Document:

ex10-42.htm

    
      

      

    

    Exhibit
10.42

     

     

    
      THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”) OR UNDER THE
SECURITIES LAWS OF ANY STATE OR JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR
SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION, IN
REASONABLY ACCEPTABLE FORM AND SCOPE, OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY, THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED
UNDER ANY SUCH LAWS.

       

      GENERAL
ENVIRONMENTAL MANAGEMENT, INC.

       

      AMENDED
AND RESTATED

      WARRANT
TO PURCHASE SHARES OF COMMON STOCK

      (Expires
August 31, 2014)

       

      
        
          
            	
                    Warrant No. CV-4

                  	
                    2,700,000
      Shares of Common Stock

                  

          

        

      

       

      FOR VALUE
RECEIVED, subject to the provisions set forth below, the undersigned, GENERAL
ENVIRONMENTAL MANAGEMENT, INC., a Nevada corporation (the “Company”), hereby certifies
that CVC California, LLC,
a Delaware limited liability company, or its registered assigns (the
“Holder”), is entitled
to purchase from the Company up to Two Million Seven Hundred Thousand
(2,700,000) fully paid and nonassessable shares (the “Warrant Shares”) of the
Company’s common stock, $.001 par value per share (the “Common Shares”), for cash at a
price of $0.01 per share (the “Exercise Price”) at any time
and from time to time from and after the date hereof and until 5:00 p.m.
(Pacific time) on August 31, 2014 (the “Expiration Date”) upon
surrender to the Company at its principal office (or at such other location as
the Company may advise the Holder in writing) of this Warrant properly endorsed
with the Notice of Exercise attached hereto duly filled in and signed and, if
applicable, upon payment in cash or by check of the aggregate Exercise Price for
the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof.  The Exercise Price and the
number of shares purchasable hereunder are subject to adjustment as provided in
Section 3 of this Warrant.

       

      1.           Exercise
of Warrant.

       

      1.1.           Exercise.  This
Warrant shall be exercisable at any time and from time to time from the date
hereof until the Expiration Date, and this Warrant shall expire on the
Expiration Date.  Upon exercise of this Warrant, the Exercise Price
shall be payable in cash or by check.  This Warrant may be exercised
in whole or in part so long as any exercise in part hereof would not involve the
issuance of fractional Warrant Shares.  If exercised in part, the
Company shall deliver to the Holder a new Warrant, identical in form to this
Warrant, in the name of the Holder, evidencing the right to purchase the number
of Warrant Shares as to which this Warrant has not been exercised, which new
Warrant shall be signed by an appropriate officer of the Company.  The
term “Warrant” as used herein shall include any subsequent Warrant issued as
provided herein.

       

      
        
          
          

        

        
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      1.2.           Exercise
Procedures; Delivery of Certificate.  Upon
surrender of this Warrant with a duly executed Notice of Exercise in the form of
Annex A
attached hereto, together with payment of the Exercise Price for the Warrant
Shares purchased, at the Company’s principal executive offices (the “Designated Office”), the
Holder shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased.  The Company agrees that the Warrant
Shares shall be deemed to have been issued to the Holder as of the close of
business on the date on which this Warrant shall have been surrendered together
with the Notice of Exercise and payment for such Warrant Shares.

       

      1.3.           Cashless
Exercise.  In
connection with any exercise of this Warrant, in lieu of payment of the Exercise
Price in cash, the Holder may exercise this Warrant, in whole or in part, by
presentation and surrender of this Warrant to the Company, together with a
Cashless Exercise Form in the form attached hereto as Annex B (or a
reasonable facsimile thereof) duly executed (a “Cashless
Exercise”).  Such presentation and surrender shall be in lieu
of the Holder's obligation to pay all or any portion of the Exercise Price, as
the case may be.  In the event of a Cashless Exercise, the Holder
shall exchange this Warrant for that number of Common Shares determined by
multiplying the number of Common Shares for which this Warrant is being
exercised by a fraction, (a) the numerator of which shall be the difference
between (i) the then current market price per Common Share, and (ii) the
Exercise Price, and (b) the denominator of which shall be the then current
market price per Common Share.  For purposes of any computation under
this Section l.3, the then current market price per Common Share at any date
shall be deemed to be the average of the daily trading price for the ten (10)
consecutive trading days immediately prior to the Cashless
Exercise.  If, during such measuring period, there shall occur any
event which gives rise to any adjustment of the Exercise Price, then a
corresponding adjustment shall be made with respect to the closing prices of the
Common Shares for the days prior to the Effective Date of such adjustment
event.  As used herein, the term “trading price” on any relevant date
means (A) if the Common Shares are listed for trading on the New York Stock
Exchange, the American Stock Exchange, the Nasdaq Global Market, the Nasdaq
Select Market (or any replacement Nasdaq market), the closing sale price (or, if
no closing sale price is reported, the last reported sale price) of the Common
Shares (regular way), or (B) if the Common Shares are not so listed but
quotations for the Common Shares are reported on the OTC Bulletin Board, the
most recent closing price as reported on the OTC Bulletin Board.

       

      1.4.           Put
Option.

       

      (a)           In
the event that and at such time as the Company or any of its subsidiaries or
stockholders enters into a binding agreement with respect to any Sale (as such
term is defined in the Amended and Restated Revolving Credit and Term Loan
Agreement dated as of September 4, 2009 by and between CVC California, LLC and
the Company (the “Loan
Agreement”)) or (if sooner) on that date which is thirty (30) days prior
to any payment or required payment in full of the Obligations (as such term is
defined in the Loan Agreement) (exclusive of obligations under this Section
1.4), the Company shall, in addition to any notice required under the Loan
Agreement, give written notice to the Holder (and/or, if applicable, the holder
of the Warrant Shares) setting forth in reasonable detail the circumstances and
material terms of the subject Sale agreement or the pendency of such payment (as
the case may be).  Subject to and in accordance with the provisions of
this Section 1.4, the Holder (which term, for purposes of this Section 1.4,
shall include each holder of Warrant Shares) shall have the right and option
(the “Put Option”),
exercisable effective at any time upon or after the consummation of such Sale or
payment, or upon and after the occurrence and during the continuance of an Event
of Default (as such term is defined in the Loan Agreement) or any other event or
circumstance which causes, effects or requires any payment in full under the
Loan Agreement (such Sale, payment in full, Maturity Date or Event of Default,
each a “Triggering
Event”) and until the Expiration Date, to require the Company to redeem
and purchase any or all Warrant Shares or rights to purchase Warrant Shares
hereunder, for a cash purchase price of $0.75 per Warrant Share or per right to
purchase a Warrant Share hereunder (the “Option Purchase Price”), such
Option Purchase Price to be subject to adjustment from time to time in respect
of any events as described in Section 3.2 below; and to the extent that, in
accordance with Section 3 below, the Holder’s rights upon exercise of this
Warrant would include the right to acquire other securities or property, then
the exercise of the Put Option shall also constitute a put to the Company of
such corresponding other securities or property.

       

      
        
          
          

        

        
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      (b)           The
Put Option shall be exercisable by the Holder providing a completed Put Option
exercise form in the form attached hereto as Annex C (or a
reasonable facsimile thereof) duly executed, to the Company at the Designated
Office, not less than ten (10) days prior to the Holder’s required date of
payment as set forth in such exercise form.  Upon payment of the
Option Purchase Price by the Company to the Holder, the Holder shall surrender
this Warrant (and/or the certificate(s) representing the subject Warrant Shares,
as applicable) to the Company, against delivery to the Holder of a replacement
Warrant (and/or certificate(s) representing Warrant Shares, as applicable)
representing the portion (if any) of this Warrant or the Warrant Shares (as
applicable) not purchased by the Company hereunder.

       

      (c)           In
the event that any proposed Sale, refinancing or repayment which gave rise to
the exercise of the Put Option is abandoned or is not consummated, then such
exercise of the Put Option shall be null and void ab initio, and the Put
Option shall thereafter be applicable and exercisable in connection with any
subsequent proposed Sale or other Triggering Event, in accordance with this
Section 1.4

       

      (d)           In
the event that the Put Option is exercised at or prior to the time of the
repayment in full of the other Obligations (as such term is defined in the Loan
Agreement), then the applicable Option Purchase Price shall constitute
Obligations which shall be secured by all Guaranties and Collateral (as such
terms are defined in the Loan Agreement) then securing the
Obligations.

       

      2.           Transfer;
Issuance of Stock Certificates; Restrictive Legends.

       

      2.1.           Transfer.  Each
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
subject to and effected in compliance with any and all applicable securities
laws, and shall be registered on the books of the Company to be maintained for
such purpose, upon surrender of this Warrant at the Designated Office, together
with a written assignment of this Warrant in the form of Annex D attached
hereto duly executed by the Holder or its agent or attorney.  Upon
such surrender and delivery, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, if
any.  A Warrant may be exercised by the new Holder for the purchase of
Warrant Shares without having a new Warrant issued.  Prior to due
presentment for registration of transfer thereof, the Company may deem and treat
the registered Holder of this Warrant as the absolute owner hereof
(notwithstanding any notations of ownership or writing thereon made by anyone
other than a duly authorized officer of the Company) for all purposes and shall
not be affected by any notice to the contrary.  All Warrants issued
upon any assignment of Warrants shall be the valid obligations of the Company,
evidencing the same rights and entitled to the same benefits as the Warrants
surrendered upon such registration of transfer or exchange.

       

      
        
          
          

        

        
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      2.2.           Stock
Certificates.  Certificates
for the Warrant Shares shall be delivered to the Holder within five (5) Business
Days (as such term is defined in the Loan Agreement described in Section 3.7(a)
below) after the rights represented by this Warrant shall have been exercised
pursuant to Section 1, and a new Warrant representing the right to purchase the
Common Shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the Holder within such
time.  The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the Holder hereof
including, without limitation, any documentary, stamp or similar tax that may be
payable in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance or delivery of any such certificate in a
name other than that of the Holder, and the Company shall not be required to
issue or deliver such certificate unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of any
such tax or shall have established to the satisfaction of the Company that any
such tax has been paid; and further provided, that the
Company shall not be required to pay any income tax to which the Holder hereof
may be subject in connection with the issuance of this Warrant or the Warrant
Shares.

       

      2.3.           Restrictive
Legend. Except
as otherwise provided in this Section 2, each certificate for Warrant Shares
initially issued upon the exercise of this Warrant and each certificate for
Warrant Shares issued to any subsequent transferee of any such certificate,
shall be stamped or otherwise imprinted with a legend in substantially the
following form:

       

      “THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION IN FORM AND FROM COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.”

       

      Notwithstanding
the foregoing, the legend requirements of this Section 2.3 shall terminate as to
any particular Warrant Shares when (i) such Warrant Shares are transferred
pursuant to an effective resale registration statement, as contemplated in the
Registration Rights Agreement dated as of August 31, 2008 (the “Registration Rights
Agreement”) executed by the Company in favor of the Holder, or
(ii) the Company shall have received from the Holder thereof an opinion of
counsel in form and substance reasonably acceptable to the Company that such
legend is not required in order to ensure compliance with the Securities
Act.  Whenever the restrictions imposed by this Section 2.3 shall
terminate, the Holder or subsequent transferee, as the case may be, shall be
entitled to receive from the Company without cost to such Holder or transferee a
certificate for the Warrant Shares without such restrictive legend.

       

      
        
          
          

        

        
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      3.           Adjustment
of Number of Shares; Exercise Price; Nature of Securities Issuable Upon Exercise
of Warrants.

       

      3.1.           Exercise
Price; Adjustment of Number of Shares.  The
Exercise Price and the number of shares purchasable hereunder shall be subject
to adjustment from time to time as hereinafter provided; provided, however, that,
notwithstanding the below, in no case shall the Exercise Price be reduced to
below the par value per share of the class of stock for which this Warrant is
exercisable at such time.

       

      3.2.           Adjustments
Upon Distribution, Subdivision or Combination.  If
the Company, at any time or from time to time after the issuance of this
Warrant, shall (a) make a dividend or distribution on its Common Shares
payable in Common Shares, (b) subdivide or reclassify the outstanding
Common Shares into a greater number of shares, or (c) combine or reclassify
the outstanding Common Shares into a smaller number of shares, the Exercise
Price in effect at that time and the number of Warrant Shares into which the
Warrant is exercisable at that time shall be proportionately adjusted effective
as of the record date for the dividend or distribution or the effective date of
the subdivision, combination or reclassification.

       

      3.3.           Adjustment
Upon Other Distributions.  If
the Company, at any time or from time to time after the issuance of this
Warrant, makes a distribution to the holders of Common Shares which is payable
in securities of the Company other than Common Shares, then, in each such event,
provision shall be made so that the Holder shall receive upon exercise of this
Warrant, in addition to the number of Warrant Shares, the amount of such
securities of the Company which would have been received if the portion of the
Warrant so exercised had been exercised for Warrant Shares on the date of such
event, subject to adjustments subsequent to the date of such event with respect
to such distributed securities which shall be on terms as nearly equivalent as
practicable to the adjustments provided in this Section 3 and all other
adjustments under this Section 3.

       

      3.4.           Adjustment
Upon Merger, Consolidation or Exchange.  If
at any time or from time to time after the issuance of this Warrant there occurs
any merger, consolidation, arrangement or statutory share exchange of the
Company with or into any other person or company, then, in each such event,
provision shall be made so that the Holder shall receive upon exercise of this
Warrant the kind and amount of shares and other securities and property
(including cash) which would have been received upon such merger, consolidation,
arrangement or statutory share exchange by the Holder if the portion of this
Warrant so exercised had been exercised for Warrant Shares immediately prior to
such merger, consolidation, arrangement or statutory share exchange, subject to
adjustments for events subsequent to the effective date of such merger,
consolidation, arrangement or statutory share exchange with respect to such
shares and other securities which shall be on terms as nearly equivalent as
practicable to the adjustments provided in this Section 3 and all other
adjustments under this Section 3.

       

      
        
          
          

        

        
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      3.5.           Adjustments
for Recapitalization or Reclassification.  If,
at any time or from time to time after the issuance of this Warrant, the Warrant
Shares issuable upon exercise of this Warrant are changed into the same or a
different number of securities of any class of the Company, whether by
recapitalization, reclassification or otherwise (other than a merger,
consolidation, arrangement or statutory share exchange provided for elsewhere in
this Section 3), then, in each such event, provision shall be made so that
the Holder shall receive upon exercise of this Warrant the kind and amount of
securities or other property which would have been received in connection with
such recapitalization, reclassification or other change by the Holder if the
portion of this Warrant so exercised had been exercised immediately prior to
such recapitalization, reclassification or change, subject to adjustments for
events subsequent to the effective date of such recapitalization,
reclassification or other change with respect to such securities which shall be
on terms as nearly equivalent as practicable to the adjustments provided in this
Section 3 and all other adjustments under this Section 3.

       

      3.6.           Extraordinary
Dividends or Distributions.  If,
at any time or from time to time after the issuance of this Warrant, the Company
shall declare a dividend or any other distribution upon the Common Shares
payable otherwise than out of current earnings, retained earnings or earned
surplus and otherwise than in Common Shares, then the Exercise Price in effect
immediately prior to such declaration shall be reduced by an amount equal, in
the case of a dividend or distribution in cash, to the amount thereof payable
per Common Share or, in the case of any other dividend or distribution, to the
value thereof per Common Share at the time such dividend or distribution was
declared, as determined by the Board of Directors of the Company in good
faith.  Such reductions shall take effect as of the date on which a
record is taken for the purposes of the subject dividend or distribution, or, if
a record is not taken, the date as of which the holders of record of Common
Shares entitled to such dividend or distribution are to be
determined.

       

      3.7           Adjustment
Upon Certain Issuances of Common Stock.

       

      (a)           If
the Company, at any time or from time to time, issues or sells any Additional
Shares of Common Stock (as defined below), other than as provided in the
foregoing subsections of this Section 3, for a price per share (which, in
the case of options, warrants, convertible securities or other rights, includes
the amounts paid therefor plus the exercise price, conversion price or other
such amounts payable thereunder) that is less than the
Exercise Price then in effect, then and in each such case, the then applicable
Exercise Price shall automatically be reduced as of the opening of business on
the date of such issue or sale, to a price determined by multiplying the
Exercise Price  then in effect by a fraction (i) the numerator of
which shall be (A) the number of Common Shares deemed outstanding (as
determined below) immediately prior to such issue or sale, plus (B) the
number of Common Shares which the aggregate consideration received by the
Company for the total number of Additional Shares of Common Stock so issued
would purchase at the Exercise Price then in effect, and (ii) the
denominator of which shall be the number of Common Shares deemed outstanding (as
defined below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued; provided, however, that upon
the expiration or other termination of options, warrants or other rights to
purchase or acquire Common Shares which triggered any adjustment under this
Section 3.7, and upon the expiration or termination of the right to convert or
exchange convertible or exchangeable securities (whether by reason of redemption
or otherwise) which triggered any adjustment under this Section 3.7, if any
thereof shall not have been exercised, converted or exchanged, as applicable,
the number of Common Shares deemed to be outstanding pursuant to this
Section 3.7(a) shall be reduced by the number of shares as to which
options, warrants, and rights to purchase or acquire Common Shares shall have
expired or terminated unexercised, and as to which conversion or exchange rights
shall have expired or terminated unexercised, and such number of shares shall no
longer be deemed to be outstanding; and the Exercise Price then in effect shall
forthwith be readjusted and thereafter be the price that it would have been had
adjustment been made on the basis of the issuance only of the Common Shares
actually issued.  For purposes of the preceding sentence, the number
of Common Shares deemed to be outstanding as of a given date shall be the sum of
(x) the number of Common Shares actually outstanding, (y) the number
of Common Shares for which this Warrant could be exercised on the day
immediately preceding the given date, and (z) the number of Common Shares
which could be obtained through the exercise or conversion of all other rights,
options and convertible securities outstanding on the day immediately preceding
the given date.  For purposes hereof, “Additional Shares of Common
Stock” shall mean all Common Shares, and all options, warrants,
convertible securities or other rights to purchase or acquire Common Shares,
issued by the Company other than (i) any Common Shares issued by the
Company upon conversion of the Convertible Term Note issued pursuant to the Loan
Agreement, (ii) Common Shares issued pursuant to the exercise of options,
warrants or convertible securities outstanding on September 4, 2009 or hereafter
issued from time to time pursuant to and in accordance with stock purchase or
stock option plans as in effect on September 4, 2009, and (iii) additional
Common Shares and/or options, warrants, or other Common Share purchase rights
for up to an aggregate of 2,000,000 Common Shares (such number to be subject to
adjustment in accordance with Section 3.2 above), provided that, in each case,
such options, warrants or other rights (A) have an exercise price per Common
Share equal to or greater than the then-current fair market value of a Common
Share, as determined in good faith by the Board of Directors of the Company or
the Compensation Committee thereof, and (B) are issued to employees,
officers or directors of, or consultants to, the Company or any subsidiary of
the Company pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Company’s Board of Directors or the
Compensation Committee thereof, and by the Company’s
stockholders.

       

      
        
          
          

        

        
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      (b)           In
the event that the exercise price, conversion price, purchase price or other
price at which Common Shares are purchasable pursuant to any options, warrants,
convertible securities or other rights to purchase or acquire Common Shares is
reduced at any time or from time to time (other than under or by reason of
provisions designed to protect against dilution), then, upon such reduction
becoming effective, the Exercise Price then in effect hereunder shall forthwith
be decreased to such Exercise Price as would have been obtained had the
adjustments made and required under this Section 3.7 upon the issuance of such
options, warrants, convertible securities or other rights been made upon the
basis of (and the total consideration received therefor) (i) the issuance of the
number of Common Shares theretofore actually delivered upon the exercise,
conversion or exchange of such options, warrants, convertible securities or
other rights, (ii) the issuance of all of the Common Shares and all other
options, warrants, convertible securities and other rights to purchase or
acquire Common Shares issued after the issuance of the modified options,
warrants, convertible securities or other rights, and (iii) the original
issuance at the time of the reduction of any such options, warrants, convertible
securities or other rights then still outstanding.

       

      (c)           In
no event shall an adjustment under this Section 3.7 be made if it would
result in an increase in the then applicable Exercise Price.

       

      3.8.           Certificate
of Adjustment.  Whenever
the Exercise Price and/or the number of Warrant Shares receivable upon exercise
of this Warrant is adjusted, the Company shall promptly deliver to the Holder a
certificate of adjustment, setting forth the Exercise Price and/or Warrant
Shares issuable after adjustment, a brief statement of the facts requiring the
adjustment and the computation by which the adjustment was made.  The
certificate of adjustment shall be prima facie evidence of the correctness of
the adjustment.

       

      3.9.           Successive
Adjustments.  The
provisions of this Section 3 shall be applicable successively to each event
described herein which may occur subsequent to the issuance of this Warrant and
prior to the exercise in full of this Warrant.

       

      
        
          
          

        

        
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      4.           Registration;
Exchange and Replacement of Warrant; Reservation of Shares.  The
Company shall keep at the Designated Office a register in which the Company
shall provide for the registration, transfer and exchange of this
Warrant.  The Company shall not at any time, except upon the
dissolution, liquidation or winding-up of the Company, close such register so as
to result in preventing or delaying the exercise or transfer of this
Warrant.

       

      The
Company may deem and treat the person in whose name this Warrant is registered
as the Holder and owner hereof for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration or
transfer as provided in this Section 4.

       

      Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant and (in case of loss, theft or
destruction) of the Holder’s indemnity in form satisfactory to the Company, and
(in the case of mutilation) upon surrender and cancellation of this Warrant, the
Company will (in the absence of notice to the Company that the Warrant has been
acquired by a bona fide purchaser) make
and deliver a new Warrant of like tenor in lieu of this Warrant, without
requiring the posting of any bond or the giving of any security.

       

      The
Company shall at all times reserve and keep available out of its authorized
shares of capital stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Common Shares as shall be issuable upon the
exercise hereof.  The Company covenants and agrees that, upon exercise
of this Warrant and payment of the Exercise Price therefor, if applicable, all
Warrant Shares issuable upon such exercise shall be duly and validly authorized
and issued, fully paid and non-assessable.

       

      5.           Investment
Representations.  The
Holder, by accepting this Warrant, covenants and agrees that, at the time of
exercise of this Warrant, if the Warrant Shares shall not then be the subject of
an effective registration statement under the Act, the securities acquired by
the Holder upon exercise hereof are for the account of the Holder or are being
acquired for its own account for investment and are not acquired with a view to,
or for sale in connection with, any distribution thereof (or any portion
thereof) and with no present intention (at such time) of offering and
distributing such securities (or any portion thereof), except in compliance with
applicable federal and state securities laws.

       

      
        
          
          

        

        
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      6.           Fractional
Warrants and Fractional Shares.  If
the number of Warrant Shares purchasable upon the exercise of this Warrant is
adjusted pursuant to Section 3 hereof, the Company shall nevertheless not be
required to issue fractions of shares upon exercise of this Warrant or
otherwise, or to distribute certificates that evidence fractional
shares.  With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of a Common Share
(determined in accordance with the last sentence of Section 1.3).

       

      7.           Warrant
Holders Not Deemed Stockholders.  No
Holder of this Warrant shall, as such, be entitled to vote or to receive
dividends (except to the extent provided in Section 3.2 above) or be deemed the
holder of Warrant Shares that may at any time be issuable upon exercise of this
Warrant, nor shall anything contained herein be construed to confer upon the
Holder of this Warrant, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issue or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger or conveyance or otherwise), or to receive notice
of meetings, or subscription rights, until such Holder shall have exercised this
Warrant and been issued Warrant Shares or deemed to have been issued Warrant
Shares in accordance with the provisions hereof.  No provision hereof,
in the absence of affirmative action by the Holder to purchase Common Shares or
other securities hereunder, and no mere enumeration herein of the rights or
privileges of the Holder hereunder, shall give rise to any liability of such
Holder for the Exercise Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by any creditors of the
Company.

       

      8.           Notices.  Any
notice which is required to be given by this Warrant must be in writing, and
shall be sent, unless otherwise expressly provided herein, by reputable
overnight courier or facsimile to the party being notified at its address or fax
number stated below.  Any notice sent by overnight courier shall be
deemed given on the third (3rd)
Business Day after being deposited with the courier with all charges prepaid or
billed to the account of the sender; and any notice sent by facsimile shall be
deemed received on the date sent if sent during normal business hours at the
point of receipt (or otherwise on the next succeeding Business
Day).  For the purposes of notice, the addresses and fax numbers of
the parties for the receipt of notice hereunder are:

       

      
        
          
            
              	 	
                      If to the Company:

                      General
      Environmental Management, Inc.

                      3191
      Temple Avenue, Suite 250

                      Pomona,
      California 91768

                      Attention:
      Timothy J. Koziol

                      Fax:
      (909) 444-8356

                       

                    
	 	
                      If to the Holder:

                      CVC
      California, LLC

                      CityPlace
      Tower

                      525
      Okeechobee Blvd., Suite 1050

                      West
      Palm Beach, Florida  33401

                      Attention:  Chief
      Financial Officer

                      Fax:  (561)
      727-2100

                    	 
      

            

             

            
              
                
                

              

              
                9

                
                  

                

              

              
                
                

              

            

          

        

      

       

      Any party
shall have the right from time to time, and at any time, to change its address
for the receipt of notice by giving at least five (5) days’ prior written notice
of the change of its address to the other parties in the manner specified
herein.

       

      9.           Successors.  All
the covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors, assigns and transferees.

       

      10.           Law
Governing.  THIS
WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.

       

      11.           Entire
Agreement; Amendments and Waivers.  This
Warrant, together with the Registration Rights Agreement, sets forth the entire
understanding of the parties with respect to the subject matter
hereof.  The failure of any party to seek redress for the violation or
to insist upon the strict performance of any term of this Warrant shall not
constitute a waiver of such term and such party shall be entitled to enforce
such term without regard to such forbearance.  This Warrant may be
amended, and any breach of or compliance with any covenant, agreement, warranty
or representation may be waived, only if the Company has obtained the written
consent or written waiver of the Holder, and then such consent or waiver shall
be effective only in the specific instance and for the specific purpose for
which given.

       

      12.           Severability;
Headings.  If
any term of this Warrant as applied to any person or to any circumstance is
prohibited, void, invalid or unenforceable in any jurisdiction, such term shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
invalidity without in any way affecting any other term of this Warrant or
affecting the validity or enforceability of this Warrant or of such provision in
any other jurisdiction.  The Section headings in this Warrant have
been inserted for purposes of convenience only and shall have no substantive
effect.

       

      13.           Effect
on Prior Warrants.  Upon
execution and delivery of this Warrant to the Holder, this Warrant shall amend,
restate and supersede in its entirety the Warrants Nos. CV-1 and CV-2 heretofore
issued by the Company to CVC California, LLC, and such Warrants Nos. CV-1 and
CV-2 shall thereupon be cancelled.

       

      [The
remainder of this page is intentionally blank]

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of
the 4th day of September, 2009.

       

      
        
          	 	
                  GENERAL
      ENVIRONMENTAL

                  MANAGEMENT, INC., a
      Nevada corporation

                	 
	 	 	 	 
	
                	
                  By:
      

                	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

        

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      ANNEX A

       

      NOTICE
OF EXERCISE

       

      (To
be executed upon partial or full

       

      exercise
of the within Warrant)

       

      The
undersigned hereby irrevocably elects to exercise the right to purchase
__________ Common Shares of General Environmental Management, Inc. covered by
the within Warrant according to the conditions hereof and herewith makes payment
of the Exercise Price of such shares in full in the amount of
$______________.

       

      By:
________________________________________                                                               

      (Signature
of Registered Holder)

       

      Dated:_______________________________

       

      Name of
Warrant Holder

      or
transferee:____________________________________________________________________________________________________

      (Please
print)

       

      Address:_______________________________________________________________________________________________________

       

      Signature:_______________________________________________________________________________________________________

       

      
        	
                NOTICE:

              	
                The
      signature on this form must correspond with the name as written upon the
      face of this Warrant in every particular, without alteration or
      enlargement or any change
whatsoever.

              

      

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      ANNEX B

       

      CASHLESS
EXERCISE FORM

       

      (To
be executed upon partial or full

      exercise
of Warrant pursuant to Section 1.3 of the Warrant)

       

      The
undersigned hereby irrevocably elects to surrender ____________ Common Shares of
General Environmental Management, Inc. purchasable under the Warrant for Common
Shares issuable in exchange therefor pursuant to the Cashless Exercise
provisions of the within Warrants, as provided for in Section 1.3 of such
Warrant.

       

      Please
issue a certificate or certificates for such Common Shares in the name of, and
pay cash for fractional shares in the name of:

       

      (Please
print name, address, and social security number/tax identification
number:)

       

      and, if
said number of Common Shares shall not be all the Common Shares purchasable
thereunder, that a new Warrant for the balance remaining of the Common Shares
purchasable under the within Warrant be registered in the name of the
undersigned Holder or its transferee as below indicated and delivered to the
address stated below.

      
      

       

      
        	Dated:  ____________________________  	
                By:_________________________________

                (Signature
      of Registered Holder)

              

      

       

      
        Name of
Warrant Holder

        or
transferee:____________________________________________________________________________________________________

        (Please
print)

         

        Address:_______________________________________________________________________________________________________

         

        Signature:_______________________________________________________________________________________________________

      

       

      
        	
                NOTICE:

              	
                The
      signature on this form must correspond with the name as written upon the
      face of this Warrant in every particular, without alteration or
      enlargement or any change
whatsoever.

              

      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      ANNEX C

       

      PUT
OPTION EXERCISE FORM

       

      (To
be executed upon exercise of a Put Option

      pursuant
to Section 1.4 of the Warrant)

      

      The
undersigned hereby irrevocably elects to require General Environmental
Management, Inc. to purchase ____ Warrant Shares covered by the within Warrant
for a cash price of $___ per Warrant Share pursuant to the Put Option provisions
of the within Warrant, as provided for in Section 1.4 of such
Warrant.

       

      Not later
than ____________, please send cash in the amount of the applicable aggregate
Option Purchase Price by wire transfer of immediately available funds
to:

       

      (Please
print name, address, and social security number/tax identification
number:)

       

      Wire
transfer instructions:

       

      (insert
wire instructions)

       

      

      Dated:____________________________

       

      
        Name of
Warrant Holder

        or
transferee:____________________________________________________________________________________________________

        (Please
print)

         

        Address:_______________________________________________________________________________________________________

         

        Signature:_______________________________________________________________________________________________________

      

       

      
        	
                NOTICE:

              	
                The
      signature on this form must correspond with the name as written upon the
      face of this Warrant in every particular, without alteration or
      enlargement or any change
whatsoever.

              

      

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      ANNEX D

       

      ASSIGNMENT
FORM

       

      FOR VALUE
RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
under this Warrant, with respect to the number of Common Shares set forth
below:

       

      

      
        
          	
                  Name and Address of
Assignee

                	
                  No. of Common Shares

                
	 
      	 
      
	 
      	 
      

        

      

      

      and does
hereby irrevocably constitute and appoint _______________________
attorney-in-fact to register such transfer onto the books of General
Environmental Management, Inc., maintained for the purpose, with full power of
substitution in the premises.

       

      
        
          
            	Dated:
      ________________________________ 	
                    Print
      Name:__________________________________

                  
	 	 
	 
      	

                    Signature:___________________________________

                  
	 	 
	 
      	

                    Witness:____________________________________

                  

          

        

      

       

       

      
        	
                NOTICE:

              	
                The
      signature on this assignment must correspond with the name as written upon
      the face of this Warrant in every particular, without alteration or
      enlargement or any change
whatsoever.

              

      

       

       

       

      15EX-10.1 Material contracts

LENDER ACQUISITION AGREEMENT

 

THIS LENDER ACQUISITION AGREEMENT (this "Agreement") is made and entered into as of the 4th day of September, 2009, by and among Adventure Energy, Inc. ("Adventure") and SLMI Holdings , LLC (“Owner”); Owner is the sole member and sole owner of SLMI Options, LLC ("Lender").

 

RECITALS:

 

A. This Agreement is made with respect to loans made by SLMI Holdings, LLC to Harry Thompson (“Thompson”), Harlis Trust (“Trust”), Wilon Resources Inc. (“Wilon”) and/or Wilon Gathering System Inc. (“WGS”) described as follows (collectively the “SLMI Loans”):

 

$500,000 in financing given May 6, 2005 for construction of a natural gas gathering system in Kentucky (the “Gathering System Loan”), $300,000 mortgage on the Wilon business offices given October 13, 2005 (the “Office Loan”), $175,000 in financing given on October 24, 2006 to finance 176 acres of land in West Virginia and to finance the placement of a natural gas treatment station (the “WV Loan”); these loans include that certain Amendment to Loan Agreements dated August 2, 2006, that certain Receipt for Shares Pledged as Collateral dated December 8, 2007 and that certain Second Amendment to Loan Agreements dated January 27, 2009 (with 5 million Wilon shares attached and pledged as additional collateral). Further, the Borrowers and SLMI have agreed to special terms for assignment of loan rights by SLMI and subsequent holders of the loans pursuant to that Acknowledgment by Borrowers delivered Jan. 5, 2009.

 

B. SLMI Options, LLC is the holder of the above described SLMI Loans by virtue of an assignment dated February 1, 2009 from its affiliate, SLMI Holdings, LLC; and

 

C. The SLMI Loans expressly include cross-default and cross-collateralization terms such that a default under any of the loans is a default under all, and that collateral given for one loan is collateral for all; and

 

D. February 1, 2007 was the maturity date for the above referenced WV Loan, its balance was not paid and resulted in all SLMI Loans being in default as of February 1, 2007 with written notice of same being delivered to Thompson, the Trust, Wilon and WGS on March 12, 2008; and

 

E. The SLMI Loans remain in default, these defaults have not been cured and are

continuing (the “Existing Defaults”); and

 

F. As of May 31, 2009, the indebtedness due under the SLMI Loans was $1,329,824, including principal of $925,000 and interest of $404,824; and

 

G. Adventure has been in negotiations to acquire the SLMI Loans, with such negotiations culminating in Adventure seeking to acquire SLMI Options, LLC from Owner rather than acquiring the SLMI Loans directly, this acquisition is made with the understanding that SLMI Options, LLC shall continue to be the sole holder and owner of the SLMI Loans ; and

 

H. Owner is willing to sell all outstanding units of ownership in SLMI Options, LLC (the“Lender Units”) on the terms provided herein.

 

NOW, THEREFORE, and in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by the parties hereto, the parties, intending to be and being legally bound hereby, acknowledge and agree as follows:

 

1. Recitals. The parties agree that the foregoing recitals are true and correct and are by this reference made a part of this Agreement.

 

2. Definitions. For purposes of this Agreement, Thompson, the Trust, Wilon and WGS are collectively referred to as “Borrower and Guarantor.”

 

3.   Adventure Commitment to Buy & Owner Commitment to Sell the Lender Units

 

(a) Adventure covenants to purchase the Lender Units for the consideration described below. Adventure acknowledges that the SLMI Loans were originated by Owner; that owner assigned all of its rights in same to SLMI Options, LLC; that said assignment was expressly without recourse to Owner; and that neither Lender, Adventure or any subsequent assignee shall have any recourse to Owner for any amount owing under the SLMI Loans. Adventure further acknowledges that it has examined the Lender and SLMI Loans; and that it is reaching its decision to purchase same without reliance on any representation by Owner other than the representation that Lender is the sole owner of the SLMI Loans, that an aggregate of $50,000 has been paid on said loans (which amount was applied to principal) and that Owner is the sole owner of SLMI Options, LLC (also referred to as Lender herein). Adventure further waives any right of recourse to Owner that might arise under the Uniform Commercial Code or any other law with respect to the SLMI Loans and acknowledges that the Lender Units are to be conveyed without recourse to Owner for payment of any amount due under the SLMI Loans.

 

(b) Owner covenants to sell SLMI Options, LLC (with the SLMI Loans remaining owned solely by SLMI Options, LLC) to Adventure for the consideration described below.

 

 

4. Purchase Price. Adventure agrees to pay the following consideration herewith in return for conveyance of the Lender Units:

 

(a) $1,000,000 payable by secured promissory note in form attached as Exhibit 1 hereto (the “Secured Note”) By December 31, 2010, Adventure shall have paid at least $250,000 in cash toward the Secured Note. By December 31, 2011, Adventure shall have paid at least $200,000 more. By December 31, 2012, Adventure shall have paid at least $300,000 more. All unpaid principal and interest shall be due no later than December 31, 2013. To the extent Adventure tenders proceeds from dispositions of real estate collateral on the SLMI Loans (which dispositions shall require the written consent of Owner), said payments shall be applied toward the Secured Note, but they shall not reduce the minimum installments required for years 2010 through 2012. From January, 2010 to December, 2013, a minimum monthly cash installment of $4,000 shall be paid by Adventure on the Secured Note until it is paid in full. .

 

(b) Contemporaneous issuance of 1.5 million ADVE.OB common shares to Owner (currently selling at $0.05 per share); and

 

(c) Other consideration and security provided elsewhere in this agreement.

 

5. Additional Security and Collateral for the Secured Note and the

covenants hereunder:

 

(a) Adventure shall issue 1 million shares of Series A Preferred Stock at the stated value of One Dollar ($1.00) per share in the name of Owner and deliver same to Owner contemporaneously herewith. These shares shall be convertible into 10 million voting common shares of Adventure in an Event of Default under this Agreement. The preferred shares shall be voting (1 for 1 basis) and shall include the right to appoint a non-voting, ex-officio member of the Board of Directors who shall also be a non-voting, ex-offico member of all committees of the Board. While Adventure is in good standing on its obligations to Owner, the Company’s Board of Directors shall be limited to 3 voting members and the Series A Preferred shares are entitled to 1 vote per share on all matters requiring the vote of common and preferred shareholders. Upon an Event of

Default (after expiration of the applicable cure period) under Adventure’s obligations to Owner, the Series A Preferred Shares shall have the right to appoint 3 additional members to the Board of Directors such that the board shall consist of 6 voting members with Owner’s ex-officio member being empowered to cast a vote to break any tie. Owner may not designate immediate family members, relatives, Richard Williams or any individual with a criminal history as a board member. Contemporaneous with this Agreement, Adventure shall amend its articles and bylaws consistent with this paragraph; Owner consents to the amended articles format set forth on attached Exhibit 2.

 

 

(b) Adventure shall execute and deliver to Owner a Comprehensive

Security Agreement pledging all of Adventure’s tangible and intangible property with said agreement being in the form attached as Exhibit 3 (the “Adventure Security Agreement”). Owner shall be authorized to file UCC Financing Statements in all jurisdictions in which Adventure has or is expected to have a property interest. Further, Adventure hereby pledges the Lender Units as security, gives custody of same to Owner and grants owner an irrevocable proxy to vote said units in an Event of Default.

 

(c) Issuance of 300,000 Shares of Series B Preferred Shares convertible into 3,000,000 common shares of Adventure. Within 15 days of this date, Adventure shall issue three hundred thousand (300,000) Series B Preferred Shares to Owner (or any assignees designated by Owner) that are convertible into 3 million (3,000,000) common shares of Adventure. The consideration due Adventure for same shall be one dollar ($1.00) per share payable with a non-recourse non-negotiable promissory note due on the

5 year anniversary of this Agreement and secured by the preferred shares themselves. The conversion rights shall expire on the same 5 year anniversary, and no conversions may be exercised prior to paying the promissory note. The terms of said note and related stock pledge agreement are set out in attached Exhibit 4. Contemporaneous with this Agreement, Adventure shall amend its articles and bylaws consistent with this paragraph.

 

(d) Future Financing. From this date until the later of full payment of the Adventure’s obligations to Owner or the 3 year anniversary of this date, upon any financing by Adventure by sale of its Common Stock or Common Stock Equivalents (a “Subsequent Financing”), Owner shall have the right to participate in up to 100% of such Subsequent Financing (the “Participation Maximum”). At least 15 Trading Days prior to the closing of the Subsequent Financing, Adventure shall deliver to Owner a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Owner if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of Owner, and only upon a request by such Owner, for a Subsequent Financing Notice, Adventure shall promptly, but no later than 3 Trading Days after such request, deliver a Subsequent Financing Notice to Owner. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder, the Person with whom such Subsequent Financing is proposed to be effected, and attached to which shall be a term sheet or similar document relating thereto. If by 6:30 p.m. (Eastern time) on the third Trading Day after the Owner has received the Pre-Notice, notifications by Owner of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Participation Maximum, then Adventure may effect the remaining portion of such Subsequent Financing on the terms and to the Persons set forth in the Subsequent Financing Notice. If Adventure receives no notice from Owner as of such third Trading Day, such Seller shall be deemed to have notified Adventure that it does not elect to participate. In addition to the foregoing, Adventure agrees to inform Owner in advance of transactions that will potentially dilute Owner’s interest in Adventure, and to give Owner full opportunity to make investments in Adventure contemporaneous with said transactions so as to avoid dilution of Owner’s position.

 

6. Ongoing Covenants of Adventure. In order to induce Owner to enter into this Agreement, Adventure covenants to maintain the following for the duration of this Agreement:

 

(a) No part of the real property pledged as collateral for the SLMI Loans collateral shall be sold or disposed of without Lender’s consent;

 

(b) No material adverse change in Adventure’s financial condition or business shall occur;

 

(c) Adventure will allow Owner and its designees, at any time, to inspect, or to make copies of and extracts from any and all books, records and other papers in possession of Adventure or its affiliates pertaining to their business, and any obligations due Owner, and upon the request of Owner, will deliver to Owner all such books, records and papers and furnish other documents requested by Owner;

 

(d) Adventure shall keep the maximum amount of common shares outstanding (after warrants and conversion rights are deemed exercised into common shares) to be under forty-five million (45,000,000);

 

(e) Adventure shall not amend its Articles of Incorporation, nor shall it recapitalize its stock by stock split, reverse split or otherwise without the written consent of Owner, which consent shall not be unreasonably withheld;

 

(f) Adventure shall maintain no more than 3 voting members on its Board of Directors until such time as Owner appoints additional members due to an Event of Default, and Adventure’s bylaws shall set the number of voting board members at seven.

 

(g) Adventure shall not default in its payment or performance obligations due Owner under the Secured Note, the Comprehensive Security Agreement or the preferred shares issued under this Agreement; and

 

(h) Adventure shall continue as a fully reporting public company listed on a US stock exchange or as an Over The Counter stock, and remain in good standing with federal and state regulatory authorities.

 

7. Event of Default. In the event Adventure is in breach of any of its obligations under this Agreement or any agreement attached hereto, Owner shall give Adventure written notice of same and thereafter Adventure shall have thirty (30) days to cure any monetary default and forty-five (45) days to cure any non-monetary default in performance. Any breach that remains uncured after the cure period lapses shall be an Event of Default (an “Event of Default”).

 

8. Notices. All notices and other communications required or permitted under this Agreement shall be in writing and, if mailed by prepaid first-class mail, certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) business days after the post-marked date thereof. In addition, notices hereunder may be delivered by hand or telefax in which event the notice shall be deemed effective when delivered. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses:

 

(i) if to Adventure, to:

Adventure Energy, Inc.

c/o Wayne Anderson

33 6th Street S

Suite 600

St. Petersburg, FL 33701

Telefax: 815-846-0755

 

(ii) if to Owner, to:

SLMI Holdings, LLC

c/o Nydia Pinzon

PO Box 68

Roswell, GA 30077

Telefax: 770-992-1056

 

with a copy to:

Attorney Mark P. Groves

Groves Counsel, P.A.

1870 The Exchange, Suite 100

Atlanta, GA 30339-2021

Telefax: 404-935-6116

 

9. Headings. The paragraph and subparagraph headings of this Agreement are for convenience and reference only and shall not be considered a part hereof, nor shall they be deemed to limit or otherwise affect any of the terms or provisions hereof.

 

10. Time of Essence. Time is of the essence of this Agreement and all of the terms and conditions hereof.

 

11. Attorneys’ Fees. In the event of any litigation arising out of any breach or alleged breach of this Agreement, the prevailing party shall be entitled to recover all costs, expenses and reasonable attorneys’ fees incurred thereby in connection with such litigation, including without limitation any trial or appeal.

12. Amendments. This Agreement may not be modified, altered or amended except by agreement in writing signed by each of the parties hereto.

 

13. Entire Agreement. This Agreement, together with the SLMI Loans, embodies the entire understanding and agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersedes all prior agreements, understandings and inducements, whether expressed or implied, oral or written. The parties hereto represent and warrant that parol evidence is not necessary to establish any terms, covenants or conditions of this Agreement.

 

14. Governing Law. The parties hereby acknowledge and agree that this Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. Further, Adventure acknowledges that there is no adequate remedy at law for many of the covenants given to induce Owner into this agreement, and that Owner shall be entitled to equitable remedies to compel Adventure’s performance.

 

15. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in Atlanta under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The parties also agree that the that either party may require that the AAA Expedited Procedures shall apply, or that the AAA Optional Rules for Emergency Measures of Protection shall apply, or that both shall apply.

 

16. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or be invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement.

 

17. Successors and Assigns. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns.

 

18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but taken together shall constitute one agreement.

 

19. Place of Execution. The undersigned each hereby certify that this Agreement as been executed by Adventure and Owner in the State of Georgia.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered under seal as of the date first written above.

 

 

 

ADVENTURE:

 

ADVENTURE ENERGY, INC.

 

By: /s/ Wayne Anderson

 

Its: President

 

 

 

OWNER:

 

SLMI HOLDINGS, LLC

 

By: /s/ Nydia Pinzon Tisdale

 

Its: Manager

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 1 (SECTION 4A)                SECURED NOTE FROM ADVENTURE

 

 

EXHIBIT 2 (SECTION 5A)                SERIES A PREFERRED STOCK TERMS

 

 

EXHIBIT 3 (SECTION 5B)                SECURITY AGREEMENT FROM

ADVENTURE

 

 

EXHIBIT 4 (SECTION 5C)                NONRECOURSE NOTE AND STOCK

PLEDGE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[EXHIBIT 1 (SECTION 4A)]

SECURED NOTE

 

US $1,000,000                                                                                    September 4, 2009

 

 

FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the order of SLMI HOLDINGS, LLC, a Nevada limited liability company, the principal sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00US).

 

 

1.         Defined Terms. As used in this Note, (i) the term "Lender" means the holder of this Note, (ii) the term "Indebtedness" means the principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security, and (iii) a "Business Day" means any day other than a Saturday, Sunday or any other day on which Lender is not open for business.

 

2. Address for Payment. All payments due under this Note shall be payable at c/o Nydia Tisdale, PO Box 68, Roswell, GA 30077 , or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

 

3. Payment of Principal and Interest. Principal and interest shall be paid as follows:

 

(a) Interest shall accrue at three percent (3.0%) per annum. Interest shall accrue and shall be due and payable upon maturity of this Note.

 

(b) The principal amount of this note is $1,000,000 and interest shall not be added to principal or compounded.

 

(c) From January, 2010 to December, 2013, a minimum monthly cash installment of $4,000 shall be paid by Borrower on the Note until it is paid in full. No later than December 31, 2010, the aggregate of Borrower’s payments shall have reduced the principal balance to $750,000 or less. No later than December 31, 2011, the aggregate of Borrower’s payments shall have reduced the principal balance to $550,000 or less. No later than December 31, 2012, the aggregate of Borrower’s payments shall have reduced the principal balance to $250,000 or less. The $4,000 minimum installments shall be due on the 5th of the month.

 

(d) All outstanding principal and accrued interest shall be due and payable ON DECEMBER 31, 2013; the stated due date shall also be referred to as the "Maturity Date". The unpaid principal balance shall continue to bear interest after the Maturity Date at the Default Rate set forth in this Note until and including the date on which it is paid in full.

            

4. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion. Borrower agrees that neither Lender's acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender's application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

 

5. Security. The Indebtedness is secured, among other things, by a Comprehensive Security Agreement dated as of the date of this Note (the "Security Instrument"), and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

 

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower. Lender may exercise this option to accelerate regardless of any prior forbearance.

 

7. Late Charge. No late charge shall apply to payments due under this Note.

 

8. Default Rate. So long as any monthly installment or any other payment  ue under this Note remains past due for 30 days or more, interest under this Note shall accrue    on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at a rate (the "Default Rate") equal to the lesser of 10 percentage points above the rate stated in the first paragraph of this Note or the maximum interest rate which may be collected from Borrower under applicable law. If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payment will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any payment under this Note is delinquent for more than 5 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender's ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment or other payment due under this Note is delinquent for more than 30 days, Lender's risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of the Borrower's delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

 

9. Notice. Borrower’s notice address is indicated by Borrower’s signature below. Notice may also be sent via Borrower’s fax number then in effect.

 

10. Prepayment. Borrower may prepay this Note in full or in part at any time without penalty.

 

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

 

12. Forbearance. Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender's right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by Lender of any security for Borrower's obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

 

13. Waivers. Presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower, Key Principal, and all endorsers and guarantors of this Note and all other third party obligors.

 

14. Loan Charges. Borrower agrees to pay an effective rate of interest equal to the sum of the interest rate provided for in this Note and any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the loan evidenced by this Note and any other fees or amounts to be paid by Borrower pursuant to any of the other Loan Documents. Neither this Note nor any of the other Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate greater than the maximum interest rate permitted to be charged under applicable law. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

 

15. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

 

16. Counting of Days. Except where otherwise specifically provided, any reference in this Note to a period of "days" means calendar days, not Business Days.

 

17. Governing Law. This Note shall be governed by the law of the State of

Georgia.

 

18. Captions. The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

 

19. Notices. All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with the Security Instrument.

 

20. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in Atlanta under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The parties also agree that either party may require that the AAA Expedited Procedures shall apply, or that the AAA Optional Rules for Emergency Measures of Protection shall apply, or that both shall apply.

 

21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

 

IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has caused this Note to be signed and delivered by its duly authorized representative.

 

 

BORROWER

 

ADVENTURE ENERGY, INC.                      Adventure Energy, Inc.

c/o Wayne Anderson

33 6th Street South, Suite 600

St. Petersburg FL 33701

By: /s/ Wayne Anderson                                   Fax: 815-846-0755

Wayne Anderson, Pres.

 

[corporate seal]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 2 (SECTION 5A)]

 

ARTICLES OF AMENDMENT

TO ARTICLES OF INCORPORATION

OF

ADVENTURE ENERGY, INC.

DESIGNATION, PREFERENCES AND OTHER RIGHTS

AND QUALIFICATIONS

OF

SERIES A PREFERRED STOCK

 

Pursuant to Section 607.1006 of the Florida Business Corporation Act, the undersigned, being the President of ADVENTURE ENERGY, INC., a Florida corporation (the “Corporation”), bearing Document Number

P08000032840, does hereby submit these Articles of Amendment for the purpose of amending the Corporation’s Articles of Incorporation as follows:

 

FIRST: On September 2, 2009, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series A Preferred Stock”. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series A Preferred Stock shall be as hereinafter described.

 

Accordingly, “Article VII” of the Articles of Incorporation of the Company is hereby amended to include the following:

 

SERIES A PREFERRED STOCK

 

1) Designations and Amounts. The Board of Directors of the Company, pursuant to authority granted in the Articles of Incorporation, hereby creates a series of preferred stock designated as Series A Preferred Stock (the “Series A Preferred Stock”) with a stated value of $0.001 per share. The number of authorized shares constituting the Series A Preferred Stock shall be Three Million (3,000,000) shares.

 

2) Dividends. The holders of Series A Preferred Stock shall not be entitled to receive dividends, payable via cash or stock. Further, no dividends may be paid on common stock or any other Series of Preferred stock while Series A Preferred Shares are outstanding .

 

3) Voting. Except as otherwise required by law or expressly provided herein, the holders of shares of Series A Preferred Stock shall be entitled to vote on all matters submitted to a vote of the stockholders of the Company and shall have such number of votes equal to the number of shares of Series A Preferred Stock held by such holders’ on a one vote per one share basis pursuant to the provisions hereof at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken. Except as otherwise required by law or expressly provided herein, the holders of shares of Series A Preferred Stock and common stock shall vote together as a single class, and not as separate classes.

 

4) Conversion.

 

a) Conversion Rate. Upon the filing of an amendment to the Company’s Articles of Incorporation,

which, once effective, makes available a sufficient number of authorized but unissued and unreserved shares of common stock to permit all then outstanding shares of Series A Preferred Stock to be so converted upon default, then, the holder of any shares of the Series A Preferred Stock shall convert upon default of the Company any such shares into fully paid and non-assessable shares of common stock at the rate of 10 shares of common stock for each share of Series A Preferred Stock (“Conversion Rate”) subject to adjustment in accordance with Section 4(e). The holder of any Series A Preferred Stock shall be entitled to convert only if the Company has failed to satisfy all financial obligations by the designated time inclusive of the cure period.

 

b) Method of Conversion. Before any holder of Series A Preferred Stock shall be entitled to convert the same into shares of common stock, such holder shall surrender the certificate or certificates therefore, duly endorsed, at the office of the Company or of any transfer agent for the Series A Preferred Stock, and shall give written notice 15 business days prior to date of conversion to the Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of common stock are to be issued. The Company shall, within five business days, issue and deliver at such office to such holder of Series A Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of common stock to which such holder shall be entitled as aforesaid. Conversion shall be deemed to have

been effected on the date when delivery of notice of an election to convert and certificates for shares is made, and such date is referred to herein as the “Conversion Date.”

 

c) Partial Conversion. In the event of the conversion of some but not all of the shares of Series A Preferred Stock represented by a certificate or certificates surrendered, the Company shall execute and deliver to or on the order of the holder, at the expense of the Company, a new certificate representing the number of shares of Series A Preferred Stock which were not converted.

 

d) Status of Converted Stock. In the event any shares of Series A Preferred Stock shall be converted or otherwise acquired by the Company, the shares so converted shall be canceled and shall resume the status of authorized shares of preferred stock without differentiation as to series. All such shares may be reissued as part of a new series of preferred stock subject to the conditions and restrictions on issuance set forth in the Articles of Incorporation or in any certificate of designation creating a series of preferred stock or any similar stock or as otherwise required by law.

 

e) Transfer Taxes. The Company shall pay all documentary, stamp or other transactional taxes attributable to the issuance or delivery of shares of common stock upon conversion of any shares of Series A Preferred Stock, provided that the Company shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares in a name other than that of the holder of the shares of Series A Preferred Stock in respect of which such shares are being issued.

 

f) Adjustments to Conversion Rate.

 

i) Subdivisions, Combinations, or Consolidations of Common Stock. In the event the outstanding shares of common stock shall be subdivided, combined or consolidated, by stock split, stock dividend, combination or like event, into a greater or lesser number of shares of common stock after the effective date of this Certificate of Designation, the Series A Conversion Rate in effect immediately prior to such subdivision, combination, consolidation or stock dividend shall, concurrently with the effectiveness of such subdivision, combination or consolidation, be proportionately adjusted as more fully set forth in Section 4(f)(ii).

 

ii) Adjustment for Common Stock Dividends and Distributions. If the Company at any time subdivides, combines or consolidates the outstanding shares of common stock as contemplated by Section 4(f)(i), in each such event the Series A Conversion Rate that is then in effect shall be adjusted as of the time of such event by multiplying the Series A Conversion Rate then in effect by a fraction (x) the numerator of which is the total number of shares of common stock issued and outstanding immediately after the time of such subdivision, combination or consolidation, and (y) the denominator of which is the total number of shares of common stock issued and outstanding immediately prior to such subdivision, combination or consolidation.

 

iii) Reclassifications and Reorganizations. In the case, at any time after the date hereof, of any capital reorganization, merger or any reclassification of the stock of the Company (other than solely as a result of a stock dividend or subdivision, split-up or combination of shares), the Series A Conversion Rate then in effect shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted and the terms of the Series A Preferred Stock shall be deemed amended such that the shares of the Series A Preferred Stock shall, after such reorganization or reclassification, be convertible into the kind and number of shares of stock or other securities or property of the Company or otherwise to which such holder would have been entitled if immediately prior to such reorganization or reclassification, the holder’s shares of the Series A Preferred Stock had been converted into common stock. The provisions of this Section 4(f)(iii) shall similarly apply to successive reorganizations or reclassifications.

 

iv) Distributions Other Than Cash Dividends Out of Retained Earnings. If the Company shall

declare a cash dividend upon its common stock payable otherwise than out of retained earnings or shall

distribute to holders of its common stock shares of its capital stock (other than shares of common stock and

other than as otherwise would result in an adjustment pursuant to this Section 4(f)), stock or other securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash

dividends) or options or rights (excluding options to purchase and rights to subscribe for common stock or

other securities of the Company convertible into or exchangeable for common stock), then, in each such case, provision shall be made so that the holders of Series A Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of common stock receivable thereupon, the amount of securities of the Company and other property which they would have received had their Series A Preferred Stock been converted into common stock on the date of such event and had they thereafter, during the period from the date of such event to and including the date of conversion, retained such securities and other property receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 4(f) with respect to the rights of the holders of the Series A Preferred Stock.

 

g) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A

Conversion Rate pursuant to Section 4(f), the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments; (ii) the Series A Conversion Rate at the time in effect; and (iii) the number of shares of common stock and the amount, if any, of other securities, cash or property which at the time would be received upon the conversion of the Series A Preferred Stock.

 

h) Fractional Shares. Fractional shares of Series A Preferred Stock may be issued and all conversion, voting and other rights shall be applied to such fractional shares on a proportional basis; provided, however, that in lieu of any fractional shares of common stock to which the holder of Series A Preferred Stock would be entitled upon conversion or otherwise pursuant hereto, the Company shall issue to such holder, one whole share of common stock. The number of whole shares to be issuable to each holder upon such conversion shall be determined on the basis of the number of shares of common stock issuable upon conversion of the total number of shares of Series A Preferred Stock of such holder at the time converting into common stock.

 

Liquidation.

 

i) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to stockholders shall be distributed among the holders of the shares of Series A Preferred Stock and common stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock pursuant to the terms hereof immediately prior to such dissolution, liquidation or winding up of the Company.

 

j) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company which will involve the distribution of assets other than cash, the Company shall promptly engage an independent appraiser to determine the fair market value of the assets to be distributed to the holders of shares of its capital stock. The Company shall, upon receipt of such appraiser’s valuation, give prompt written notice to each holder of shares of Series A Preferred Stock of the appraiser’s valuation. Any equity securities of other entities to be distributed shall be valued as follows: (i) if the common stock is listed on a national securities exchange or NASDAQ, the last sale price of the common stock in the principal trading market for the common stock on such date or, if there are no sales common stock on that date, then on the next preceding date on which there were any sales of common shares, as reported by the exchange or NASDAQ, as the case may be; or (ii) if the common stock is not listed on a national securities exchange or NASDAQ, but is traded in the over-the-counter market, the closing bid price for the common stock on such date, as quoted by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations or, if there are no sales common stock on that date, then on the next preceding date on

which there were any sales of common shares, as quoted by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations, as the case may be; or (iii) if the fair market value of the common stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Board of Directors of the Company shall reasonably determine, in good faith.

 

5) Registration Rights. None.

 

6) Redemption. The holders of the Series A Preferred Stock shall return all shares to the Company after obligations of the Loan Acquisition and Forbearance Agreement with SLMI Options, LLC (the “SLMI Obligations”) are satisfied.

 

7) No Impairment. Except and to the extent as waived or consented to by the holder, or as otherwise provided herein, the Company shall not by any action, including, without limitation, amending its Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series A Preferred Stock, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of holders as set forth in this Certificate of Designations against impairment.

 

8) Loss, Theft, Destruction of Series A Preferred Stock Certificates. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of shares of Series A Preferred Stock and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of the Series A Preferred Stock, the Company shall make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated shares of Series A Preferred Stock, new shares of Series A Preferred Stock of like tenor. The Series A Preferred Stock shall be held and owned upon the express condition that the provisions of this Section are exclusive with respect to the replacement of mutilated, destroyed, lost or stolen shares of Series A Preferred Stock and shall preclude any and all other rights and remedies

notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of negotiable instruments or other securities without the surrender thereof.

 

9) Notices. The holders of the Series A Preferred Stock shall be entitled to receive all communications sent by the Company to the holders of the common stock. Any notice required by the provisions of this Section 10 to be given to the holder of shares of the Series A Preferred Stock shall be deemed given when personally delivered to such holder or five business days after the same has been deposited in the United States mail, certified or registered mail, return receipt requested, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Company.

 

10) Severability. If any right, preference or limitation of the Series A Preferred Stock set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule, law or public policy, all other rights, preferences and limitations set forth herein that can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall nevertheless remain in full force and effect, and no right, preference or limitation herein shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein.

 

11) Board. The holders of the Series A Preferred Stock shall be entitled to appoint one non-voting, ex-officio director to the Board of Directors of the Company. In addition, this appointee shall have the right to serve on all committees of the Board of Directors. In the event of default, the holders of the Series A Preferred Stock shall be entitled to appoint three additional directors to the Company’s Board of Directors. Upon default, each of the four (4) appointees by the holders of the Series A Preferred Stock shall have the same voting rights as any other director serving on the Company’s Board of Directors.

 

12) Seniority. The Series A Preferred Stock shall be senior to any additional Series of Preferred Stock issued by the Company.

 

The foregoing Amendment was adopted by the Board of Directors of the Company pursuant to the Florida Business Company Act on September 2, 2009. Therefore, the number of votes cast for the Amendment to the Company’s Articles of Incorporation was sufficient for approval.

 

IN WITNESS WHEREOF, the Company has caused this Amendment to its Articles of Incorporation to be executed by its duly authorized officer this September 2, 2009.

 

 

Adventure Energy, Inc.

 

 

/s/ Wayne Anderson

President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARTICLES OF AMENDMENT 

TO ARTICLES OF INCORPORATION 

OF 

ADVENTURE ENERGY, INC. 

DESIGNATION, PREFERENCES AND OTHER RIGHTS 

AND QUALIFICATIONS 

OF 

SERIES B PREFERRED STOCK 

 

Pursuant to Section 607.1006 of the Florida Business Corporation Act, the undersigned, being the President of ADVENTURE ENERGY, INC., a Florida corporation (the “Corporation”), bearing Document Number P08000032840, does hereby submit these Articles of Amendment for the purpose of amending the Corporation’s Articles of Incorporation as follows:

FIRST: On September 2, 2009, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series B Preferred Stock”. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series B Preferred Stock shall be as hereinafter described. 

Accordingly, “Article VII” of the Articles of Incorporation of the Company is hereby amended to include the following: 

SERIES B PREFERRED STOCK 

1) Designations and Amounts. The Board of Directors of the Company, pursuant to authority granted in the Articles of Incorporation, hereby creates a series of preferred stock designated as Series B Preferred Stock (the “Series B Preferred Stock”) with a stated value of $0.001 per share. The number of authorized shares constituting the Series B Preferred Stock shall be Three Hundred Thousand (300,000) shares. 

 

 

2) Dividends. The holders of Series B Preferred Stock shall not be entitled to receive dividends, payable via cash or stock.  

3) Voting. Except as otherwise required by law or expressly provided herein, the holders of shares of Series B Preferred Stock shall not be entitled to vote on any matters submitted to a vote of the stockholders of the Company.

4) Conversion. 

a) Conversion Rate. Upon the filing of an amendment to the Company’s Articles of Incorporation, which, once effective, makes available a sufficient number of authorized but unissued and unreserved shares of common stock to permit all then outstanding shares of Series B Preferred Stock to be so converted, then, the holder of any shares of the Series B Preferred Stock shall convert any such shares into fully paid and non-assessable shares of common stock at the rate of 10.0 shares of common stock for each share of Series B Preferred Stock (“Conversion Rate”) subject to adjustment in accordance with Section 4(e). 

b) Method of Conversion. Before any holder of Series B Preferred Stock shall be entitled to convert the same into shares of common stock, such holder shall surrender the certificate or certificates therefore, duly endorsed, at the office of the Company or of any transfer agent for the Series B Preferred Stock, and shall give written notice 5 business days prior to date of conversion to the Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of common stock are to be issued. The Company shall, within five business days, issue and deliver at such office to such holder of Series B Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of common stock to which such holder shall be entitled as aforesaid. Conversion shall be deemed to have been effected on the date when delivery of notice of an election to convert and certificates for shares is made, and such date is referred to herein as the “Conversion Date.” 

c) Partial Conversion. In the event of the conversion of some but not all of the shares of Series B Preferred Stock represented by a certificate or certificates surrendered, the Company shall execute and deliver to or on the order of the holder, at the expense of the Company, a new certificate representing the number of shares of Series B Preferred Stock which were not converted. 

d) Status of Converted Stock. In the event any shares of Series B Preferred Stock shall be converted or otherwise acquired by the Company, the shares so converted shall be canceled and shall resume the status of authorized shares of preferred stock without differentiation as to series. All such shares may be reissued as part of a new series of preferred stock subject to the conditions and restrictions on issuance set forth in the Articles of Incorporation or in any certificate of designation creating a series of preferred stock or any similar stock or as otherwise required by law. 

e) Transfer Taxes. The Company shall pay all documentary, stamp or other transactional taxes attributable to the issuance or delivery of shares of common stock upon conversion of any shares of Series B Preferred Stock, provided that the Company shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares in a name other than that of the holder of the shares of Series B Preferred Stock in respect of which such shares are being issued. 

f) Adjustments to Conversion Rate. 

i) Subdivisions, Combinations, or Consolidations of Common Stock. In the event the outstanding shares of common stock shall be subdivided, combined or consolidated, by stock split, stock dividend, combination or like event, into a greater or lesser number of shares of common stock after the effective date of this Certificate of Designation, the Series B Conversion Rate in effect immediately prior to such subdivision, combination, consolidation or stock dividend shall, concurrently with the effectiveness of such subdivision, combination or consolidation, be proportionately adjusted as more fully set forth in Section 4(f)(ii). 

ii) Adjustment for Common Stock Dividends and Distributions. If the Company at any time subdivides, combines or consolidates the outstanding shares of common stock as contemplated by Section 4(f)(i), in each such event the Series B Conversion Rate that is then in effect shall be adjusted as of the time of such event by multiplying the Series B Conversion Rate then in effect by a fraction (x) the numerator of which is the total number of shares of common stock issued and outstanding immediately after the time of such subdivision, combination or consolidation, and (y) the denominator of which is the total number of shares of common stock issued and outstanding immediately prior to such subdivision, combination or consolidation. 

iii) Reclassifications and Reorganizations. In the case, at any time after the date hereof, of any capital reorganization, merger or any reclassification of the stock of the Company (other than solely as a result of a stock dividend or subdivision, split-up or combination of shares), the Series B Conversion Rate then in effect shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted and the terms of the Series B Preferred Stock shall be deemed amended such that the shares of the Series B Preferred Stock shall, after such reorganization or reclassification, be convertible into the kind and number of shares of stock or other securities or property of the Company or otherwise to which such holder would have been entitled if immediately prior to such reorganization or reclassification, the holder’s shares of the Series B Preferred Stock had been converted into common stock. The provisions of this Section 4(f)(iii) shall similarly apply to successive reorganizations or reclassifications. 

 

 

 

g) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series B Conversion Rate pursuant to Section 4(f), the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the Series B Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any holder of Series B Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments; (ii) the Series B Conversion Rate at the time in effect; and (iii) the number of shares of common stock and the amount, if any, of other securities, cash or property which at the time would be received upon the conversion of the Series B Preferred Stock. 

h) Fractional Shares. Fractional shares of Series B Preferred Stock may be issued and all conversion rights shall be applied to such fractional shares on a proportional basis; provided, however, that in lieu of any fractional shares of common stock to which the holder of Series B Preferred Stock would be entitled upon conversion or otherwise pursuant hereto, the Company shall issue to such holder, one whole share of common stock. The number of whole shares to be issuable to each holder upon such conversion shall be determined on the basis of the number of shares of common stock issuable upon conversion of the total number of shares of Series B Preferred Stock of such holder at the time converting into common stock. 

 

Liquidation. 

i) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to stockholders shall be distributed among the holders of the shares of Series A Preferred Stock, Series B Preferred Stock, and common stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock pursuant to the terms hereof immediately prior to such dissolution, liquidation or winding up of the Company. 

j) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company which will involve the distribution of assets other than cash, the Company shall promptly engage an independent appraiser to determine the fair market value of the assets to be distributed to the holders of shares of its capital stock. The Company shall, upon receipt of such appraiser’s valuation, give prompt written notice to each holder of shares of Series B Preferred Stock of the appraiser’s valuation. Any equity securities of other entities to be distributed shall be valued as follows: (i) if the common stock is listed on a national securities exchange or NASDAQ, the last sale price of the common stock in the principal trading market for the common stock on such date or, if there are no sales common stock on that date, then on the next preceding date on which there were any sales of common shares, as reported by the exchange or NASDAQ, as the case may be; or (ii) if the common stock is not listed on a national securities exchange or NASDAQ, but is traded in the over-the-counter market, the closing bid price for the common stock on such date, as quoted by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations or, if there are no sales common stock on that date, then on the next preceding date on which there were any sales of common shares, as quoted by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations, as the case may be; or (iii) if the fair market value of the common stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Board of Directors of the Company shall reasonably determine, in good faith. 

5) Registration Rights. None. 

6) Redemption. None

7) No Impairment. Except and to the extent as waived or consented to by the holder, or as otherwise provided herein, the Company shall not by any action, including, without limitation, amending its Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series B Preferred Stock, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of holders as set forth in this Certificate of Designations against impairment. 

  

8) Loss, Theft, Destruction of Series A Preferred Stock Certificates. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of shares of Series B Preferred Stock and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of the Series B Preferred Stock, the Company shall make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated shares of Series B Preferred Stock, new shares of Series B Preferred Stock of like tenor. The Series B Preferred Stock shall be held and owned upon the express condition that the provisions of this Section are exclusive with respect to the replacement of mutilated, destroyed, lost or stolen shares of Series B Preferred Stock and shall preclude any and all other rights and remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of negotiable instruments or other securities without the surrender thereof. 

9) Notices. The holders of the Series B Preferred Stock shall be entitled to receive all communications sent by the Company to the holders of the common stock. Any notice required by the provisions of this Section 10 to be given to the holder of shares of the Series B Preferred Stock shall be deemed given when personally delivered to such holder or five business days after the same has been deposited in the United States mail, certified or registered mail, return receipt requested, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Company. 

10) Severability. If any right, preference or limitation of the Series B Preferred Stock set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule, law or public policy, all other rights, preferences and limitations set forth herein that can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall nevertheless remain in full force and effect, and no right, preference or limitation herein shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein. 

11) Consideration. The consideration due Adventure prior to conversion shall be one dollar ($1.00) per Series B share payable with a non-recourse non-negotiable promissory note due on the 5 year anniversary of this Agreement and secured by the preferred shares themselves.  The conversion rights shall expire on the same 5 year anniversary, and no conversions may be exercised prior to paying the promissory note.  

12) Seniority. The Series B Preferred Stock shall be senior to any additional newly issued Series of Preferred Stock except that of Series A which shall be senior to all Preferred Series.

The foregoing Amendment was adopted by the Board of Directors of the Company pursuant to the Florida Business Company Act on September 2, 2009. Therefore, the number of votes cast for the Amendment to the Company’s Articles of Incorporation was sufficient for approval. 

IN WITNESS WHEREOF, the Company has caused this Amendment to its Articles of Incorporation to be executed by its duly authorized officer this September 2, 2009. 

 

                                                                                                                Adventure Energy, Inc.

 

 

/s/ Wayne Anderson

President

 

 

 

 

 

 

 

 

 

 

[EXHIBIT 3 (SECTION 5B)]

 

SECURITY AGREEMENT

 

This Security Agreement is made and entered into this 4th day of September, 2009, by and between ADVENTURE ENERGY, INC., a Florida corporation, hereinafter referred to as the "Debtor," and SLMI Holdings, LLC, a Nevada limited liability company, hereinafter referred to as the "Secured Party."

 

For value received, the Debtor hereby grants to the Secured Party a security interest in the property described in Addendum A, hereinafter referred to as the "Collateral," to secure: (1) the Debtor's note of $1,000,000 to the Secured Party dated this day (the “Note”); (2) performance obligations of Debtor under that certain Lender Acquisition Agreement made this day between the parties; (3) all expenditures by the Secured Party for taxes, insurance, repairs to and maintenance of the Collateral, and all costs and expenses incurred by the Secured Party in the collection and enforcement of the note and other indebtedness of the Debtor; and (4) all liabilities of the Debtor to the Secured Party now existing or hereafter incurred, matured or unmatured, direct or contingent, and any renewals and extensions thereof and substitutions therefor.

 

The Debtor warrants and covenants:

 

The Collateral is to be used in business other than farming operations.

 

The Collateral is being acquired by the Debtor from the Secured Party or is being acquired with the proceeds of the advance evidenced by this Agreement.

 

The Debtor's chief place of business is at 33 6th Street South, Suite 600, St. Petersburg, FL 33701.

 

 

DEBTOR WARRANTS, COVENANTS, AND AGREES:

 

 

Title.

 

1. Except for the security interest hereby granted, the Debtor has, or on acquisition will have, full title to the Collateral free from any lien, security interest, encumbrance, or claim, and the Debtor will, at the Debtor's cost and expense, defend any action which  may affect the Secured Party's security interest in, or the Debtor's title to, the Collateral.

 

Financing Statement.

 

2. Secured Party is authorized to file Financing Statement covering the Collateral or any part thereof or any proceeds thereof in all applicable public offices and, at the Secured

Party's request, the Debtor will join in executing all necessary Financing Statements in forms satisfactory to the Secured Party and will pay the cost of filing the same and will further execute all other necessary instruments deemed necessary by the Secured Party and pay the cost of filing the same.

 

Sale, Lease, or Disposition of Collateral

 

3. The Debtor will not, without the prior written consent of the Secured Party, sell, agree to sell, lease, encumber, or dispose of the Collateral or any interest therein until this

Security Agreement and all debts secured thereby have been fully satisfied, except for transactions in Debtor’s ordinary course of business.

 

Insurance

 

4. The Debtor will obtain insurance policies with companies acceptable to the Secured Party against such casualties and in such amounts as the Secured Party shall reasonably require. Such policies will inure to the benefit of the Secured Party who is hereby  authorized to collect sums which may become due under any of said policies and apply the same to the obligations hereby secured.

 

Protection of Collateral

 

5. The Debtor will keep the Collateral in good order and repair and will not waste or destroy the Collateral or any part thereof. The Debtor will not use the Collateral in violation of any statute or ordinance and the Secured Party will have the right to examine and inspect the Collateral at any reasonable time. Debtor agrees that its default shall entitle Secured Party to appoint a receiver to administer to the Collateral instanter.

 

Taxes

 

6. The Debtor will pay promptly when due all taxes and assessments on the Collateral or for its use and operation.

 

Location and Identification

 

7. The Debtor will keep the Collateral separate and identifiable and at the address shown above and will not remove the Collateral from said address without the Secured Party's written consent.

 

Security Interest in Proceeds, Accessions, Etc.

 

8. The Debtor hereby grants to the Secured Party a security interest in and to all proceeds, increases, substitutions, replacements, additions, and accessions to the Collateral. This provision shall not be construed to mean that the Debtor is authorized to sell, lease, or dispose of the Collateral without the consent of the Secured Party.

 

 

 

 

Decrease in Value of Collateral

 

9. The Debtor shall, if in the Secured Party's judgment the Collateral has materially decreased in value or if the Secured Party shall at any time deem that the Secured Party is insecure, either provide enough additional Collateral to satisfy the Secured Party or reduce the total indebtedness by an amount sufficient to satisfy the Secured Party.

 

Reimbursement of Expenses

 

10. At the option of the Secured Party, the Secured Party may discharge taxes, liens, interest, or perform or cause to be performed for and on behalf of the Debtor any actions and conditions, obligations, or covenants which the Debtor has failed or refused to perform, and may pay for the repair, maintenance, and preservation of the Collateral, and all sums so expended, including, but not limited to, attorney's fees, court costs, agent's fees, or commissions, or any other costs or expenses, shall bear interest from the date of payment at the default rate under the Note and shall be payable at the place designated in the above-described note and shall be secured by this Security Agreement.

 

Payment

 

11. The Debtor will pay the note secured by this Security Agreement and any renewal or extension thereof and any other indebtedness hereby secured in accordance with the  terms and provisions thereof and will repay immediately all sums expended by the  Secured Party in accordance with the terms and provisions of this Security Agreement.

 

Change of Residence or Place of Business

 

12. The Debtor will promptly notify the Secured Party of any change of the Debtor's residence, chief place of business, or place where records concerning accounts and other contract rights are kept.

 

Attorney in Fact

 

13. The Debtor hereby appoints the Secured Party as the Debtor's Attorney in Fact to do any and every act which the Debtor is obligated by this Security Agreement to do, and to exercise all rights of the Debtor in the Collateral and to make collections and to execute any and all papers and instruments and to do all other things necessary to preserve and protect the Collateral and to make collections and to protect the Secured Party's security interest in said Collateral. This grant of power is coupled with Security Party’s interest and is irrevocable.

 

Time of Performance and Waiver

 

14. In performing any act under this Security Agreement and the note secured thereby, time shall be of the essence. The Secured Party's acceptance of partial or delinquent payments, or the failure of the Secured Party to exercise any right or remedy shall not constitute a waiver of any obligation of the Debtor or right of the Secured Party or constitute a waiver of any other similar default subsequently occurring.

 

Default

 

15. The Debtor shall be in default under this Security Agreement on the happening of any of the following events or conditions:

 

a. Default in the payment or performance of any note, obligation, covenant, or liability contained or referred to therein;

 

b. Any warranty, representation, or statement made or furnished to the Secured Party by or in behalf of the Debtor proves to have been false or misleading in any material respect when made or furnished;

 

c. Any event which results in the acceleration of the maturity of the indebtedness of the

Debtor to others under any agreement or undertaking;

 

d. Loss, theft, substantial damage, destruction, sale, or encumbrance to or any of the Collateral, or the making of any levy, seizure, or attachment thereof or thereon;

 

e. Any time the Secured Party believes that the prospect of payment of any indebtedness secured hereby or the performance of this Security Agreement is impaired;

 

f. Death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver for any part of the Collateral assignment for the benefit of creditors or the commencement of any proceeding under any bankruptcy or insolvency law by or against the Debtor or any guarantor or surety for the Debtor.

 

Remedies

 

16. On the occurrence of any such event of default, and at any time thereafter, the Secured Party may declare all obligations secured hereby immediately due and payable and may proceed to enforce payment of the same and exercise any and all of the rights and remedies provided by law. The Secured Party shall have the right to remove the Collateral from the premises of the Debtor and, for purposes of removal and possession, the Secured Party or its representatives may enter any premises of the Debtor without legal process and the Debtor hereby waives and releases the Secured Party of and from any and all claims in connection therewith or arising therefrom. The Secured Party may require the Debtor to assemble the Collateral and make it available to the Secured Party  at anyplace to be designated by the Secured Party which is reasonably convenient to both parties. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Secured Party will give the Debtor notice of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made. The Arbitration provisions of the Note are incorporated by this reference.

 

Miscellaneous Provisions

 

17. State Law to Apply: This Agreement shall be construed under and in accordance with the Uniform Commercial Code and other applicable laws of the State of Georgia.

 

Parties Bound: This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors, and assigns where permitted by this Agreement.

 

Legal Construction: In case any one or more of the provisions contained in this Agreement shall for any reason beheld to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not effect any other provision thereof and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.

 

18. Co-Pledgor. SLMI Options, LLC pledges all of its interests in the SLMI Loans as defined in said Lender Acquisition Agreement, and enters into this Agreement as a  copledgor and co-debtor with respect to such collateral. Debtor also pledges its  ownership units in SLMI Options, LLC and has surrendered possession of the certificate  to same to Secured Party.

 

 

ADVENTURE ENERGY, INC.                      SLMI OPTIONS, LLC

 

 

By: /s/ Wayne Anderson                                   By: /s/ Nydia Tisdale

Wayne Anderson, Pres.                                    Nydia Tisdale, authorized agent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADDENDUM “A”

COLLATERAL

 

 

All of the following whether now owned or existing or hereafter acquired or arising, wherever located, together with all proceeds, products, additions and substitutions:

 

All equipment inventory, furniture, tangible personal property, cash, cash proceeds, accessions, instruments, documents, investment property, chattel paper (including but not limited to receivables and collateral relating to Wilon Resources), accounts, and other rights to payment including but not limited to payments for property or services sold, leased, rented, licensed, or assigned, all rights under contracts regarding oil or gas wells, all general intangibles, and accounts receivable of Debtor Adventure Energy, Inc. and its co-pledgor, SLMI Options, LLC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[EXHIBIT 4 (SECTION 5C)]

 

NONRECOURSE NOTE WITH STOCK PLEDGE

 

For value received, the undersigned maker promises to pay to Adventure Energy, Inc. the principal sum of Three Hundred Thousand Dollars, plus interest at three percent (3.0%) per annum on the 5 year anniversary of this date.

 

This note is given in order to purchase 300,000 shares of Series B Convertible Preferred Stock issued by Adventure Energy, Inc. (“Adventure”). Said stock requires full payment of this note before conversion can occur. This note may be prepaid in whole or in part without penalty.

 

Maker hereby pledges said 300,000 shares of Series B Convertible Preferred Stock to Adventure as collateral for this note and tenders possession of said stock (the “Pledged Shares”) to Adventure.

 

The holder of this note shall have no recourse to maker for non-payment, and the sole recourse for nonpayment of this note shall be to the Pledged Shares.

 

This 4th day of September, 2009

 

 

MAKER

 

 

by: _____________________

            its authorized agent

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