Document:

exv4w4

Exhibit 4.4

EXECUTION
COPY

REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into July 31,
2009, between American Airlines, Inc., a Delaware corporation (the “Company”), and Morgan
Stanley & Co. Incorporated (“Morgan Stanley”), in its capacity as representative (the
“Representative”) of the several initial purchasers set forth in the Purchase Agreement
(together with the Representative, the “Initial Purchasers”).

          This Agreement is made pursuant to the Purchase Agreement (the “Purchase Agreement”),
dated July 27, 2009, between the Company and the Initial Purchasers, which provides for the sale by
the Company to the Initial Purchasers of $276,400,000 aggregate principal amount of the Company’s
13.0% 2009-2 Secured Notes due 2016 (the “Notes”). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial
Purchasers and its direct and indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under the Purchase
Agreement.

          In consideration of the foregoing, the parties hereto agree as follows:

          1. Definitions.

          As used in this Agreement, the following capitalized defined terms shall have the following
meanings:

          “1933 Act” shall mean the Securities Act of 1933, as amended from time to time.

          “1934 Act” shall mean the Securities Exchange Act of 1934, as amended from time
to time.

          “Agreement” shall have the meaning set forth in the preamble.

          “Closing Date” shall mean the Closing Date as defined in the Purchase
Agreement.

          “Company” shall have the meaning set forth in the preamble and shall also
include the Company’s successors.

          “Exchange Dates” shall have the meaning set forth in Section 2(a)(ii) of this
Agreement.

      “Exchange Notes” shall mean notes issued by the Company containing terms
identical to the Notes (except that (i) interest thereon shall accrue from the last date on
which interest was paid on the Notes or, if no such interest was paid, July 31, 2009, (ii)
the Exchange Notes will not contain restrictions on transfer and (iii) the Exchange Notes
will only be available in book-entry form) and to be offered to Holders of Notes in exchange
for Notes pursuant to the Exchange Offer.

 

 

     “Exchange Offer” shall mean the exchange offer by the Company of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.

     “Exchange Offer Registration” shall mean a registration under the 1933 Act
effected pursuant to Section 2(a) hereof.

     “Exchange Offer Registration Statement” shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate form) and all
amendments and supplements to such registration statement, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated by
reference therein.

     “Free Writing Prospectus” shall mean each free writing prospectus (as defined
in Rule 405 under the 1933 Act) prepared by or on behalf of the Company or used by the
Company in connection with a Shelf Registration.

     “Holder” shall mean the Initial Purchasers, for so long as they own any
Registrable Notes, and each of their successors, assigns and direct and indirect transferees
who become registered owners of Registrable Notes under the Indenture; provided that
for purposes of Sections 4 and 5 of this Agreement, the term “Holder” shall include
Participating Broker-Dealers (as defined in Section 4(a)).

     “Indenture” shall mean the indenture between the Company and the Trustee, dated
as of the Closing Date relating to the Notes.

     “Initial Purchasers” shall have the meaning set forth in the preamble.

     “Issuer Information” shall mean material information about the Company or the
Notes that has been provided by or on behalf of the Company.

     “Majority Holders” shall mean the Holders of a majority of the aggregate
principal amount of outstanding Registrable Notes; provided that whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is required
hereunder, Registrable Notes held by the Company or any of its affiliates (as such term is
defined in Rule 405 under the 1933 Act) (other than the Initial Purchasers or subsequent
Holders of Registrable Notes if such subsequent Holders are deemed to be such affiliates
solely by reason of their holding of such Registrable Notes) shall not be counted in
determining whether such consent or approval was given by the Holders of such required
percentage or amount.

     “Moody’s” shall mean Moody’s Investors Service, Inc.

     “Notes” shall have the meaning set forth in the preamble.

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     “Person” shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, or a government or agency or political
subdivision thereof.

     “Prospectus” shall mean the prospectus included in a Registration Statement,
including any preliminary prospectus, and any such prospectus as amended or supplemented by
any prospectus supplement, including a prospectus supplement with respect to the terms of
the offering of any portion of the Registrable Notes covered by a Shelf Registration
Statement, and by all other amendments and supplements to such prospectus, and in each case
including all material incorporated by reference therein.

     “Purchase Agreement” shall have the meaning set forth in the preamble.

     “Registrable Notes” shall mean the Notes; provided, however,
that the Notes shall cease to be Registrable Notes (i) when such Notes are exchanged for
Exchange Notes, (ii) when a Registration Statement with respect to such Notes shall have
been declared effective under the 1933 Act and such Notes shall have been disposed of
pursuant to such Registration Statement, (iii) when such Notes have been sold to the public
pursuant to Rule 144 (but not Rule 144A) under the 1933 Act or (iv) when such Notes shall
have otherwise ceased to be outstanding.

     “Registration Expenses” shall mean any and all expenses incident to performance
of or compliance by the Company with this Agreement, including without limitation: (i) all
SEC, stock exchange or Financial Industry Regulatory Authority registration and filing fees,
(ii) all fees and expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel for any underwriters
or Holders in connection with blue sky qualification of any of the Exchange Notes or
Registrable Notes), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting agreements, securities
sales agreements and other documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees (it being understood that no rating agency shall be
engaged by an Initial Purchaser), (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi) the fees and
disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf Registration Statement, the fees and
disbursements of one counsel for the Holders (which counsel shall be selected by the
Majority Holders and which counsel may also be counsel for the Initial Purchasers) and
(viii) the fees and disbursements of the independent public accountants of the Company,
including the expenses of any special audits or “cold comfort” letters required by or
incident to such performance and compliance, but excluding fees and expenses of counsel to
the underwriters (other than fees and expenses set forth in clause (ii) above) or the
Holders and underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Notes by a Holder.

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     “Registration Statement” shall mean any registration statement of the Company
that covers any of the Exchange Notes or Registrable Notes pursuant to the provisions of
this Agreement and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference therein.

     “SEC” shall mean the Securities and Exchange Commission.

     “Shelf Registration” shall mean a registration effected pursuant to Section
2(b) hereof.

     “Shelf Registration Statement” shall mean a “shelf” registration statement of
the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of
the Registrable Notes on an appropriate form under Rule 415 under the 1933 Act, or any
similar rule that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated by
reference therein.

     “Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a Standard &
Poor’s Financial Services LLC business.

     “Stated Maturity Date” shall mean August 1, 2016.

     “TIA” shall have the meaning set forth in Section 3(1) of this Agreement.

     “Trustee” shall mean U.S. Bank Trust National Association, as trustee with
respect to the Notes under the Indenture.

     “Underwriter” shall have the meaning set forth in Section 3 hereof.

     “Underwritten Registration” or “Underwritten Offering” shall mean a
registration in which Registrable Notes are sold to an Underwriter for reoffering to the
public.

     2. Registration Under the 1933 Act and Ratings.

         (a) To the extent not prohibited by any applicable law or applicable interpretation of the
Staff of the SEC, the Company shall use its reasonable best efforts to cause to be filed an
Exchange Offer Registration Statement covering the offer by the Company to the Holders who are not
prohibited by any law or policy of the SEC, or applicable interpretation of the Staff of the SEC,
from participating in the Exchange Offer to exchange all of the Registrable Notes for Exchange
Notes, to have the Exchange Offer Registration Statement declared effective and to have such
Registration Statement remain effective until the closing of the Exchange Offer. The Company shall
commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been
declared effective by the SEC and use its reasonable best efforts to have the Exchange Offer
consummated not later than December 31, 2009. The Company shall commence the Exchange Offer by
mailing the related exchange offer Prospectus and accompanying documents to each Holder, through
DTC or otherwise, stating in such Prospectus

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or accompanying documents, in addition to such other disclosures as are required by applicable
law:

     (i) that the Exchange Offer is being made pursuant to this Agreement and that all
Registrable Notes validly tendered and not withdrawn will be accepted for exchange;

     (ii) the dates of acceptance for exchange (which shall be a period of at least 20
business days from the date such notice is mailed) (the “Exchange Dates”);

     (iii) that any Registrable Note not tendered will remain outstanding and continue to
accrue interest, but will not retain any rights under this Registration Rights Agreement;

     (iv) that Holders electing to have a Registrable Note exchanged pursuant to the
Exchange Offer will be required to surrender such Registrable Note, together with the
enclosed letters of transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice prior to the close of
business on the last Exchange Date; and

     (v) that Holders will be entitled to withdraw their election, not later than the close
of business on the last Exchange Date, by sending to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in the notice a
telegram, facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Notes delivered for exchange and a statement that such
Holder is withdrawing his election to have such Notes exchanged.

     As soon as practicable after the last Exchange Date, the Company shall:

     (i) accept for exchange Registrable Notes or portions thereof tendered and not validly
withdrawn pursuant to the Exchange Offer; and

     (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable
Notes or portions thereof so accepted for exchange by the Company and issue, and cause the
Trustee to promptly authenticate and mail to each Holder, an Exchange Note equal in
principal amount to the principal amount of the Registrable Notes surrendered by such
Holder.

The Company shall use its reasonable best efforts to complete the Exchange Offer as provided above
and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other
applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that the Exchange Offer does not violate applicable
law or any applicable interpretation of the Staff of the SEC. The Company shall inform the Initial
Purchasers of the names and addresses known to the Company (including through DTC) of the Holders
to whom the Exchange Offer is made, and the Initial Purchasers shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Notes in
the Exchange Offer.

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If the Company effects the Exchange Offer, the Company shall be entitled to close the Exchange
Offer twenty (20) business days after such commencement (provided that the Company has accepted all
the Notes theretofore validly tendered and not withdrawn in accordance with the terms of the
Exchange Offer).

Each Holder participating in the Exchange Offer shall be required to represent to the Company in
writing that at the time of the consummation of the Exchange Offer (i) any Exchange Notes received
by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any Person to participate in the distribution (within the
meaning of the 1933 Act) of the Notes or the Exchange Notes, (iii) such Holder is not an affiliate
of the Company within the meaning of Rule 405 under the 1933 Act, (iv) if such Holder is not a
broker dealer, that it is not engaged in and does not intend to engage in, the distribution of the
Exchange Notes and (v) if such Holder is a broker dealer, that it will receive Exchange Notes for
its own account in exchange for Notes that were acquired as a result of market making activities or
other trading activities and that it will be required to acknowledge that it will deliver a
prospectus in connection with the resale of such Exchange Notes.

          (b) In the event that the Company determines that the Exchange Offer Registration provided for
in Section 2(a) above is not available or may not be consummated as soon as practicable after the
last Exchange Date because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, the Company shall, in lieu of effecting the registration of the Exchange Notes
pursuant to the Exchange Offer Registration Statement and at no cost to the holders of the
Registrable Notes, (i) as promptly as practicable, file with the SEC a shelf registration statement
covering resales of the Registrable Notes (the “Shelf Registration Statement”), (ii) use
its reasonable best efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act by December 31, 2009 and (iii) use its reasonable best efforts to keep
effective the Shelf Registration Statement for a period of one year after its effective date (or
for such shorter period as shall end when all of the Registrable Notes covered by the Shelf
Registration Statement have been sold pursuant thereto or may be freely sold pursuant to Rule 144
under the Securities Act). The Company further agrees to supplement or amend the Shelf
Registration Statement if required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or by the 1933 Act or
by any other rules and regulations thereunder for shelf registration or if reasonably requested by
a Holder with respect to information relating to such Holder, and to use its best efforts to cause
any such amendment to become effective and such Shelf Registration Statement to become usable as
soon as thereafter practicable. The Company agrees to furnish to the Holders of Registrable Notes
copies of any such supplement or amendment promptly after its being used or filed with the SEC.

          (c) The Company shall use its reasonable best efforts to have the Notes and the Exchange Notes
rated by each of Moody’s and Standard & Poor’s on or prior to December 31, 2009.

          (d) The Company shall pay all Registration Expenses in connection with the registration
pursuant to Section 2(a) and Section 2(b). Each Holder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s
Registrable Notes pursuant to the Shelf Registration Statement.

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          (e) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf
Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC. As provided for in the Indenture, if (i) neither
the Exchange Offer is consummated nor the Shelf Registration Statement is declared effective on or
prior to December 31, 2009, or (ii) the Notes or the Exchange Notes, as the case may be, have not
been rated by each of Moody’s and Standard & Poor’s on or prior to December 31, 2009, the interest
rate on the Notes and the Exchange Notes will be increased by 1.00% per annum effective as of
January 1, 2010. If the Shelf Registration Statement ceases to be effective for more than 60 days,
whether or not consecutive, during the period that it is required to be effective pursuant to
Section 2(b), the interest rate per annum borne by the Notes shall be increased by 1.00% from the
61st day until such time as the Shelf Registration Statement again becomes effective;
provided that for the purpose of this sentence, the Shelf Registration Statement shall be
deemed to have ceased to be effective during any period in which the offering of Registrable Notes
pursuant to the Shelf Registration Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or court.

          (f) The maximum possible increase in the interest rate per annum on the Notes and the Exchange
Notes pursuant to Section 2(e) hereof, at any time, shall be 1.00%.

          (g) Without limiting the remedies available to the Initial Purchasers and the Holders, the
Company acknowledges that any failure by the Company to comply with its obligations under Section
2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to specifically enforce the
Company’s obligations under Section 2(a) and Section 2(b) hereof.

          3. Registration Procedures.

          In connection with the obligations of the Company with respect to the Registration Statements
pursuant to Section 2(a) and Section 2(b) hereof, the Company shall as reasonably expeditiously as
possible:

     (a) prepare and file with the SEC a Registration Statement on the appropriate form
under the 1933 Act, which form (x) shall be selected by the Company, (y) shall, in the case
of a Shelf Registration, be available for the sale of the Registrable Notes by the selling
Holders thereof and (z) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements required by the SEC
to be filed therewith, and use its reasonable best efforts to cause such Registration
Statement to become effective and remain effective in accordance with Section 2 hereof;

     (b) prepare and file with the SEC such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration Statement effective for
the applicable period under this Agreement and cause each Prospectus to be supplemented by
any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424
under the 1933 Act; to keep each

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Prospectus current during the period described under Section 4(3) and Rule 174 under
the 1933 Act that is applicable to transactions by brokers or dealers with respect to the
Registrable Notes or Exchange Notes;

     (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Notes,
to counsel for the Initial Purchasers, to counsel for the Holders and to each Underwriter of
an Underwritten Offering of Registrable Notes, if any, without charge, as many copies of
each Prospectus, including each preliminary Prospectus, and any amendment or supplement
thereto and such other documents as such Holder or Underwriter may reasonably request, in
order to facilitate the public sale or other disposition of the Registrable Notes; and the
Company consents to the use of such Prospectus and any amendment or supplement thereto in
accordance with applicable law by each of the selling Holders of Registrable Notes and any
such Underwriters in connection with the offering and sale of the Registrable Notes covered
by and in the manner described in such Prospectus or any amendment or supplement thereto in
accordance with applicable law;

     (d) use its reasonable best efforts to register or qualify the Registrable Notes under
all applicable state securities or “blue sky” laws of such jurisdictions as any Holder of
Registrable Notes covered by a Registration Statement shall reasonably request in writing by
the time the applicable Registration Statement is declared effective by the SEC, to
cooperate with such Holders in connection with any filings required to be made with the
Financial Industry Regulatory Authority and do any and all other acts and things which may
be reasonably necessary or advisable to enable such Holder to consummate the disposition in
each such jurisdiction of such Registrable Notes owned by such Holder; provided,
however, that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (ii) file any general consent to service of
process or (iii) subject itself to taxation in any such jurisdiction if it is not so
subject;

     (e) in the case of a Shelf Registration, notify each Holder of Registrable Notes who
has provided contact information to the Company, counsel for the Holders and counsel for the
Initial Purchasers promptly and, if requested by any such Holder or counsel, confirm such
advice in writing (i) when a Shelf Registration Statement has become effective and when any
post-effective amendment thereto has been filed and becomes effective, (ii) of any request
by the SEC or any state securities authority for amendments and supplements to a Shelf
Registration Statement and Prospectus or for material additional information after the Shelf
Registration Statement has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a Shelf Registration
Statement or the initiation of any proceedings for that purpose, (iv) if, between the
effective date of a Shelf Registration Statement and the closing of any sale of Registrable
Notes covered thereby, the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects or if the
Company receives any notification with respect to the suspension of the qualification of the
Registrable Notes for sale in any jurisdiction or the initiation of any proceeding for such
purpose,

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(v)
of the happening of any event during the period a Shelf Registration Statement is
effective which makes any statement made in such Shelf Registration Statement or the related
Prospectus untrue in any material respect or which requires the making of any changes in
such Shelf Registration Statement or Prospectus in order to make the statements therein (in
the case of the Prospectus, in the light of the circumstances under which they were made)
not misleading and (vi) of any determination by the Company that a post-effective amendment
to a Registration Statement would be appropriate;

     (f) make every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement at the earliest possible moment and provide
immediate notice to each Holder of the withdrawal of any such order;

     (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Notes,
without charge, at least one conformed copy of each Shelf Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);

     (h) in the case of a Shelf Registration, cooperate with the selling Holders of
Registrable Notes to facilitate the timely preparation and delivery of notes representing
Registrable Notes to be sold and not bearing any restrictive legends, and enable such
Registrable Notes to be in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders may reasonably request at
least two business days prior to the closing of any sale of Registrable Notes;

     (i) in the case of a Shelf Registration, upon the occurrence of any event contemplated
by Section 3(e)(v) hereof, use its reasonable best efforts to prepare and file with the SEC
a supplement or post-effective amendment to a Shelf Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable Notes, such
Prospectus will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company agrees to notify the Holders to
suspend use of the Prospectus as promptly as practicable after the occurrence of such an
event, and the Holders hereby agree to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or omission;

     (j) a reasonable time prior to the filing of any Registration Statement, any
Prospectus, any amendment to a Registration Statement or amendment or supplement to a
Prospectus or any document which is to be incorporated by reference into a Registration
Statement or a Prospectus after initial filing of a Registration Statement, provide copies
of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) and make such of the representatives
of the Company as shall be reasonably requested by the Initial Purchasers or their counsel
(and, in the case of a Shelf Registration Statement, the Holders or their counsel) available
for discussion of such document, and shall not at any time file or make any amendment to the
Registration Statement, any Prospectus or any amendment of or

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supplement to a Registration Statement or a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus, of which the
Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement,
the Holders and their counsel) shall not have previously been advised and furnished a copy
or to which the Initial Purchasers or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) shall reasonably object, except for
any amendment or supplement or document (a copy of which has been previously furnished to
the Initial Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel)) which counsel to the Company shall advise the
Company in writing is required in order to comply with applicable law; the Initial
Purchasers agree that, if they receive timely notice and documents under this clause (j),
they will not take actions or make objections under this clause (j) such that the Company is
unable to comply with its obligations under Section 2(a) or Section 2(b) hereof;

     (k) obtain a CUSIP number for each of the Exchange Notes or the Registrable Notes, as
the case may be, not later than the effective date of a Registration Statement;

     (l) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as
amended (the “TIA”), in connection with the registration of the Exchange Notes or
Registrable Notes, as the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and execute, and use its reasonable best efforts to
cause the Trustee to execute, all documents as may be required to effect such changes and
all other forms and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;

     (m) in the case of a Shelf Registration, make available for inspection by a
representative of the Holders of the Registrable Notes, any Underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a reasonable manner, all financial and
other records, pertinent documents and properties of the Company, and cause the respective
officers, directors and employees of the Company to supply all information reasonably
requested by any such representative, Underwriter, attorney or accountant in connection with
a Shelf Registration Statement; provided, however, that any records,
information or documents that are reasonably designated by the Company as confidential at
the time of delivery of such records, information or documents shall be kept confidential by
such persons, unless (i) such records, information or documents are in the public domain or
otherwise publicly available, (ii) disclosure of such records, information or documents is
required by court or administrative order or is necessary to respond to inquiries of
regulatory authorities (subject to the requirements of such order, and only after such
person shall have given the Company prompt, and, if possible, at least 48 hours, prior
written notice of such requirements so that the Company, at its expense, may undertake
appropriate action to prevent disclosure of such information or records; provided
that, should it be determined their disclosure is required, such person will take all
precautions in consultation with the Company to preserve the confidentiality of such
records, information or documents), (iii) disclosure of such records, information or

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documents is required by law (including any disclosure requirements pursuant to federal
securities laws in connection with the filing of any Registration Statement or the use of
any Prospectus referred to in this Agreement) or (iv) such records, information or documents
become available to any such person from a source other than the Company and that such
person reasonably believes was entitled to disclose such records, information or documents
to such person, and such sources is not subject to any contractual, legal, fiduciary or
other obligation of confidentiality;

     (n) if reasonably requested by any Holder of Registrable Notes covered by a
Registration Statement, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information with respect to such Holder as such Holder
reasonably requests to be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such filing; and

     (o) in the case of a Shelf Registration, enter into such customary agreements and take
all such other actions in connection therewith (including those requested by the Holders of
a majority of the Registrable Notes being sold) in order to expedite or facilitate the
disposition of such Registrable Notes including, but not limited to, an Underwritten
Offering and in such connection, (i) to the extent possible, make such representations and
warranties to the Holders and any Underwriters of such Registrable Notes with respect to the
business of the Company and its subsidiaries, the Registration Statement, Prospectus and
documents incorporated by reference or deemed incorporated by reference, if any, in each
case, in form, substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of
counsel to the Company (which counsel and opinions, in form, scope and substance, shall be
reasonably satisfactory to the Holders of a majority in principal amount of Registrable
Notes being sold and such Underwriters and their respective counsel) addressed to each
selling Holder and Underwriter of Registrable Notes, covering the matters customarily
covered in opinions requested in connection with underwritten firm commitment offerings,
(iii) obtain “cold comfort” letters from the independent certified public accountants of the
Company (and, if necessary, any other certified public accountant of any subsidiary of the
Company, or of any business acquired by the Company for which financial statements and
financial data are or are required to be included in the Registration Statement) addressed
to each selling Holder and Underwriter of Registrable Notes, such letters to be in customary
form and covering matters of the type customarily covered in “cold comfort” letters in
connection with underwritten firm commitment offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority in principal amount
of the Registrable Notes being sold or the Underwriters, and which are customarily delivered
in underwritten offerings, to evidence the continued validity of the representations and
warranties of the Company made pursuant to clause (i) above and to evidence compliance with
any customary conditions contained in an underwriting agreement.

         In the case of a Shelf Registration Statement, the Company may require each Holder of
Registrable Notes to furnish to the Company such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Notes as the Company may

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from time to time reasonably request in writing. The Company may exclude from such
registrations the Registrable Note of any Holder who fails to furnish such information within 30
days after receiving such request.

          In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in Section 3(e)(v)
hereof, such Holder will forthwith discontinue disposition of Registrable Notes pursuant to a Shelf
Registration Statement until such Holder’s receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder
will deliver to the Company (at the Company’s expense) all copies in its possession, other than
permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable
Notes current at the time of receipt of such notice. If the Company shall give any such notice to
suspend the disposition of Registrable Notes pursuant to a Registration Statement, the Company
shall extend the period during which the Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and including the date of
the giving of such notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions. The Company may give
any such notice only twice during any 365-day period and any such suspensions may not exceed 45
days for each suspension and there may not be more than two suspensions in effect during any
365-day period.

          The Holders of Registrable Notes covered by a Shelf Registration Statement who desire to do so
may sell such Registrable Notes in an Underwritten Offering. In any such Underwritten Offering if
requested by the Majority Holders, the investment banker or investment bankers and manager or
managers (the “Underwriters”) that will administer the offering will be selected by the
Majority Holders of the Registrable Notes included in such offering, subject to the consent of the
Company (which shall not be unreasonably withheld).

          4. Participation of Broker-Dealers in Exchange Offer.

          (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange
Notes for its own account in the Exchange Offer in exchange for Notes that were acquired by such
broker-dealer as a result of market-making or other trading activities (a “Participating
Broker-Dealer”), may be deemed to be an “underwriter” within the meaning of the 1933 Act and
must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of
such Exchange Notes.

          The Company understands that it is the Staff’s position that if the Prospectus contained in
the Exchange Offer Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell the Exchange Notes,
without naming the Participating Broker-Dealers or specifying the amount of Exchange Notes owned by
them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus
delivery obligation under the 1933 Act in connection with resales of Exchange Notes for their own
accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act.

12

 

          (b) In light of Section 4(a), notwithstanding the other provisions of this Agreement, the
Company agrees that the provisions of this Agreement as they relate to a Shelf Registration shall
also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications
thereto as may be, reasonably requested by the Initial Purchasers or by one or more Participating
Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or facilitate
the disposition of any Exchange Notes by Participating Broker-Dealers consistent with the positions
of the Staff recited in Section 4(a) above; provided that:

     (i) the Company shall not be required to amend or supplement the Prospectus contained
in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section
3(i), (A) after the Participating Broker-Dealers shall have disposed of the Registrable
Notes or (B) for a period exceeding 90 days after the last Exchange Date (as such period may
be extended pursuant to the penultimate paragraph of Section 3 of this Agreement) and
Participating Broker-Dealers shall not be authorized by the Company to deliver and shall not
deliver such Prospectus after such period in connection with the resales contemplated by
this Section 4; and

     (ii) the application of the Shelf Registration procedures set forth in Section 3 of
this Agreement to an Exchange Offer Registration, to the extent not required by the
positions of the Staff of the SEC or the 1933 Act and the rules and regulations thereunder,
will be in conformity with the reasonable request to the Company by the Initial Purchasers
or with the reasonable request in writing to the Company by one or more broker-dealers who
certify to the Initial Purchasers and the Company in writing that they anticipate that they
will be Participating Broker-Dealers; and provided further that, in
connection with such application of the Shelf Registration procedures set forth in Section 3
to an Exchange Offer Registration, the Company shall be obligated (x) to deal only with one
entity representing the Participating Broker-Dealers, which shall be Morgan Stanley unless
it elects not to act as such representative, (y) to pay the fees and expenses of only one
counsel representing the Participating Broker-Dealers, which shall be counsel to the Initial
Purchasers unless such counsel elects not to so act and (z) to cause to be delivered only
one, if any, “cold comfort” letter with respect to the Prospectus in the form existing on
the last Exchange Date and with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (i) above.

          (c) The Initial Purchasers shall have no liability to the Company or any Holder with respect
to any request that it may make pursuant to Section 4(b) above.

          5. Indemnification and Contribution.

          (a) The Company agrees to indemnify and hold harmless the Initial Purchasers, each Holder and
each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is
controlled by, any Initial Purchaser or any Holder, from and against all losses, claims, damages
and liabilities (including, without limitation, any legal or other expenses reasonably incurred by
the Initial Purchasers, any Holder or any such controlling or affiliated Person in connection with
defending or investigating any such action or claim) caused by any untrue statement or alleged
untrue statement of a material fact contained in any

13

 

Registration Statement (or any amendment thereto) pursuant to which Exchange Notes or
Registrable Notes were registered under the 1933 Act, including all documents incorporated therein
by reference, or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, or caused
by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus
(as amended or supplemented if the Company shall have furnished any amendments or supplements
thereto), any Free Writing Prospectus or any Issuer Information filed or required to be filed
pursuant to Rule 433(d) under the 1933 Act in each case, taken together with the prospectus, or
caused by any omission or alleged omission to state therein a material fact necessary to make the
statements therein in the light of the circumstances under which they were made not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon information relating to
the Initial Purchasers or any Holder furnished to the Company in writing through Morgan Stanley or
any selling Holder expressly for use therein. In connection with any Underwritten Offering
permitted by Section 3, the Company will also indemnify the Underwriters, if any, and dealers
participating in the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent as provided above
with respect to the indemnification of the Holders, if requested in connection with any
Registration Statement.

          (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company,
the Initial Purchasers and the other selling Holders, and each of their respective directors,
officers who sign the Registration Statement and each Person, if any, who controls the Company, any
Initial Purchaser and any other selling Holder within the meaning of either Section 15 of the 1933
Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company to
the Initial Purchasers and the Holders, but only with reference to information relating to such
Holder furnished to the Company in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto), any Prospectus (or any amendment or supplement thereto) or
any Free Writing Prospectus.

          (c) In case any proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a)
or paragraph (b) above, such Person (the “indemnified party”) shall promptly notify the
Person against whom such indemnity may be sought (the “indemnifying party”) in writing and
the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable fees and
disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is understood that
the indemnifying party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Initial Purchasers and all Persons, if any,

14

 

who control any Initial Purchaser within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition
to any local counsel) for the Company, its directors, its officers who sign the Registration
Statement and each Person, if any, who controls the Company within the meaning of either such
Section and (c) the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Holders and all Persons, if any, who control any Holders within the meaning of
either such Section, and that all such fees and expenses shall be reimbursed as they are incurred.
In such case involving the Initial Purchasers and Persons who control the Initial Purchasers, such
firm shall be designated in writing by the Initial Purchasers. In such case involving the Holders
and such Persons who control Holders, such firm shall be designated in writing by the Majority
Holders. In all other cases, such firm shall be designated by the Company. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its written consent but,
if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or liability by reason of
such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 90 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims that are the subject
matter of such proceeding.

          (d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is
unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or
liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and
of the indemnified party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. The Holders’
respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the
respective principal amount of Registrable Notes of such Holder that were registered pursuant to a
Registration Statement.

          (e) The Company and each Holder agree that it would not be just or equitable if contribution
pursuant to this Section 5 were determined by pro rata allocation or by any other

15

 

method of allocation that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which Registrable Notes
were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 5 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any indemnified party at
law or in equity.

          The indemnity and contribution provisions contained in this Section 5 shall remain operative
and in full force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Initial Purchasers, any Holder or any Person controlling
any Initial Purchaser or any Holder, or by or on behalf of the Company, its officers or directors
or any Person controlling the Company, (iii) acceptance of any of the Exchange Notes and (iv) any
sale of Registrable Notes pursuant to a Shelf Registration Statement.

          6. Miscellaneous.

          (a) No Inconsistent Agreements. The Company has not entered into, and on or after the
date of this Agreement will not enter into, any agreement which is inconsistent with the rights
granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company’s other issued and
outstanding securities under any such agreements.

          (b) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver or consent;
provided, however, that no amendment, modification, supplement, waiver or consent
to any departure from the provisions of Section 5 hereof shall be effective as against any Holder
of Registrable Notes unless consented to in writing by such Holder.

          (c) Notices. All notices and other communications provided for or permitted hereunder
shall be made in writing by hand-delivery, registered first-class mail, telecopier, or any courier
guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such
Holder to the Company by means of a notice given in accordance with the provisions of this Section
6(c), which address initially is, with respect to the Initial Purchasers, c/o Morgan Stanley & Co.
Incorporated, 1585 Broadway, 29th Floor, New York, New York 10036, facsimile no. (212)
507-8999, attention Investment Banking Division; and (ii) if to the Company, initially

16

 

at P.O. Box 619616, Dallas/Fort Worth Airport, Texas 75261-9616, facsimile no. (817) 967-2199,
attention of the Treasurer and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c).

          All such notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight delivery.

          Copies of all such notices, demands, or other communications shall be concurrently delivered
by the Person giving the same to the Trustee, at the address specified in the Indenture.

          The Company shall notify all holders of the Notes and, if any, the Exchange Notes if it
satisfied the obligations set forth in (i) Section 2(a) or Section 2(b) and (ii) Section 2(e)(i)
and whether or not the interest rate on the Notes and, if any, the Exchange Notes will be increased
pursuant to Section 2(e) hereof no later than January 15, 2010, which notification may be
transmitted through the facilities of DTC, by press release or by such other means as the Company
may reasonably determine.

          (d) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors, assigns and transferees of each of the parties, including, without
limitation and without the need for an express assignment, subsequent Holders; provided
that nothing herein shall be deemed to permit any assignment, transfer or other disposition of
Registrable Notes in violation of the terms of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Registrable Notes, in any manner, whether by operation of
law or otherwise, such Registrable Notes shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Notes such Person shall be conclusively
deemed to have agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers
(in their capacity as Initial Purchasers) shall have no liability or obligation to the Company with
respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the
obligations of such Holder under this Agreement.

          (e) Purchases and Sales of Notes. The Company shall not, and shall use its best
efforts to cause its affiliates (as defined in Rule 405 under the 1933 Act) not to, purchase and
then resell or otherwise transfer any Notes prior to the consummation of the Exchange Offer or a
Shelf Registration Statement being declared effective.

          (f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the
agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the
other hand, and shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder.

          (g) Counterparts. This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed

17

 

shall be deemed to be an original and all of which taken together shall constitute one and the
same agreement.

          (h) Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

          (i) Governing Law. This Agreement shall be governed by the laws of the State of New
York.

          (j) Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable,
the validity, legality and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.

18

 

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.

	 	 	 	 	 
	 	AMERICAN AIRLINES, INC.

 	 
	 	By:  	/s/ Beverly K. Goulet
 	 
	 	 	Name:  	Beverly K. Goulet 	 
	 	 	Title:  	Vice President Corporate Development

and Treasurer 	 
	 

Registration Rights Agreement Signature Page

 

 

Confirmed and accepted as of
the date first above written:

MORGAN STANLEY & CO. INCORPORATED

	 	 	 	 	 
	 	 	 
	By:  	/s/ Yurij Slyz
 	 	 
	 	Name:  	Yurij Slyz 	 	 
	 	Title:  	Vice President 	 	 
	 

As Representative of the several Initial Purchasers

Registration Rights Agreement Signature Pageex41.htm

Exhibit 4.1

 

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date:

Original Conversion Price (subject to adjustment herein): $0.70

$_______

ORIGINAL ISSUE DISCOUNT SECURED CONVERTIBLE DEBENTURE

DUE ______

THIS ORIGINAL ISSUE DISCOUNT SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Original Issue Discount Secured Convertible Debentures of Beyond Commerce, Inc., a Nevada corporation, (the “Company”),
having its principal place of business at 9029 South Pecos, Suite 2800, Henderson, NV 89074, designated as its Original Issue Discount Secured Convertible Debenture due _______ (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).

FOR VALUE RECEIVED, the Company promises to pay to OmniReliant Holdings, Inc. or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum ______ on _____ (the “Maturity
Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof.  This Debenture is subject to the following additional provisions:

Section 1.                      Definitions.  For
the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

 

 

1

 

 

“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d)
the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g)
the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(c)(ii).

“Business Day” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.

“Buy-In” shall have the meaning set forth in Section 4(d)(v).

“Change of Control Transaction” means the occurrence after the date hereof of any 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 33% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior
to such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board
of Directors 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), or (e) 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 in clauses (a) through (d) above.

 

2

 

 

“Conversion” shall have the meaning ascribed to such term in Section 4.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with the terms hereof.

“Debenture Register” shall have the meaning set forth in Section 2(c).

“Dilutive Issuance” shall have the meaning set forth in Section 5(b).

“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).

“Equity Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have
paid all liquidated damages and other amounts owing to the Holder in respect of this Debenture, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction
Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such
Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (f) except for the Company’s default the secured note issued to ST. George Investments, LLC on June 4, 2009, there is no existing Event of Default
or no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of a Monthly Redemption, the shares issuable upon conversion in full of the  Monthly Redemption Amount) to the Holder would not violate the limitations set forth in Section 4(c)(i) and Section 4(c)(ii) herein, (h) there has been no public
announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (i) the Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information and (j) for each Trading Day in a period of 20 consecutive Trading Days prior to the applicable date in question, the daily trading volume for the Common Stock on the principal Trading Market exceeds (i) 173,821shares (subject to adjustment
for forward and reverse stock splits and the like) per Trading Day.

 

3

 

 

“Event of Default” shall have the meaning set forth in Section 8(a).

“Fundamental Transaction” shall have the meaning set forth in Section 5(e).

 

“Interest Conversion Rate” means the lesser of (a) the Conversion Price or (b) 90% of the lesser of (i) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Interest Payment Date or
(ii) the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the date the applicable Interest Conversion Shares are issued and delivered if such delivery is after the Interest Payment Date.

“Interest Conversion Shares” shall have the meaning set forth in Section 2(a).

“Interest Notice Period” shall have the meaning set forth in Section 2(a).

 

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

“Interest Share Amount” shall have the meaning set forth in Section 2(a).

“Issuable Maximum” shall have the meaning set forth in Section 4(c)(i).

“Late Fees” shall have the meaning set forth in Section 2(d).

“Mandatory Default Amount”  means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A)
demanded (if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, or (ii) 100% of the outstanding principal amount of this Debenture, plus 100% of accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

 

 

4

 

 

“Monthly Conversion Period” shall have the meaning set forth in Section 6(b) hereof.

 

“Monthly Conversion Price” shall have the meaning set forth in Section 6(b) hereof.

 

“Monthly Redemption” means the redemption of this Debenture pursuant to Section 6(b) hereof.

 

“Monthly Redemption Amount” means, as to a Monthly Redemption, $______, plus accrued but unpaid interest, liquidated damages and any other amounts then owing to the Holder in respect of this Debenture.

“Monthly Redemption Date” means the 1st of each month, commencing six months from the original issue date and terminating upon the full redemption of this Debenture.

“Monthly Redemption Notice” shall have the meaning set forth in Section 6(b) hereof.

 “New York Courts” shall have the meaning set forth in Section 9(d).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures.

“Permitted Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(aa) attached to the Purchase
Agreement, (c) lease obligations and purchase money indebtedness of up to $200,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets and (d) indebtedness that (i) is expressly subordinate to the Debentures (d) under the definition of Exempt Issuance (as defined in the Purchase Agreement).

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in
the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; (c) Liens incurred in connection with Permitted Indebtedness under clauses (a), (b) thereunder; and (d) Liens
incurred in connection with Permitted Indebtedness under clause (c) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased.

 

 

5

 

 

“Pre-Redemption Conversion Shares” shall have the meaning set forth in Section 6(b) hereof.

“Purchase Agreement” means the Amended and Restated Securities Purchase Agreement, dated as of July 30, 2009 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share Delivery Date” shall have the meaning set forth in Section 4(d)(ii).

“Subsidiary” shall have the meaning set forth in the Purchase Agreement.

“Threshold Period” shall have the meaning set forth in Section 6(d).

“Trading Day” means a day on which the New York Stock Exchange is open for business.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.

“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

 

 

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Section 2.                      Interest.

a) Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture
at the rate of 10% per annum, payable on each Monthly Redemption Date (as to that principal amount then being redeemed), on each Conversion Date (as to that principal amount then being converted), and on the Maturity Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash or, at the Company’s option,
in duly authorized, validly issued, fully paid and non-assessable shares of Common Stock at the Interest Conversion Rate (the dollar amount to be paid in shares, the “Interest Share Amount”) or a combination thereof; provided, however, that payment in shares of Common Stock may only occur if (i) all of the
Equity Conditions have been met (unless waived by the Holder in writing) during the 20 Trading Days immediately prior to the applicable Interest Payment Date  (the “Interest Notice Period”) and through and including the date such shares of Common Stock are actually issued to the Holder, (ii) the Company shall have given the Holder notice in accordance with the notice requirements set forth below and (iii) as to such Interest
Payment Date, prior to such Interest Notice Period (but not more than five (5) Trading Days prior to the commencement of such Interest Notice Period), the Company shall have delivered to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such Interest Share Amount equal to the quotient of (x) the applicable Interest Share Amount divided by (y) the lesser of the (i) then Conversion Price and (ii) the Interest Conversion Rate assuming for such purposes
that the Interest Payment Date is the Trading Day immediately prior to the commencement of the Interest Notice Period (the “Interest Conversion Shares”).

 

b) Company’s Election to Pay Interest in Cash or Shares of Common Stock.  Subject to the terms and conditions herein, the decision whether to pay interest
hereunder in cash, shares of Common Stock or a combination thereof shall be at the sole discretion of the Company.  Prior to the commencement of any Interest Notice Period, the Company shall deliver to the Holder a written notice of its election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof and the Interest Share Amount as to the applicable Interest Payment Date, provided that the Company may indicate in such notice
that the election contained in such notice shall apply to future Interest Payment Dates until revised by a subsequent notice.  During any Interest Notice Period, the Company’s election (whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment Date.  Subject to the aforementioned conditions, failure to timely deliver such written notice to the Holder shall be deemed an election by the Company to pay the interest on such Interest Payment
Date in cash.  At any time the Company delivers a notice to the Holder of its election to pay the interest in shares of Common Stock, the Company shall timely file a prospectus supplement pursuant to Rule 424 disclosing such election.  The aggregate number of shares of Common Stock otherwise issuable to the Holder on an Interest Payment Date shall be reduced by the number of Interest Conversion Shares previously issued to the Holder in connection with such Interest Payment Date.

 

 

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c) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on
the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.  Payment of interest in shares of Common Stock (other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) herein and, solely for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the
Conversion Date.  Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually delivers the Conversion Shares within the time period required by Section 4(d)(ii) herein.  Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture Register”).
Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment of cash shall be distributed ratably among the holders of the then-outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.

d) Late Fee.  All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or
the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full. Notwithstanding anything to the contrary contained herein, if, on any Interest Payment Date the Company has elected to pay accrued interest in the form of Common Stock but the Company is not permitted to pay accrued interest in Common Stock because
it fails to satisfy the conditions for payment in Common Stock set forth in Section 2(a) herein, then, at the option of the Holder, the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled interest payment in cash, shall deliver, within three (3) Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of (x) the number of shares of Common Stock otherwise deliverable to the Holder in connection with the payment
of interest due on such Interest Payment Date multiplied by (y) the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading Day prior to the date such payment is actually made.  If any Interest Conversion Shares are issued to the Holder in connection with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall promptly return such excess shares to the Company.

 

 

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e) Prepayment.  Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture without the
prior written consent of the Holder.

Section 3.                      Registration of Transfers and Exchanges.

 

a) Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by
the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

 

b) Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

c) Reliance on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of the Company may treat the Person
in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.                      Conversion.

 

a) Voluntary Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in part,
into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(c) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the
principal amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.  To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the
Company unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within 1 Business
Day of delivery of such Notice of Conversion.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than
the amount stated on the face hereof.

 

 

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b) Conversion Price.  The conversion price in effect on any Conversion Date shall be equal to $0.70, subject
to adjustment herein (the “Conversion Price”).

c) Adjustment.  If (i) the Company does not repay this Note in full on or before January 30, 2010 or (ii) upon an “Event of Default”, the Conversion
Price shall be reset to equal to 80% of the lowest closing bid price for three days prior to the Conversion Date.

d) Conversion Limitations.

i. Reserved.

ii. Holder’s Restriction on Conversion. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right to convert any portion
of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company  subject to a
limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Debentures or the Warrants) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(c)(ii), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  To the extent that the limitation contained in this
Section 4(c)(ii) applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Debenture is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Debenture may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which
principal amount of this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.   For purposes of this Section 4(c)(ii), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Company’s most recent periodic or annual report, as the case may be; (B) a more recent public announcement by the Company; or (C)
a more recent notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this
Debenture, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture held by the Holder.  The Holder, upon not less than 61 days’
prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(c)(ii), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Debenture held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(c)(ii) shall continue to apply.  Any such increase
or decrease will not be effective until the 61st day after such notice is delivered to the Company.  The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(c)(ii) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Debenture.

 

 

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e)  
	
Mechanics of Conversion.

 

i. Conversion Shares Issuable Upon Conversion of Principal Amount.  The number of Conversion Shares issuable upon a conversion hereunder shall be determined
by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price.

 

 

ii. Delivery of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Debenture
(including, if the Company has given continuous notice pursuant to Section 2(b) for payment of interest in shares of Common Stock at least 20 Trading Days prior to the date on which the Notice of Conversion is delivered to the Company, shares of Common Stock representing the payment of accrued interest otherwise determined pursuant to Section 2(a) but assuming that the Interest Notice Period is the 20 Trading Days period immediately prior to the date on which the Notice of Conversion is delivered to the Company
and excluding for such issuance the condition that the Company deliver Interest Conversion Shares as to such interest payment) and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this
Section 4(d) electronically through the Depository Trust Company or another established clearing corporation performing similar functions.

 

iii. Failure to Deliver Certificates.  If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates representing the principal amount of this Debenture unsuccessfully tendered for
conversion to the Company.

 

iv. Obligation Absolute; Partial Liquidated Damages.  The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Debenture
in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or
any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.  In the event the Holder of this Debenture
shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained, ,  If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such third (3rd)
Trading Day until such certificates are delivered.    Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  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.

 

v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for
any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery
Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied
by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(d)(ii).  For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.  The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant to the
terms hereof.

 

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vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares
of Common Stock for the sole 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 (and the other holders of the Debentures), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions
of Section 5) 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 authorized, validly issued, fully paid and nonassessable and, if the Registration Statement is then effective under the Securities Act, shall be registered for public sale in accordance with such Registration Statement.

vii. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture.  As to any fraction
of a share which Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

viii. Transfer Taxes.  The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

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Section 5.                      Certain Adjustments.

 

a) Stock Dividends and Stock Splits.  If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or otherwise makes a distribution
or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a
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 any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to 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.

 

b) Subsequent Equity Sales.  If, at any time while this Debenture is outstanding,  the Company or any Subsidiary, as applicable, sells or grants any
option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred
for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance.  If the Company enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement,
the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Company shall notify the Holder in writing, no later than 1 Business Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive
Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

 

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c) Subsequent Rights Offerings.  If the Company, at any time while the Debenture is outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date referenced below, then the Conversion Price shall be multiplied by a fraction of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number
of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming delivery to the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights, options or warrants.

 

d) Pro Rata Distributions. If the Company, at any time while this Debenture is outstanding, distributes to all holders of Common Stock (and not to the Holders) evidences
of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security (other than the Common Stock, which shall be subject to Section 5(b)), then in each such case the Conversion Price shall be adjusted by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date
mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to 1 outstanding share of the Common Stock as determined by the Board of Directors of the Company in good faith.  In either case the adjustments shall be described in a statement delivered to the Holder describing the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to 1 share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

 

14

 

e) Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another
Person, (ii) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of 1 share of Common Stock (the “Alternate Consideration”).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect
of 1 share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion
of this Debenture following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 5(e) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

f) Calculations.  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For
purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

g) Notice to the Holder.

 

15

 

 

i. Adjustment to Conversion Price.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver
to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the
Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice.  The Holder is entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice.

 

Section 6.                      Redemption and Forced Conversion.

a) Reserved

b) Monthly Redemption.  On each Monthly Redemption Date, the Company shall redeem the Monthly Redemption Amount (the “Monthly
Redemption”). The Monthly Redemption Amount payable on each Monthly Redemption Date shall be paid in cash at the rate of 110% of the Monthly Redemption Amount; provided, however, as to any Monthly Redemption and upon 30 Trading Days’ prior written irrevocable notice (the “Monthly Redemption Notice”),
in lieu of a cash redemption payment the Company may elect to pay all or part of a Monthly Redemption Amount in Conversion Shares based on a conversion price equal to the lesser of (i) the then Conversion Price and (ii) 80% of the average of the VWAPs for the 5 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Monthly Redemption Date (subject to adjustment for any stock dividend, stock split, stock combination or other similar event affecting the Common Stock during
such 5 Trading Day period) (the price calculated during the 5 Trading Day period immediately prior to the Monthly Redemption Date, the “Monthly Conversion Price” and such 5 Trading Day period, the “Monthly Conversion Period”); provided, further,
that the Company may not pay the Monthly Redemption Amount in Conversion Shares unless (y) from the date the Holder receives the duly delivered Monthly Redemption Notice through and until the date such Monthly Redemption is paid in full, the Equity Conditions have been satisfied, unless waived in writing by the Holder, and (z) as to such Monthly Redemption, prior to such Monthly Conversion Period (but not more than 5 Trading Days prior to the commencement of the Monthly Conversion Period), the Company shall have
delivered to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such Monthly Redemption Amount equal to the quotient of (x) the applicable Monthly Redemption Amount divided by (y) the lesser of (A) the Conversion Price and (B) 80% of the average of the 5 VWAPs during the period ending on the 3rd Trading Day immediately prior to the date of the Monthly Redemption Notice
(the “Pre-Redemption Conversion Shares”).  The Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Monthly Redemption at any time prior to the date that the Monthly Redemption Amount, plus accrued but unpaid interest, liquidated damages and any other amounts then owing to the Holder are due and paid in full.  Unless otherwise indicated by the Holder in the applicable Notice
of Conversion, any principal amount of this Debenture converted during the applicable Monthly Conversion Period until the date the Monthly Redemption Amount is paid in full shall be first applied to the principal amount subject to the Monthly Redemption Amount payable in cash and then to the Monthly Redemption Amount payable in Conversion Shares.  Any principal amount of this Debenture converted during the applicable Monthly Conversion Period in excess of the Monthly Redemption Amount shall be applied
against the last principal amount of this Debenture scheduled to be redeemed hereunder, in reverse time order from the Maturity Date; provided, however, if any such conversion is applied against such Monthly Redemption Amount, the Pre-Redemption Conversion Shares, if any were issued in connection with such Monthly Redemption or were not already applied to such conversions, shall be
first applied against such conversion.  The Company covenants and agrees that it will honor all Notices of Conversion tendered up until such amounts are paid in full.  The Company’s determination to pay a Monthly Redemption in cash, shares of Common Stock or a combination thereof shall be applied ratably to all of the holders of the then outstanding Debentures based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement.  At
any time the Company delivers a notice to the Holder of its election to pay the Monthly Redemption Amount in shares of Common Stock, the Company shall file a prospectus supplement pursuant to Rule 424 disclosing such election.

 

 

16

 

 

c) Redemption Procedure.  The payment of cash or issuance of Common Stock, as applicable, pursuant to a Monthly Redemption shall be payable on the Monthly Redemption
Date.  If any portion of the payment pursuant to an Monthly Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until such amount is paid in full.  Notwithstanding anything herein contained to the contrary, if any portion of the Monthly Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to the Company
given at any time thereafter, to invalidate such Monthly Redemption, ab initio, and, with respect to the Company’s failure to honor the Optional Redemption, the Company shall have no further right to exercise such Optional Redemption.  Notwithstanding anything to the contrary in this Section 6, the Company’s determination to redeem in cash or its elections
under Section 6(b) shall be applied ratably among the Holders of Debentures. The Holder may elect to convert the outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company.

 

d) Reserved.

Section 7.                      Negative Covenants. As long as any portion of this Debenture remains
outstanding, the Company shall not, and shall not permit any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date) to, directly or indirectly:

a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including, but not limited to, a guarantee, 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 therefrom;

 

b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens 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
therefrom;

c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of
shares of its Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Debenture;

 

17

 

 

e) repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata basis, other than regularly scheduled principal and interest payments as such terms are in effect as
of the Original Issue Date, provided that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or occur;

f) pay cash dividends or distributions on any equity securities of the Company;

g) enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by
a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or

h) enter into any agreement with respect to any of the foregoing.

 

Section 8.                      Events of Default.

a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary
or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i. any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion
Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 3 Trading Days;

 

ii. the Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which
breach is addressed in clause (xi) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the Company has become or should have become aware of such failure;

iii. a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);

 

18

 

 

iv. any representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or
any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

v. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)  shall be subject to a Bankruptcy Event;

 

vi. the Company or any Subsidiary shall default on any of its obligations under 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 that (a) involves an obligation greater than $150,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

vii. the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days;

viii. the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether
or not such sale would constitute a Change of Control Transaction);

ix. Reserved;

x. Reserved;

xi. the Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to Section 4(d) or the Company shall provide at any time notice to the Holder, including by
way of public announcement, of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;

xii. any Person shall breach any agreement delivered to the Holder pursuant to Section 2.2 of the Purchase Agreement; or

 

19

 

 

xiii. any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $50,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.

b) Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages
and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount.  Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law.  Upon the payment in
full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the Company.  In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such
acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 9.                      Miscellaneous.

 

a) Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section 9(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified
on the signature page prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature page between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required
to be given.

 

 

20

 

 

b) Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed.  This Debenture is a direct debt obligation of the Company.  This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

c) Lost or Mutilated Debenture.  If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to the Company.

d) Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices
to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby.
If either party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

 

21

 

e) Waiver.  Any waiver by the Company or 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 Company or 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 by the Company or the Holder must be in writing.

 

f) Severability.  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 violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. 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 impede 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.

 

g) Next Business Day.  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.

h) Headings.  The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any
of the provisions hereof.

i) Assumption.  Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction, all of the
obligations of the Company under this Debenture and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to this Debenture, including, without limitation, having a principal amount and interest rate equal to the principal amount and the interest rate
of this Debenture and having similar ranking to this Debenture, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed).  The provisions of this Section 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture.

*********************

 

(Signature Pages Follow)

 

  

22

  

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

 

	 	
BEYOND COMMERCE, INC.
	 
	 	 	 	 
	
 
	
By: 
	 	 
	 	 	Name: Robert McNulty
Title: Chief Executive Officer
	 
	 	 	 	 
	 	 	 	 

 

  

23

  

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the [___ % [Original Issue Discount [Senior [Secured Convertible Debenture due [________ of [____________, a [____________ corporation (the “Company”), into
shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No
fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange Act.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Debenture to be Converted:

Payment of Interest in Common Stock __ yes  __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

Number of shares of Common Stock to be issued:

Signature:

Name:

Address for Delivery of Common Stock Certificates:

Or

DWAC Instructions:

Broker No:_____________________

Account No:___________________                                           

  

24

  

Schedule 1

CONVERSION SCHEDULE

The [____ % [Original Issue Discount [Senior [Secured Convertible Debentures due on [________ in the aggregate principal amount of $____________ are issued by [____________, a [________ corporation.  This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.

Dated:

	
 

 

Date of Conversion

(or for first entry, Original Issue Date)
	 
 

 

Amount of Conversion
	 
Aggregate Principal Amount Remaining Subsequent to Conversion

(or original Principal Amount)
	 
 

 

Company Attest

	  	  	  	  
	
 
	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  

 

25

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