any subsidiary of the Company
or there is commenced against the Company or any subsidiary of
the Company any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Company
or any subsidiary of the Company is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any
such case or proceeding is entered; or the Company or any
subsidiary of the Company suffers any appointment of any
custodian, private or court appointed receiver or the like for it
or any substantial part of its property which continues
undischarged or unstayed for a period of sixty one (61) days; or
the Company or any subsidiary of the Company makes a general
assignment for the benefit of creditors; or the Company or any
subsidiary of the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Company or any subsidiary of
the Company shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its
debts; or the Company or any subsidiary of the Company shall by
any act or failure to act expressly indicate its consent to,
approval of or acquiescence in any of the foregoing; or any
corporate or other action is taken by the Company or any
subsidiary of the Company for the purpose of effecting any of the
foregoing;
(iii) The Company or any subsidiary of the Company shall default in
any of its obligations under any other debenture or any mortgage,
credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement of the Company or any subsidiary
of the Company in an amount exceeding $100,000, whether such
indebtedness now exists or shall hereafter be created and such
default shall result in such indebtedness becoming or being
declared due and payable;
(iv) If the Common Stock is quoted or listed for trading on any of the
following and it ceases to be so quoted or listed for trading and
shall not again be quoted or listed for trading on any Primary
Market within five (5) Trading Days of such delisting: (a) the
American Stock Exchange, (b) New York Stock Exchange, (c) the
Nasdaq Global Market, (d) the Nasdaq Capital Market, or (e) the
Nasdaq OTC Bulletin Board ("OTCBB") (each, a "Primary Market");
(v) The Company or any subsidiary of the Company shall be a party to
any Change of Control Transaction (as defined in Section 6)
unless in connection with such Change of Control Transaction this
Debenture is retired;
(vi) the Company's (A) failure to cure a Conversion Failure by
delivery of the required number of shares of Common Stock within
five (5) Business Days after the applicable Conversion Failure or
(B) notice, written or oral, to any holder of the Debentures,
including by way of public announcement, at any time, of its
intention not to comply with a request for conversion of any
Debentures into shares of Common Stock that is tendered in
accordance with the provisions of the Debentures, other than
pursuant to Section 4(c);
(vii) The Company shall fail for any reason to deliver the payment in
cash pursuant to a Buy-In (as defined herein) within three (3)
Business Days after such payment is due;
(viii) The Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit
any breach or default of any provision of this Debenture (except
as may be covered by Section 2(a)(i) through 2(a)(vii) hereof) or
any Transaction Document (as defined in Section 17) which is not
cured within the time prescribed.
(ix) any Event of Default (as defined in the Other Debentures) occurs
with respect to any Other Debentures.
(b) During the time that any portion of this Debenture is outstanding, if
any Event of Default has occurred, the full unpaid Principal amount of
this Debenture, together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become at the
Holder's election, immediately due and payable in cash; provided
however, the Holder may request (but shall have no obligation to
request) payment of such amounts in Common Stock of the Company.
Furthermore, in addition to any other remedies, the Holder shall have
the right (but not the obligation) to convert this Debenture at any
time after (x) an Event of Default or (y) the Maturity Date at the
Installment Conversion Price. The Holder need not provide and the
Company hereby waives any presentment, demand, protest or other notice
of any kind, (other than required notice of conversion) 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.
(3) COMPANY INSTALLMENT REDEMPTION.
(a) General. On each applicable Installment Date, the Company shall pay to
the Holder of this Debenture a minimum of the Installment Amount due
on such date by redeeming such Installment Amount (a "Company
Redemption") on the applicable Installment Date, subject to the
provisions of this Section 3.
(b) Mechanics of Company Redemption. The Company shall pay to the Holder
on each Installment Date, by wire transfer of immediately available
funds, in an amount in cash equal to such Installment Amount plus
accrued and unpaid Interest (the "Company Redemption Amount"). If the
Company fails to redeem the Company Redemption Amount on the
applicable Installment Date, then at the option of the Holder, the
Holder may convert all or any part of such Company Redemption Amount
into shares of Common Stock of the Company by dividing such Company
Redemption Amount by the Installment Conversion Price. Such
Conversions pursuant to this Section 3(b) shall be made in accordance
with the provisions of Section 4(b). In the event the Holder elects to
convert all or any portion of the Company Redemption Amount, the
Company Redemption Amount so converted shall be deducted from the
Installment Amounts relating to the applicable Installment Dates as
set forth in the applicable Conversion Notice. Without limitation and
in addition to any other rights of the Holder, any portion of the
Installment Amount that is not paid by the Company or converted into
Common Stock shall accrue to, and be paid on the next Installment
Date.
(c) Deferred Installment Amount. Notwithstanding any provision of this
Section 3 to the contrary, the Holder may, at its option and in its
sole discretion, deliver a written notice to the Company at least two
(2) days prior to any Installment Date electing to have the payment of
all or any portion of such Installment Amount payable on the next
Installment Date deferred to the Maturity Date. Any amount deferred to
the Maturity Date pursuant to this Section 3(d) shall continue to
accrue Interest through the Maturity Date.
(d) Company's Additional Cash Redemption. The Company at its option shall
have the right to redeem ("Optional Redemption") a portion or all
amounts outstanding under this Debenture in addition to any
Installment Amount prior to the Maturity Date provided that as of the
date of the Holder's receipt of a Redemption Notice (as defined
herein) (i) the Closing Bid Price is less than the Conversion Price,
and (ii) no Event of Default has occurred. The Company shall pay an
amount equal to the principal amount being redeemed plus a redemption
premium ("Redemption Premium") equal to fifteen percent (15%) of the
Principal amount being redeemed, and accrued Interest, (collectively
referred to as the "Company Additional Redemption Amount"). In order
to make a redemption pursuant to this Section, the Company shall first
provide written notice to the Holder of its intention to make a
redemption (the "Redemption Notice") setting forth the amount of
Principal it desires to redeem. After receipt of the Redemption Notice
the Holder shall have three (3) Business Days to elect to convert all
or any portion of this Debenture, subject to the limitations set forth
in Section 4(b). On the fourth (4th) Business Day after the Redemption
Notice, the Company shall deliver to the Holder the Company Additional
Redemption Amount with respect to the Principal amount redeemed after
giving effect to conversions effected during the three (3) Business
Day period.
(4) CONVERSION OF DEBENTURE. This Debenture shall be convertible into shares of
the Company's Common Stock, on the terms and conditions set forth in this
Section 4.
(a) Conversion Right. Subject to the provisions of Section 4(c), at any
time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid
Conversion Amount (as defined below) into fully paid and nonassessable
shares of Common Stock in accordance with Section 4(b), at the
Conversion Rate (as defined below). The number of shares of Common
Stock issuable upon conversion of any Conversion Amount pursuant to
this Section 4(a) shall be determined by dividing (x) such Conversion
Amount by (y) the Conversion Price (the "Conversion Rate"). The
Company shall not issue any fraction of a share of Common Stock upon
any conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up to the nearest whole share. The
Company shall pay any and all transfer, stamp and similar taxes that
may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.
(i) "Conversion Amount" means the portion of the Principal and
accrued Interest to be converted, redeemed or otherwise with
respect to which this determination is being made.
(ii) "Conversion Price" means, as of any Conversion Date (as defined
below) or other date of determination, $1.25, on a post Reverse
Stock Split basis, subject to adjustment as provided herein.
(b) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into shares
of Common Stock on any date (a "Conversion Date"), the Holder
shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 11:59 p.m., New York Time, on such date, a
copy of an executed notice of conversion in the form attached
hereto as Exhibit I (the "Conversion Notice") to the Company and
(B) if required by Section 4(b)(iv), surrender this Debenture to
a nationally recognized overnight delivery service for delivery
to the Company (or an indemnification undertaking reasonably
satisfactory to the Company with respect to this Debenture in the
case of its loss, theft or destruction). On or before the third
Business Day following the date of receipt of a Conversion Notice
(the "Share Delivery Date"), the Company shall (X) if legends are
not required to be placed on certificates of Common Stock
pursuant to the Securities Purchase Agreement and provided that
the Transfer Agent is participating in the Depository Trust
Company's ("DTC") Fast Automated Securities Transfer Program,
credit such aggregate number of shares of Common Stock to which
the Holder shall be entitled to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver to the address as specified in the
Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock
to which the Holder shall be entitled which certificates shall
not bear any restrictive legends unless required pursuant to
Section 2(g) of the Securities Purchase Agreement. If this
Debenture is physically surrendered for conversion and the
outstanding Principal of this Debenture is greater than the
Principal portion of the Conversion Amount being converted, then
the Company shall as soon as practicable and in no event later
than three (3) Business Days after receipt of this Debenture and
at its own expense, issue and deliver to the holder a new
Debenture representing the outstanding Principal not converted.
The Person or Persons entitled to receive the shares of Common
Stock issuable upon a conversion of this Debenture shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock upon the transmission of a Conversion
Notice.
(ii) Company's Failure to Timely Convert. If within three (3) Trading
Days after the Company's receipt of the facsimile copy of a
Conversion Notice the Company shall fail to issue and deliver a
certificate to the Holder or credit the Holder's balance account
with DTC for the number of shares of Common Stock to which the
Holder is entitled upon such holder's conversion of any
Conversion Amount (a "Conversion Failure"), and if on or after
such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by the Holder of Common Stock issuable upon such
conversion that the Holder anticipated receiving from the Company
(a "Buy-In"), then the Company shall, within three (3) Business
Days after the Holder's request and in the Holder's discretion,
either (i) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions
and other out of pocket expenses, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point
the Company's obligation to deliver such certificate (and to
issue such Common Stock) shall terminate, or (ii) promptly honor
its obligation to deliver to the Holder a certificate or
certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common
Stock, times (B) the Closing Bid Price on the Conversion Date.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Debenture in
accordance with the terms hereof, the Holder shall not be
required to physically surrender this Debenture to the Company
unless (A) the full Conversion Amount represented by this
Debenture is being converted or (B) the Holder has provided the
Company with prior written notice (which notice may be included
in a Conversion Notice) requesting reissuance of this Debenture
upon physical surrender of this Debenture. The Holder and the
Company shall maintain records showing the Principal and Interest
converted and the dates of such conversions or shall use such
other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this
Debenture upon conversion.
(c) Limitations on Conversions.
(i) Beneficial Ownership. The Company shall not effect any
conversions of this Debenture and the Holder shall not have the
right to convert any portion of this Debenture or receive shares
of Common Stock as payment of interest hereunder to the extent
that after giving effect to such conversion or receipt of such
interest payment, the Holder, together with any affiliate
thereof, would beneficially own (as determined in accordance with
Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 4.99% of the number of shares of Common
Stock outstanding immediately after giving effect to such
conversion or receipt of shares as payment of interest. Since the
Holder will not be obligated to report to the Company the number
of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.99% of the then
outstanding shares of Common Stock without regard to any other
shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this
Section will limit any particular conversion hereunder and to the
extent that the Holder determines that the limitation contained
in this Section applies, the determination of which portion of
the principal amount of this Debenture is convertible shall be
the responsibility and obligation of the Holder. If the Holder
has delivered a Conversion Notice for a principal amount of this
Debenture that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in
the issuance in excess of the permitted amount hereunder, the
Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with Section 4(a)
and, any principal amount tendered for conversion in excess of
the permitted amount hereunder shall remain outstanding under
this Debenture. The provisions of this Section may be waived by a
Holder (but only as to itself and not to any other Holder) upon
not less than 65 days prior notice to the Company. Other Holders
shall be unaffected by any such waiver.
(d) Other Provisions.
(i) The Company shall at all times reserve and keep available out of
its authorized Common Stock the full number of shares of Common
Stock issuable upon conversion of all outstanding amounts under
this Debenture; and within three (3) Business Days following the
receipt by the Company of a Holder's notice that such minimum
number of Underlying Shares is not so reserved, the Company shall
promptly reserve a sufficient number of shares of Common Stock to
comply with such requirement.
(ii) All calculations under this Section 4 shall be rounded to the
nearest $0.0001 or whole share.
(iii) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of this
Debenture and payment of interest on this Debenture, each as
herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder, not
less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to
reservation of such shares set forth in this Debenture or in the
Transaction Documents) be issuable (taking into account the
adjustments and restrictions set forth herein) upon the
conversion of the outstanding principal amount of this Debenture
and payment of interest hereunder. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid,
nonassessable and, if the Underlying Shares Registration
Statement has been declared effective under the Securities Act,
registered for public sale in accordance with such Underlying
Shares Registration Statement.
(iv) Nothing herein shall limit a Holder's right to pursue actual
damages or declare an Event of Default pursuant to Section 2
herein for the Company 's failure to deliver certificates
representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief, in each case without the need to post a
bond or provide other security. The exercise of any such rights
shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.
(5) Adjustments to Conversion Price
(a) Adjustment of Conversion Price upon Issuance of Common Stock. If the
Company, at any time while this Debenture is outstanding, issues or
sells, or in accordance with this Section 5(a) is deemed to have
issued or sold, any shares of Common Stock, excluding shares of Common
Stock deemed to have been issued or sold by the Company in connection
with any Excluded Securities, for a consideration per share (the "New
Issuance Price") less than a price equal to the Conversion Price in
effect immediately prior to such issue or sale (such price the
"Applicable Price") (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance the Conversion Price then in
effect shall be reduced to an amount equal to the New Issuance Price.
For purposes of determining the adjusted Conversion Price under this
Section 5(a), the following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants or sells
any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or
upon conversion or exchange or exercise of any Convertible
Securities issuable upon exercise of such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company
at the time of the granting or sale of such Option for such price
per share. For purposes of this Section, the "lowest price per
share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon granting or sale of
the Option, upon exercise of the Option and upon conversion or
exchange or exercise of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Conversion
Price shall be made upon the actual issuance of such share of
Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock
upon conversion or exchange or exercise of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the lowest price
per share for which one share of Common Stock is issuable upon
such conversion or exchange or exercise thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company
at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this
Section, the "lowest price per share for which one share of
Common Stock is issuable upon such conversion or exchange or
exercise" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or
sale of the Convertible Security and upon the conversion or
exchange or exercise of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual
issuance of such share of Common Stock upon conversion or
exchange or exercise of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustment of the Conversion
Price had been or are to be made pursuant to other provisions of
this Section, no further adjustment of the Conversion Price shall
be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exchange or exercise
of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or
exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to
the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities provided for such
changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially
granted, issued or sold. For purposes of this Section, if the
terms of any Option or Convertible Security that was outstanding
as of the Issuance Date are changed in the manner described in
the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the
Conversion Price then in effect.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been
issued for the difference of (x) the aggregate fair market value
of such Options and other securities issued or sold in such
integrated transaction, less (y) the fair market value of the
securities other than such Option, issued or sold in such
transaction and the other securities issued or sold in such
integrated transaction will be deemed to have been issued or sold
for the balance of the consideration received by the Company. If
any Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the gross
amount raised by the Company; provided, however, that such gross
amount is not greater than 110% of the net amount received by the
Company therefor. If any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by
the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case
the amount of consideration received by the Company will be the
Closing Bid Price of such securities on the date of receipt. If
any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount
of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving
entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined
jointly by the Company and the Holder. If such parties are unable
to reach agreement within ten (10) days after the occurrence of
an event requiring valuation (the "Valuation Event"), the fair
value of such consideration will be determined within five (5)
Business Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by
the Company and the Holder. The determination of such appraiser
shall be deemed binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the
Company.
(v) Record Date. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options
or in Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date will be deemed to be the date of the issue or sale of the
Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(b) Adjustment of Conversion Price upon Subdivision or Combination of
Common Stock. If the Company, at any time while this Debenture is
outstanding, shall (a) pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock, (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number
of shares, or (d) issue by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock outstanding after such event.
Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the
case of a subdivision, combination or re-classification.
(c) Purchase Rights. If at any time the Company grants, issues or sells
any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders
of any class of Common Stock (the "Purchase Rights"), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Debenture (without
taking into account any limitations or restrictions on the
convertibility of this Debenture) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(d) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the
rights of the Holder under this Debenture; provided that no such
adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 5.
(e) Other Corporate Events. In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with respect to or in
exchange for shares of 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, at the Holder's option, (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 (without
taking into account any limitations or restrictions on the
convertibility of this Debenture) 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 shares 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 Rate. Provision made pursuant to the preceding sentence
shall be in a form and substance satisfactory to the Required Holders.
The provisions of this Section shall apply similarly and equally to
successive Corporate Events and shall be applied without regard to any
limitations on the conversion or redemption of this Debenture.
(f) Whenever the Conversion Price is adjusted pursuant to Section 5
hereof, the Company shall promptly mail to the Holder a notice setting
forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
(g) In case of any (1) merger or consolidation of the Company or any
subsidiary of the Company with or into another Person, or (2) sale by
the Company or any subsidiary of the Company of more than one-half of
the assets of the Company in one or a series of related transactions,
a Holder shall have the right to (A) exercise any rights under Section
2(b), (B) convert the aggregate amount of this Debenture then
outstanding into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common
Stock following such merger, consolidation or sale, and such Holder
shall be entitled upon such event or series of related events to
receive such amount of securities, cash and property as the shares of
Common Stock into which such aggregate principal amount of this
Debenture could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (C) in the case of
a merger or consolidation, require the surviving entity to issue to
the Holder a convertible Debenture with a principal amount equal to
the aggregate principal amount of this Debenture then held by such
Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible Debenture shall have
terms identical (including with respect to conversion) to the terms of
this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of this Debenture set forth herein and the
agreements pursuant to which this Debentures were issued. In the case
of clause (C), the conversion price applicable for the newly issued
shares of convertible preferred stock or convertible Debentures shall
be based upon the amount of securities, cash and property that each
share of Common Stock would receive in such transaction and the
Conversion Price in effect immediately prior to the effectiveness or
closing date for such transaction. The terms of any such merger, sale
or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set
forth in this Section upon any conversion or redemption following such
event. This provision shall similarly apply to successive such events.
(6) REISSUANCE OF THIS DEBENTURE.
(a) Transfer. If this Debenture is to be transferred, the Holder shall
surrender this Debenture to the Company, whereupon the Company will,
subject to the satisfaction of the transfer provisions of the
Securities Purchase Agreement, forthwith issue and deliver upon the
order of the Holder a new Debenture (in accordance with Section 6(d)),
registered in the name of the registered transferee or assignee,
representing the outstanding Principal being transferred by the Holder
and, if less then the entire outstanding Principal is being
transferred, a new Debenture (in accordance with Section 6(d)) to the
Holder representing the outstanding Principal not being transferred.
The Holder and any assignee, by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of Section
4(b)(iii) following conversion or redemption of any portion of this
Debenture, the outstanding Principal represented by this Debenture may
be less than the Principal stated on the face of this Debenture.
(b) Lost, Stolen or Mutilated Debenture. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Debenture, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the Holder
to the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Debenture, the Company shall
execute and deliver to the Holder a new Debenture (in accordance with
Section 6(d)) representing the outstanding Principal.
(c) Debenture Exchangeable for Different Denominations. This Debenture is
exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Debenture or Debentures (in
accordance with Section 6(d)) representing in the aggregate the
outstanding Principal of this Debenture, and each such new Debenture
will represent such portion of such outstanding Principal as is
designated by the Holder at the time of such surrender.
(d) Issuance of New Debentures. 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 remaining outstanding (or in the case of a new Debenture
being issued pursuant to Section 6(a) or Section 6(c), the Principal
designated by the Holder which, when added to the principal
represented by the other new Debentures issued in connection with such
issuance, does not exceed the Principal remaining outstanding under
this Debenture immediately prior to such issuance of new Debentures),
(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 accrued and unpaid Interest from
the Issuance Date.
(7) NOTICES. Any notices, consents, waivers or other communications required or
permitted to be given under the terms hereof must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file
by the sending party); or (iii) one (1) Trading Day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company, to: GS CleanTech Corporation
One Penn Plaza, Suite 1612
New York, New York 10119
Attn: Kevin Kreisler. Chief Executive Officer
Telephone: (212) 994-5374
Facsimile: (646) 572-6336
If to the Holder: YA Global Investments, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07303
Attention: Mark Angelo
Telephone: (201) 985-8300
With a copy to: Troy Rillo, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
or at such other address and/or facsimile number and/or to the
attention of such other person as the recipient party has specified by
written notice given to each other party three (3) Business Days prior to
the effectiveness of such change. Written confirmation of receipt (i) given
by the recipient of such notice, consent, waiver or other communication,
(ii) mechanically or electronically generated by the sender's facsimile
machine containing the time, date, recipient facsimile number and an image
of the first page of such transmission or (iii) provided by a nationally
recognized overnight delivery service, shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii)
or (iii) above, respectively.
(8) Except as expressly provided herein, no provision of this Debenture shall
alter or impair the obligations of the Company, which are absolute and
unconditional, to pay the principal of, interest and other charges (if any)
on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Company. As long as this Debenture is outstanding, the Company shall not
and shall cause their subsidiaries not to, without the consent of the
Holder, (i) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holder; (ii) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock or other equity securities other than as to the Underlying
Shares to the extent permitted or required under the Transaction Documents;
or (iii) enter into any agreement with respect to any of the foregoing.
(9) This Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to
vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other proceedings
of the Company, unless and to the extent converted into shares of Common
Stock in accordance with the terms hereof.
(10) No indebtedness of the Company is senior to this Debenture in right of
payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise. Without the Holder's consent, the Company will
not and will not permit any of their subsidiaries to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, on or with respect to any of its property or
assets now owned or hereafter acquired or any interest therein or any
income or profits there from that is senior in any respect to the
obligations of the Company under this Debenture.
(11) This Debenture shall be governed by and construed in accordance with the
laws of the State of New Jersey, without giving effect to conflicts of laws
thereof. Each of the parties consents to the jurisdiction of the Superior
Courts of the State of New Jersey sitting in Hudson County, New Jersey and
the U.S. District Court for the District of New Jersey sitting in Newark,
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 conveniens to the bringing of
any such proceeding in such jurisdictions.
(12) If the Company fails to strictly comply with the terms of this Debenture,
then the Company shall reimburse the Holder promptly for all fees, costs
and expenses, including, without limitation, attorneys' fees and expenses
incurred by the Holder in any action in connection with this Debenture,
including, without limitation, those incurred: (i) during any workout,
attempted workout, and/or in connection with the rendering of legal advice
as to the Holder's rights, remedies and obligations, (ii) collecting any
sums which become due to the Holder, (iii) defending or prosecuting any
proceeding or any counterclaim to any proceeding or appeal; or (iv) the
protection, preservation or enforcement of any rights or remedies of the
Holder.
(13) Any waiver by the Holder of a breach of any provision of this Debenture
shall not operate as or be construed to be a waiver of any other breach of
such provision or of any breach of any other provision of this Debenture.
The failure of the Holder to insist upon strict adherence to any term of
this Debenture on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Debenture. Any waiver must be in
writing.
(14) If any provision of this Debenture is invalid, illegal or unenforceable,
the balance of this Debenture shall remain in effect, and if any provision
is inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall
violate applicable laws governing usury, the applicable rate of interest
due hereunder shall automatically be lowered to equal the maximum permitted
rate of interest. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Debenture
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this
indenture, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impeded the
execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been enacted.
(15) Whenever any payment or other obligation hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next
succeeding Business Day.
(16) THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS
AGREEMENT.
(17) CERTAIN DEFINITIONS For purposes of this Debenture, the following terms
shall have the following meanings:
(a) "Approved Stock Plan" means a stock option plan that has been approved
by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued only to any employee, officer, or
director for services provided to the Company.
(b) "Bloomberg" means Bloomberg Financial Markets.
(c) "Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on
which banking institutions are authorized or required by law or other
government action to close.
(d) "Change of Control Transaction" means the occurrence of (a) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the
Exchange Act) of effective control (whether through legal or
beneficial ownership of capital stock of the Company, by contract or
otherwise) of in excess of fifty percent (50%) of the voting
securities of the Company (except that the acquisition of voting
securities by the Holder or any other current holder of convertible
securities of the Company shall not constitute a Change of Control
Transaction for purposes hereof), (b) a replacement at one time or
over time of more than one-half of the members of the board of
directors of the Company which is not approved by a majority of those
individuals who are members of the board of directors on the date
hereof (or by those individuals who are serving as members of the
board of directors on any date whose nomination to the board of
directors was approved by a majority of the members of the board of
directors who are members on the date hereof), (c) the merger,
consolidation or sale of fifty percent (50%) or more of the assets of
the Company or any subsidiary of the Company in one or a series of
related transactions with or into another entity, or (d) the execution
by the Company of an agreement to which the Company is a party or by
which it is bound, providing for any of the events set forth above in
(a), (b) or (c).
(e) "Closing Bid Price" means the price per share in the last reported
trade of the Common Stock on a Primary Market or on the exchange which
the Common Stock is then listed as quoted by Bloomberg.
(f) "Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
(g) "Commission" means the Securities and Exchange Commission.
(h) "Common Stock" means the common stock, par value $0.001, of the
Company and stock of any other class into which such shares may
hereafter be changed or reclassified.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) "Excluded Securities" means, (a) shares issued or deemed to have been
issued by the Company pursuant to an Approved Stock Plan (b) shares of
Common Stock issued or deemed to be issued by the Company upon the
conversion, exchange or exercise of any right, option, obligation or
security outstanding on the date prior to date of the Securities
Purchase Agreement, provided that the terms of such right, option,
obligation or security are not amended or otherwise modified on or
after the date of the Securities Purchase Agreement, and provided that
the conversion price, exchange price, exercise price or other purchase
price is not reduced, adjusted or otherwise modified and the number of
shares of Common Stock issued or issuable is not increased (whether by
operation of, or in accordance with, the relevant governing documents
or otherwise) on or after the date of the Securities Purchase
Agreement, (c) shares issued in connection with any acquisition by the
Company, whether through an acquisition of stock or a merger of any
business, assets or technologies, leasing arrangement or any other
transaction the primary purpose of which is not to raise equity
capital, and (d) the shares of Common Stock issued or deemed to be
issued by the Company upon conversion of this Debenture.
(k) "Installment Amount" means an aggregate of $250,000 combined between
this Debenture and the Other Debentures. The Holder shall have the
right to allocate the total Installment Amount due to it among this
Debenture and the Other Debentures as it sees fit and shall promptly
notify the Company of such allocation.
(l) Installment Conversion Price" means, the lower of (i) the applicable
Conversion Price and (ii) that price which shall be computed as ninety
percent (90%) of the lowest daily Volume Weighted Average Price of the
Common Stock during the twenty (20) consecutive Trading Days
immediately preceding the applicable Installment Date. All such
determinations to be appropriately adjusted for any stock split, stock
dividend, stock combination or other similar transaction
(m) "Installment Date" means February 1, 2008, and continuing on the first
Business Day of each successive calendar month thereafter.
(n) "Other Debentures" means the other amended and restated secured
convertible debentures issued pursuant to the Agreement.
(o) "Options" means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.
(p) "Original Issue Date" means the date of the first issuance of this
Debenture regardless of the number of transfers and regardless of the
number of instruments, which may be issued to evidence such Debenture.
(q) "Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
(r) "Reverse Stock Split" means a 50 for 1 stock split to be completed by
the Company.
(s) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
(t) "Trading Day" means a day on which the shares of Common Stock are
quoted on the OTCBB or quoted or traded on such Primary Market on
which the shares of Common Stock are then quoted or listed; provided,
that in the event that the shares of Common Stock are not listed or
quoted, then Trading Day shall mean a Business Day.
(u) "Transaction Documents" shall have the meaning ascribed to it in the
Agreement. .
(v) "Underlying Shares" means the shares of Common Stock issuable upon
conversion of this Debenture or as payment of interest in accordance
with the terms hereof.
(w) "Volume Weighted Average Price" means, for any security as of any
date, the daily dollar volume-weighted average price for such security
on the Primary Market as reported by Bloomberg through its "Historical
Prices - Px Table with Average Daily Volume" functions, or, if no
dollar volume-weighted average price is reported for such security by
Bloomberg, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as
reported in the "pink sheets" by Pink Sheets LLC.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Secured Convertible
Debenture to be duly executed by a duly authorized officer as of the date set
forth above.
COMPANY:
GS CLEANTECH CORPORATION
By:
Name: Kevin Kreisler
Title: Chairman
EXHIBIT I
CONVERSION NOTICE
(To be executed by the Holder in order to Convert the Debenture)
TO:
The undersigned hereby irrevocably elects to convert $________________
of the principal amount of Debenture No.GSCR ___ into Shares of Common Stock
of GS CLEANTECH CORPORATION, according to the conditions stated therein, as
of the Conversion Date written below.
Conversion Date: ____________________________
Conversion Amount to be converted: $____________________________
Conversion Price: $____________________________
Number of shares of Common Stock to be
issued: ____________________________
Amount of Debenture Unconverted: $____________________________
Please issue the shares of Common Stock in the following name and to the
following address: Issue to:
Authorized Signature: ______________________________
Name: ______________________________
Title: ______________________________
Broker DTC Participant Code:
Account Number: