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.
GREENSHIFT CORPORATION
SECURED CONVERTIBLE DEBENTURE
Principal Amount: $1,950,000
Debenture Issuance Date: December 11, 2008
FOR VALUE RECEIVED, GREENSHIFT 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 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 Convertible Debenture (including all debentures
issued in exchange, transfer or replacement hereof, this "Debenture") is issued
pursuant to the Exchange Agreement between the Holder and the Company of even
date herewith (the "Agreement"). 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
pursuant to the Global Security Agreement among the Company, the Holder,
and other parties dated on or about January 11, 2008 (the "Security
Agreement"), the Global Pledge Agreement among the Company, the Holder, and
other parties dated on or about January 11, 2008 (the "Pledge Agreement"),
the Global IP Security Agreement among the Company, the Holder, and other
parties dated on or about January 11, 2008 (the "IP Security Agreement"),
the Global Guaranty Agreement among the Company, the Holder, and other
parties dated on or about January 11, 2008 (the "Guaranty Agreement" and
along with the Security Agreement, the Pledge Agreement, and the Prior
Security Documents, the IP Security Agreement, any mortgages granted to the
Buyer, and all other documents, instruments, and agreements granted to the
Lender to secure the obligations of the Company to the Buyer, the "Security
Documents").
(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 9.99% 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: GreenShift 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 07302
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, 2009, 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 by the Company on January 11, 2008, with an aggregate
outstanding principal balance as of November 30, 2008 of $6,401,790 and a
maturity date of December 31, 2011.
(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:
GREENSHIFT CORPORATION
By: /s/ Kevin Kreisler
--------------------------------
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. GERS - - into Shares of Common Stock of GREENSHIFT
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: