Document:

ex4-4.htm

Exhibit 4.4

 

NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS AND NEITHER THIS DEBENTURE NOR ANY INTEREST THEREIN NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, IS AVAILABLE.

14.25% SECURED CONVERTIBLE DEBENTURE

 

	$  _______     	_________   ,2004

 

FOR VALUE RECEIVED, POWER2SHIP, INC., a Nevada corporation (the "Company"), hereby promises to pay to__________ (the "Holder") having an address at _____________ on December 31, 2006, or earlier upon prepayment of this Debenture as provided herein, the principal sum of ___________ DOLLARS ($______ ), together with simple interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid balance at the rate of fourteen and one-quarter percent (14.25%) per annum from the date hereof until the principal hereof shall have been paid.

The Company  shall  pay  interest  semi-annually in arrears on June 30 and December  31  of each year that any portion of the principal balance is unpaid. Interest payments  shall  commence  on  June  30,  2004.

All  payments  of  principal  and interest shall be made to the Holder in lawful currency  of the United States of America to the address set forth above or such other  address  as  to  which the Holder shall notify the Company in writing ten (10)  days  prior  to the due date of any payment or upon any prepayment of this Debenture  as  provided  herein.

Subject to and in compliance with the provisions hereof, the Holder may, at its  option,  convert all or any portion of the outstanding principal balance of this  Debenture,  and  all or any portion of the interest accrued hereon to such date,  into  shares  of  common  stock  of the Company (the "Common Stock") at a conversion price (the "Conversion Price") equal to the lesser of $0.80 per share or  90%  of  the  average  closing  bid  price  of  the  Common  Stock  on  the Over-the-Counter  Bulletin  Board  or  such other quotation system as the Common Stock  may  be  principally  quoted  for  the  ten (10) trading days immediately preceding  the  date  the  registration  statement  registering the Common Stock underlying  this  Debenture is declared effective by the Securities and Exchange Commission.  Notwithstanding the foregoing, if the registration statement is not declared  effective  by  the  one-year  anniversary  of the final closing of the Debentures,  then  the conversion price shall equal the lesser of $.80 per share or  90%  of the average closing bid price of the common stock for the 10 trading days  immediately preceding the one-year anniversary of the final closing of the Debentures,  but  in no event less than $0.25 per share. The Holder hereof shall communicate  its intention to convert all or any portion of the principal amount of  this  Debenture  and  all  or  any  portion of interest accrued through such conversion  date  by  surrendering  this  Debenture,  with the Form of Notice of Election to Convert attached as EXHIBIT "A" hereto duly completed and signed, to the  Company  at  its  address  for  notice  set  forth  elsewhere  herein.

The  Debenture  shall  automatically  convert  into  Common  Stock  upon satisfaction  of  the following conditions: (i) the Company is not in default of any  provision of this Debenture (not taking into account any cure period), (ii) the  Common Stock underlying the Debenture has been registered for sale with the Securities  and  Exchange  Commission  on  the  date  of such conversion and the Company  is  otherwise  in  compliance  with the terms of the Registration Right Agreement  (the "Registration Rights Agreement") of even date herewith and (iii) the  closing  bid  price of the Common Stock for the 20 consecutive trading days prior  to  conversion has been equal to at least 150% of the conversion price as determined  herein.  Upon satisfaction of such  conditions, the Company shall notify the Holder in writing of the conversion and shall promptly deliver to the Holder one or more stock certificates evidencing the Common Stock into which the Debenture  was  converted. Delivery of the stock certificates may be conditioned upon the Holder surrendering this Debenture or indemnifying the Company if such Debenture  is misplaced.

 

  

  

  

The Company may, at its option, redeem the outstanding portion of this Debenture as follows:

 

 

	Redemption Date: 	 	Redemption Price:	 
	 	 	 	 
	 	 	 	 
	Up to 1st Anniversary	 	

110% of outstanding principal balance in cash, plus an additional 10% of the outstanding principal balance in Common Stock, plus accrued but unpaid interest in cash

	 
	 	 	 	 
	After 1st Anniversary up to 2nd Anniversary   	 	

110% of outstanding principal balance in cash, plus an additional 5% of the outstanding principal balance in Common Stock, plus accrued but unpaid interest in cash

	 
	 	 	 	 
	After 2nd Anniversary up to 3rd Anniversary	 	

105% of outstanding principal balance in cash, plus an additional 5% of the outstanding principal balance in Common Stock, plus accrued but unpaid interest in cash

	 

For  the  purposes  of  the  preceding paragraph, the Common Stock shall be valued  at  the  average  closing  bid  price  of  the  Common  Stock  on  the Over-the-Counter  Bulletin  Board  or  such other quotation system as the Common Stock  may  be  principally  quoted  for  the  ten (10) trading days immediately preceding  the date the conversion becomes effective.  To so redeem, the Company shall provide written notice to the Holder of its intent to redeem, which notice shall specify the amount of the Debenture that the Company intends to redeem and the closing date (which shall be on the fifteenth (15) business day after the date  of  such  notice).  The Holder may, at its option, convert any portion of this  Debenture  after  the  date  of  the  written  notice,  provided that such conversions  are received by the Company at least two (2) business days prior to the  closing  date  specified  in  the  written  notice.

If the Holder elects to convert less than the entire principal amount of this Debenture and interest accrued to the date of such conversion, the Company shall issue or cause to be issued and delivered to the Holder, at its expense, a new Debenture evidencing the outstanding amount of principal due hereunder after giving effect to the amount applied to the conversion, which such Debenture shall, except as to the principal amount thereof, be identical to this Debenture in all respects.

If the Company, at any time while this Debenture is outstanding shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

  

  

  

If the Company shall (i) fail to make a payment of principal or interest when due; or (ii) make an assignment for the benefit of creditors, files a petition in bankruptcy, be adjudicated insolvent or bankrupt, suffers an order for relief under any federal bankruptcy law, petition or apply to any tribunal for the appointment of a custodian, receiver or any trustee for the Company or any substantial part of its assets, or (iii) commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statue of any jurisdiction, whether now or hereafter in effect; or (iv) have been filed any such petition or application, or any such proceeding shall have been commenced against the Company, which remains undismissed, unstayed or unbonded for a period of thirty (30) days or more; or (v) by any act or omission shall indicate consent to, approve or acquiescence in any such petition, application or proceeding or the appointment of a custodian, receiver or any trustee for all or any substantial part of its properties, or (vi) allow such custodianship, receivership, or trusteeship to continue undischarged, unstayed or unbonded for a period of thirty (30) days or more, or (vii) violate any term or provision of this Debenture (except as set forth in subsection (i) of this paragraph), the Security Agreements entered into between the Company and the Holders (the "Security Agreements") of even date herewith or the Registration Rights Agreement and same remains uncured for a period of ten (10) business days after notice thereof by the Holder (unless a longer cure period is set forth in any of the aforementioned agreements), then and in any such event, the outstanding principal amount of this Debenture, together with all accrued and unpaid interest thereon, shall be and become immediately due and payable. For purposes of (i), above, the payment of interest subsequent to its due date by withdrawal from the account established under one of the Security Agreements for the purpose of securing the payment of interest, shall be deemed to have been paid when due.

This  Debenture  is  secured  by  the  Security  Agreements.

All  notices  and other communications provided for herein shall be sent by certified  mail,  return  receipt  requested,  or  by  personal delivery or by a nationally  recognized  overnight courier to the Holder or the Company, at their respective  addresses  as set forth herein, or to such other address as to which either  party  may  advise  the  other  by  notice given in accordance with this provision. All such notices shall be deemed given upon the earlier of receipt or within  five  (5)  business  days  of  mailing  if  receipt  is  refused.

Notwithstanding  any other provision of this Debenture, interest under this Debenture  shall not exceed the maximum rate permitted by law; and if any amount is  paid  under  this Debenture as interest in excess of such maximum rate, then the amount so paid will not constitute interest but will constitute a prepayment on  account  of  the  principal  amount  of  this Debenture.  If at any time the interest rate under this Debenture would, but for the provision of the preceding sentence,  exceed  the  maximum  rate  permitted  by  law,  then the outstanding principal  balance  of  this  Debenture  shall,  on demand by the Holder of this Debenture,  become  and  be  due  and  payable.

All payments  under this Debenture shall be made without deduction for any taxes  of  any  nature  now  or  hereafter  imposed.

The provisions of  this  Debenture  shall  in  all  respects be construed according  to, and the rights and liabilities of the parties hereto and shall in all  respects  be governed by, the laws of the State of Florida.  This Debenture shall  be  deemed  a  contract made under the laws of the State of Florida to be fully  performed  therein, and the validity of this Debenture and all rights and liabilities  hereunder  shall be determined under the laws of said State without reference  to  the  conflicts  of  laws provisions thereof.  For purposes of any proceeding involving this Debenture, the Company and the Holder hereby submit to the  exclusive  jurisdiction  of  the  courts of the State of Florida and of the United  States  having  jurisdiction in the County of Broward, State of Florida, and  agree  not  to  raise  and waive any objection to or defense based upon the venue  of  any  such  court  or  based  upon  forum  non  conveniens.

 

  

  

  

In  the  event  this  Debenture  is  placed in the hands of an attorney for collection or for enforcement or protection of the security, or if Holder incurs any costs incident to the collection of the indebtedness evidenced hereby or the enforcement  or  protection of the security, the Company agrees to pay to Holder all  reasonable  attorneys'  fees so incurred, all court and other costs and the reasonable  costs  of any other collection efforts, including all costs incurred in  collecting  any judgment and in any appellate or bankruptcy proceeding.  The Company  agrees  to  pay  any documentary stamp taxes, intangible taxes or other taxes  which may now or hereafter apply to this Debenture or any payment made in respect  of  this  Debenture.

No delay or omission on the part of the Holder in the exercise of any right hereunder shall  operate  as a waiver of such right or of any other right under this  Debenture.  A  waiver by the Holder of any right or remedy conferred to it hereunder  on any one occasion shall not be construed as a bar to, or waiver of, any  such  right  and/or  remedy as to any future occasion.  The Company and all persons  now or hereafter becoming obligated or liable for the payment hereof do jointly  and  severally  waive demand, notice of non-payment, protest, notice of dishonor  and  presentment.  No failure to accelerate the indebtedness evidenced hereby  by  reason of default hereunder, acceptance of a past-due installment or other indulgences granted from time to time, shall be construed as a novation of this  Debenture  or as a waiver of such right of acceleration or of the right of the  Holder  thereafter  to insist upon strict compliance with the terms of this Debenture  or to prevent the exercise of such right of acceleration or any other right  granted  hereunder  or  by  applicable  law.

This  Debenture may be amended only by a written instrument executed by the Company  and  the  Holder.

THE COMPANY  HEREBY  KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT WHICH  IT  MAY  HAVE TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION  BASED  HEREON, OR ARISING OUT OF, UNDER OR IN ANY WAY CONNECTED WITH THE DEALINGS  BETWEEN  THE  HOLDER AND THE COMPANY, THIS DEBENTURE, OR ANY DOCUMENTS EXECUTED  IN  CONNECTION  HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS  (WHETHER  ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,  EQUITY  OR  OTHERWISE.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDERS EXTENDING THE  LOAN  EVIDENCED  BY  THIS  DEBENTURE.

 

 

 

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SIGNATURE PAGE FOLLOWS

  

  

  

IN WITNESS WHEREOF, POWER2SHIP, INC. has caused this 14.25% Secured Convertible Debenture to be executed in its corporate name by its Chief Executive Officer, thereunto duly authorized.

Dated:   ____________,  2004

                              THE COMPANY:  ________________

                                   POWER2SHIP, INC.

                       By:   /s/ Richard Hersch

                                      Richard  Hersh

  

  

  

 

EXHIBIT "A"

NOTICE OF CONVERSION

(To be Executed by the Holder in order to Convert this Debenture)

The undersigned hereby elects to convert the attached 14.25% Secured Convertible Debenture into shares of common stock (the "Common Stock"), of Power2Ship, Inc. (the "Company") according  to  the  conditions  hereof, as of the date written below.  If  shares  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.

Conversion calculations:

	 	 
	 	Date to Effect Conversion
	 	 
	 	

 Principal Amount of Debenture to be Converted

	 	 
	 	Payment of Interest  in  Kind	[ ] Yes
	 	 	[ ] No
	 	 
	 	If  yes,  $_______  of  Interest  Accrued  on Account of Conversion at Issue
	 	 
	 	 
	 	Number of shares of Common Stock to be Issued
	 	 
	 	 
	 	Applicable  Conversion  Price
	 	 
	 	 
	 	Signature
	 	 
	 	 
	 	Name
	 	 
	 	 
	 	Addressex4-5.htm

Exhibit 4.5

 

 

NEITHER THIS NOTE NORE THE SECURITIES INTO WHICH THIS NOTE 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 “SECURTIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN AN TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

	No. _______  	 $_______

 

 

NuState Energy Holdings, Inc.

12% Convertible Note

Due ____________

This 12% Convertible Note (“this note”) is issued by NuState Energy Holdings, Inc., a Nevada corporation (the “Obligor”), to ____________ (the “Holder”).

FOR VALUE RECEIVED, the Obligor hereby promises to pay to the Holder or his, her or its successors and assigns the principal sum of _____________ Dollars ($_______) together with accrued by unpaid interest on or before November ____, 2011 (the “Maturity Date”) in accordance with the following terms:

Interest shall accrue on the outstanding principal balance hereof at an annual rate equal to Twelve (12%). Interest shall be calculated as simple interest on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid to the Holder (such reference and all subsequent references to the “Holder” shall include his, her or its permitted and recognized successors and assigns) in whose name this Note is registered on the records of the Obligor regarding registration and transfers of Notes. In the event a portion or all of this Note is converted into the Obligor’s common stock (“Common Stock”) and share purchase warrants pursuant to Section 3 below, a pro rata portion (based on the percentage of this Note converted) of the accrued interest shall be due immediately. All accrued interest not paid in accordance with preceding sentence shall be paid on the Maturity Date.

This Note is subject to the following additional provisions (including the defined terms in Section 5 below that are spelled in title case letters –i.e. initial capital letters):

Section 1.  Right of Redemption.  The Obligor at its option shall have the right, by giving thirty (30) days advance written notice (the “Redemption Notice”) to the Holder, to redeem a portion or all amounts outstanding under this Note prior to the Maturity Date. In such event, the Obligor shall pay an amount equal to the principal amount being redeemed plus a pro rata portion (based upon the percentage of this Note being redeemed) of accrued interest (collectively referred to as the “Redemption Amount”). The Obligor shall deliver to the Holder the Redemption Amount on the thirtieth (30th) business day after the Redemption Notice.

Section 2.  Events of Default.

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

 

  

  

  

(i)            Any default in the payment of the principal of, interest on, or other charges in respect of this Note, free of any claim of subordination, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) and such payment is not paid within thirty (30) days after delivery of written notices to Obligor of such failure to pay;

(ii)           The Obligor shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Note (except as may be covered by Section 2(a)(i) hereof) or any Transaction Document (as defined in Section 6 below) which is not cured within the time prescribed; or

(iii)          The Obligor or any subsidiary of the Obligor shall commence, or there shall be commenced against the Obligor or any subsidiary of the Obligor, a proceeding under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Obligor or any subsidiary of the Obligor shall commence any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction, whether now or hereafter in effect, relating to the Obligor or any subsidiary of the Obligor; or there is commenced against the Obligor or any subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of sixty-one (61) days; or the Obligor or any subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order of relief or other order approving such case or proceeding is entered; or the Obligor or any subsidiary of the Obligor suffers any appointment of any custodian, private or court appointed receiver or the link for it or any substantial part of its property, which continues undischarged or unstayed for a period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor makes a general assignment for the benefit of creditors; or the Obligor or any subsidiary of the Obligor shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Obligor or any subsidiary of the Obligor shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Obligor or any subsidiary of the Obligor for the purpose of effecting any of the foregoing.

(b)           During the time that any portion of this Note is outstanding, if any Event of Default has occurred, the full principal amount of this Note, together with interest and other amounts owing in respect thereof to date of acceleration, at the Holder’s election, shall become immediately due and payable in cash. In addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Note at any time after an Event of Default at the Conversion Price (as defined in Section 3(b)(i) below). The Holder need not provide and the Obligor hereby waives any presentment, demand, protest, or other notice of any kind; and immediately and without expiration of any grace period, the Holder may enforce any and all rights and remedies hereunder and all other remedies available under applicable law. Furthermore, a declaration of an Event of Default may be rescinded and annulled by the Holder at any time prior to payment hereunder. No such rescission or annulment shall affect or impair any of the Holder’s rights with respect to any subsequent Event of Default.

Section 3.              Conversion

(a)           Conversion at Option of Holder.

(i)            This Note shall be convertible into shares of Common Stock and share purchase warrants at the option of the Holder, in whole or in part at any time and from time to time, after the Original Issue Date (as defined in Section 5 below). The Holder shall be entitled to one warrant for every two common shares issued. The warrants shall have an expiry term of three years and an exercise price of $0.025 per share. A partial conversion shall be at least in the amount of Ten Thousand Dollars ($10,000) of principal under this Note. The number of shares of Common Stock that may be issued upon a conversion hereunder equals the quotient obtained by dividing (x) the outstanding amount of this Note to be converted by (y) the Conversion Price (as defined in Section 3(b)(i) below). The Obligor shall deliver the applicable stock certificate to the Holder prior to the close of the thirtieth (30th) day after a Conversion Date.

 

  

  

  

(ii)           The Holder shall effect conversions by delivering to the Obligor a completed notice in the form attached hereto as Exhibit “A” (a “Conversion Notice”). The date on which a Conversion Notice is delivered is the “Conversion Date.” The Holder shall physically surrender this Note to the Obligor in order to effect a conversion, whether a partial conversion or a total conversion. In the event of a partial conversion, in order to reflect the reduction in the outstanding principal amount of this Note and the reduction in the accrued and unpaid interest, the Obligor shall prepare and deliver to the Holder a new Note, identical in all respects to the surrendered Note except for the principal amount outstanding reflected on the first page hereof. Such replacement Note (resulting from the partial conversion) shall be delivered to the Holder prior to the close of the fifteenth (15th) day after the applicable Conversion Date.

(b)           Conversion Price and Adjustments to Conversion Price.

(i)            The conversion price in effect on any Conversion Date shall be equal to 80% of the average closing price of the Common Stock for the 30 trading days immediately preceding the date Subscriber submits a Conversion Notice to the Company, as adjusted pursuant to the other terms of this Section 3(b) (the “Conversion Price”). Notwithstanding the foregoing, in no event shall the Conversion Price per share be less than $0.005 or more than $0.10.

(ii)           If the Obligor or any subsidiary thereof, as applicable, at any time while this Note is outstanding, shall issue shares of Common Stock or rights, warrants, options, or other securities or debt that are convertible into or exchangeable for shares of Common Stock (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price, then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustments shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment to the Conversion Price shall be made (A) upon the exercise of any warrants, options or convertible securities granted, issued and outstanding on the Original Issue Date or upon the conversion of any of the $500,000 in notes issued by the Obligor in the note offering that included this Note; (B) upon the grant or exercise of any stock or options which may hereafter be granted or exercised under any option plan, restricted stock plan or employee benefit plan of the Obligor now existing or to be implemented in the future, so long as the issuance of such stock or options is approved by a majority of the members of the Board of Directors of the Obligor; and (C) as long as the valuation of the Common Stock subsequently issued or any other securities convertible into Common Stock that are subsequently issued is at least equal to the Conversion Price, regardless of whether the issuance of securities pertains to the settlement of a debt, the consideration for a merger, consolidation or purchase of assets, strategic alliance, business relationship, partnership or joint venture (in each case, the primary purpose of which is not to raise equity capital), or in connection with the disposition or acquisition of a business, product or license by the Obligor.

 

  

  

  

(iii)          If the Obligor, at any time while this Note is outstanding, shall (a) pay a stock or dividend or otherwise make a distribution or distribtuions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combined (including by way of reverse stock split) outstanding shares of Common Stock into a small number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Obligor, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, or combination or re-classification.

(iv)           If the Obligor, at any time while this Note is outstanding, shall issue rights, options, or warrants (a “Dilutive Option”) to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Price, then the Conversion Price shall be reduced to the Exercise Price of such Dilutive Option. 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 Dilutive Option. However, upon the expiration of any such Dilutive Option to purchase shares of the Common Stock the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section, if any such right, option or warrant shall not have been exercised, immediately upon such expiration, the Conversion Price shall be recomputed. Effective immediately upon such expiration, the Conversion Price shall be increased to the price which it would have been had the adjustment of the Conversion Price due to the expired right, option or warrant causing the decrease in the Conversion Price not occurred; however such increase in the Conversion Price shall only apply to the extent such rights, options or warrants were not exercised prior to their expiration.

(v)            In case of any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, the Holder shall have the right thereafter to, at his, her or its option, to : (A) convert the then outstanding principal amount, together with all accrued but unpaid interest and any other amounts then owing hereunder in respect of this Note into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of the Common Stock following such reclassification or share securities, cash or property as the shares of the Common Stock of the Obligor into which the then owing hereunder in respect of this Note could have been converted immediately prior to such outstanding principal amount of this Note, or (B) require the Obligor to prepay the outstanding principal amount of this Note, plus all interest and other amounts due and payable thereon. The entire prepayment price shall be paid in cash. This provision shall similarly apply to successive reclassifications or share exchanges.

(vi)           The Obligor shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock to be issued upon conversion of all outstanding amounts under this Note; and within sixty (60) calendar days following the receipt by the Obligor or a Holder’s notice that such minimum number of Underlying Shares is not so reserved, the Obligor shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement.

 

  

  

  

(vii)         All calculations under this Section 3 shall be rounded up to the neared $0.001 or whole share of Common Stock.

(viii)        In case of any (1) merger or consolidation of the Obligor or any subsidiary of the Obligor with or into Person, or (2) sale by the Obligor or any subsidiary of the Obligor of more than one-half of the assets of the Obligor in one or a series of related transactions, a Holder shall have the right to: (A) convert the aggregate amount of this Note then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate principal amount of this Note could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (B) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible note with a principal amount equal to the aggregate principal amount of this Note then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible note shall have terms identical (including those with respect to conversion) to the terms of this note, and shall be entitled to all of the rights and privileges of the Holder of this Note set forth herein and the agreements pursuant to which this Notes were issued. In the case of Clause (B) above, the conversion price applicable for the newly issued shares of convertible preferred stock or convertible notes shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

(d)           No Taxes on Certificates. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate.

Section 4.              Exchange. In the event that (a) the Obligor shall issue any convertible debt instrument (“New Convertible Debt Security”) to any other Person after the final Closing and (b) such New Convertible Debt Security includes, and is issued pursuant to, different terms and conditions than this Notes, the Obligor shall have the option, in its sole discretion, to exchange such New Convertible Debt Security for this Note (an “Exchange”); provided, however, that no Exchange will be permitted if the New Convertible Debt Security includes or is issued pursuant to terms and conditions that are less favorable economically in the aggregate to the Holder (as determined by a majority of the independent members of the Board). Upon an Exchange, the Holder also shall be assigned all rights (and assume all obligations) provided in the definitive agreements pursuant to which the New Convertible Debt Security was sold.

Section 5.              Definitions.       For the purposes hereof, the following terms shall have the following meanings:

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

 

  

  

  

“Common Stock” means the common stock, no par value, of the Obligor and stock of any other class into which such shares may hereafter be changed or reclassified.

“Conversion Date” shall mean the date upon which the Holder gives the Obligor notice of their intention to effectuate a conversion of this Note into shares of the Common Stock as outlined herein.

“Original Issue Date” shall mean the date of the first issuance of this Note regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Note.

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“Transaction Documents” means this Note or any other agreement including, without limitation, the Security Agreement and the Warrants.

“Underlying Shares” means the shares of Common Stock issuable upon conversion of this Note or as payment of interest in accordance with the terms hereof.

Section 6.              Notices.      Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally; or (b) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party). The addresses and facsimile numbers of such communications shall be:

If to the Obligor, to:                                            NuState Energy Holdings, Inc.

1201 Main Street, Suite 1980

Columbia, SC 29201

Attn: S. Kevin Yates

Fax No.: (866) 695-9680

If to the Holder:                                                   To the address set forth under such Purchaser’s name on the signature pages attached hereto.

Or at such other address and facsimile number and to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile, or receipt from a nationally recognized overnight delivery service in accordance with Clauses (i), (ii) or (iii) above, respectively.

Section 7.              No Stockholder Rights. This Note shall not entitle the Holder to any of the rights of a stockholder of the Obligor, including without limitation, the right to vote, to receive dividends or other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Obligor, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

  

  

  

Section 8.              Replacement.  If this Note is mutilated, lost, stolen or destroyed, the Obligor shall execute and deliver, in exchange and substitution for and upon cancellation of the mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft, or destruction of such note, and of the ownership hereof, a payment for the cost to Obligor of such replacement and related verifications, and an agreement to indemnify Obligor for any resulting claims, all reasonably satisfactory to the Obligor.

Section 9.              Ranking; Seniority.  This Note is a direct obligation of the Obligor. This note ranks pari passu with all other Notes included in the $500,000 aggregate offering of such securities now or hereafter issued under the terms set forth herein. No indebtedness of the Obligor is senior to this Note in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise. Without the Holder’s consent, the Obligor shall not and shall not permit any of their subsidiaries to, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest herein or any income or profits there from that is senior in any respect to the obligations of the Obligor under this Note.

Section 10.            Enforcement Expenses.  If the Obligor fails to strictly comply with the terms of this Note, then the Obligor shall reimburse the Holder promptly for all reasonable fees, costs and expenses, including, without limitation, reasonable attorneys’’ fees and expenses of the Holder in any action in connection with this Note that are incurred; (a) during any workout, attempted workout, and in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations; (b) collecting any sums which become due to the Holder; (c) defending or prosecuting any proceeding or any counterclaim to any proceeding or appear; or (d) the protection, preservation or enforcement of any rights or remedies of the Holder.

Secion 11.             Waiver.  Any waiver by the Holder of a breach of any provision of this Note 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 Note. The failure of the Holder to insist upon strict adherence to any term of this Note 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 Note. Any waiver must be in writing.

Section 12.            Severability.  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision in inapplicable to any person or circumstance, it shall nevertheless remain inapplicable to all other person and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Obligor 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 Obligor from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note.

 

  

  

  

Section 13.            Payment Dates.  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.

Section 14.            WAIVER OF TRIAL BY JURY. THE PARTIES HEREBY KNOWLINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

Section 15.            Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Florida, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the state courts of the State of Florida sitting in Miami-Dade County, Florida in connection with any dispute arising under this Note and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

IN WITNESS WHEREOF, the Obligor has caused this Note to be duly executed by a duly authorized officer as of the date set forth above.

 

	 	

NuState Energy Holdings, Inc.

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
By: 

	/s/ Kevin Yates	 
	 	Name:	S. Kevin Yates	 
	 	Title:	Chairman of the Board

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