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[FORM OF SERIES B SENIOR SECURED EXCHANGEABLE CONVERTIBLE
NOTE]
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF
THIS NOTE, INCLUDING SECTIONS 3(c)(iv), 4(c)(iv) AND 21(a)
HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE
AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT
TO SECTIONS 3(c)(iv) AND 4(c)(iv) OF THIS NOTE.
Earth Biofuels, Inc.
Series B Senior Secured Exchangeable Convertible Note
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Original
Issuance Date: June 26, 2008
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Original
Principal Amount: U.S. $3,000,000.00
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FOR VALUE RECEIVED, Earth Biofuels, Inc., a Delaware
corporation (the " Company "), hereby
promises to pay to the order of CASTLERIGG PNG INVESTMENTS LLC or
registered assigns (" Holder ") the amount
set out above as the Original Principal Amount (as reduced pursuant
to the terms hereof pursuant to redemption, conversion, exchange or
otherwise, and as increased to include the amount of any
Capitalized Interest (as defined below), the " Principal ") when due,
whether upon the Maturity Date (as defined below), acceleration,
redemption or otherwise (in each case in accordance with the terms
hereof) and to pay interest (" Interest ") on any
outstanding Principal at the applicable Interest Rate from the
Redemption Expiration Date (as defined below) until the same
becomes due and payable, whether upon an Interest Date (as defined
below), any Redemption Date or the Maturity Date or acceleration,
conversion, redemption, exchange or otherwise (in each case in
accordance with the terms hereof). This Series B Senior
Secured Exchangeable Convertible Note (including all Series B
Senior Secured Exchangeable Convertible Notes issued in exchange,
transfer or replacement hereof, this " Note ") is one of an
issue of Series B Senior Secured Exchangeable Convertible Notes
issued pursuant to the Amendment and Exchange Agreements dated as
of date set out above as the Original Issuance Date (the "
Amendment
Date ") by and between each of the Buyers (as defined in the
Amendment and Exchange Agreements) and the Company (individually,
with respect to any Buyer, the " Amendment and Exchange
Agreement " and collectively, with respect to all Buyers,
the " Amendment
and Exchange Agreements ") (collectively, the " Notes " and such other
Series B Senior Secured Exchangeable Convertible Notes, the "
Other
Notes
"). Certain capitalized terms used herein are defined in
Section 31.
(1)
PAYMENTS OF
PRINCIPAL . On the Maturity Date, the
Company shall pay to the Holder an amount in cash representing
all outstanding Principal, accrued and unpaid Interest and
accrued and unpaid Late Charges on such Principal and
Interest. The " Maturity
Date "
shall be July 25, 2010 (the " Stated Maturity
Date "), as may be extended at the option
of
the
Holder (i) in the event that, and for so long as, an Event of
Default (as defined in Section 5(a)) shall have occurred and
be continuing on the Maturity Date (as may be extended
pursuant to this Section 1) or any event shall have occurred
and be continuing on the Maturity Date (as may be extended
pursuant to this Section 1) that with the passage of time and
the failure to cure would result in an Event of Default and
(ii) through the date that is ten (10) Business Days after the
consummation of a Change of Control in the event that a Change
of Control is publicly announced or a Change of Control Notice
(as defined in Section 6(b)) is delivered prior to the
Maturity Date. Other than as specifically permitted
by this Note, the Company may not prepay any portion of the
outstanding Principal, accrued and unpaid interest or accrued
and unpaid Late Charges on Principal and Interest, if
any. Notwithstanding any provision of this Section
1 to the contrary, the Holder may at any time and from time to
time at its option and in its sole discretion by delivering a
written notice to the Company at any time while this Note is
outstanding, elect to have the payment of all or any portion
of the Principal and Interest, if any, payable on the Stated
Maturity Date deferred (such amount deferred, the "
Maturity
Deferral Amount ") to any date that is not later than
five (5) years after the Stated Maturity Date, which date
shall thereafter be the "Maturity Date" for all purposes
hereunder. Any notice delivered by the Holder
pursuant to this Section 1 shall set forth (i) the Maturity
Deferral Amount and (ii) the date that such Maturity Deferral
Amount shall now be payable.
(2)
INTEREST;
INTEREST RATE . Interest on this Note shall
commence accruing on the Amendment Date and shall be computed
on the basis of a 360-day year comprised of twelve (12) thirty
(30) day months and shall be payable in arrears for each
Calendar Quarter on the first day of the succeeding Calendar
Quarter during the period beginning on the Amendment Date and
ending on, and including, the Maturity Date (each, an "
Interest
Date
") with the first Interest Date being July 1,
2009. Interest shall be payable on each Interest
Date, to the record holder of this Note on the applicable
Interest Date, and to the extent that any Principal amount of
this Note is converted prior to such Interest Date, accrued
and unpaid Interest with respect to such converted Principal
amount and accrued and unpaid Late Charges with respect to
such Principal and Interest shall be paid on the Conversion
Date (as defined below) to the record holder of this Note on
the applicable Conversion Date, in cash (" Cash Interest ");
provided however, that the Company may, at its option
following notice to the Holder elect pursuant to an Interest
Election Notice (as defined below) to capitalize such Interest
on and as of each Interest Date by adding it to the then
outstanding Principal of this Note (the " Capitalized
Interest "). The Company shall deliver a
written notice (each, an " Interest Election
Notice ") to each holder of the Notes on or prior to
the Interest Notice Due Date (the date such notice is
delivered to all of the holders, the " Interest Notice
Date ") which notice (1) either (A) confirms that the
Company shall pay Interest as Cash Interest or (B) elects to
pay Interest as Capitalized Interest or a combination of Cash
Interest and Capitalized Interest and specifies the amount of
Interest that shall be paid as Cash Interest and Capitalized
Interest. From and after the occurrence and during
the continuance of an Event of Default, the Interest Rate
shall be increased to the rate which is the lesser of (x)
twenty-eight percent (28.0%), or (y) the highest rate
permitted by law to accrue under this Note. In the
event that such Event of Default is subsequently cured, the
adjustment referred to in the preceding sentence shall cease
to be effective as of the date of such cure; provided that the
Interest as calculated and unpaid at such increased rate
during the continuance of such Event of Default shall continue
to apply to the extent relating to the days after the
occurrence of such Event of Default through and including the
date of cure of such Event of Default.
(3)
CONVERSION OF
NOTES . This Note shall be convertible into
shares of the Company's common stock, par value $0.001 per
share (the " Common Stock "),
on the terms and conditions set forth in this Section
3.
(a)
Conversion
Right . Subject to the provisions of Section
3(d), at any time or times on or after the Amendment Date, the
Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below)
into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as
defined below). The Company shall not issue any
fraction of a share of Common Stock upon any
conversion. If the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and
all transfer, stamp and similar taxes that may be payable with
respect to the issuance and delivery of Common Stock upon
conversion of any Conversion Amount.
(b)
Conversion
Rate . The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to
Section 3(a) shall be determined by dividing (x) such
Conversion Amount by (y) the Conversion Price (the "
Conversion
Rate ").
(i) "
Conversion
Amount " means the portion of the Principal to be
converted, redeemed or otherwise with respect to which this
determination is being made.
(ii) "
Conversion
Price " means, as of any Conversion Date (as defined
below) or other date of determination, $0.25, subject to
adjustment as provided herein; provided, further that, on each
Automatic Adjustment Date, the then current Conversion Price
shall be reduced to the lower of (i) the then current
Conversion Price and (ii) the Automatic Adjustment Reset Price
as of such applicable Automatic Adjustment Date.
(c)
Mechanics of
Conversion .
(i)
Optional
Conversion . To convert any Conversion
Amount into shares of Common Stock on any date (a "
Conversion
Date "), the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 11:59 p.m., New
York Time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I
(the " Conversion Notice
") to the Company and (B) if required by Section 3(c)(iii),
surrender this Note to a nationally recognized overnight
delivery service for delivery to the Company (or an
indemnification undertaking with respect to this Note in the
case of its loss, theft or destruction). On or
before the first (1 st
) Business Day following the date of receipt of a Conversion
Notice, the Company shall transmit by facsimile a confirmation
of receipt of such Conversion Notice to the Holder and the
Company's transfer agent (the " Transfer Agent
"). On or before the third (3 rd
) Business Day following the date of receipt of a Conversion
Notice (the " Share Delivery
Date
"), the Company shall (1) (X) provided that the Transfer Agent
is participating in the Depository Trust Company's ("
DTC ")
Fast Automated Securities Transfer Program, credit such
aggregate number of shares of Common Stock to which the Holder
shall be entitled to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not
participating in the
DTC
Fast Automated Securities Transfer Program, issue and deliver
to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its
designee, for the number of shares of Common Stock to which
the Holder shall be entitled which certificates shall not bear
any restrictive legends; and (2) (X) pay to the Holder in cash
an amount equal to the accrued and unpaid Interest on the
Conversion Amount up to and including the Conversion Date, (Y)
deliver to the Holder an Interest Election Notice electing to
treat the accrued and unpaid Interest on the Conversion Amount
as Capitalized Interest or (Z) credit to the Holder's balance
account with DTC, or issue and deliver a certificate to the
Holder, for an aggregate amount of shares of Common Stock
equal to the result obtained by dividing (I) the accrued and
unpaid Interest on the Conversion Amount up to and including
the Conversion Date by (II) the applicable Conversion Price
set forth in the Conversion Notice. If this Note is
physically surrendered for conversion as required by Section
3(c)(iii) and the outstanding Principal of this Note is
greater than the Principal portion of the Conversion Amount
being converted, then the Company shall as soon as practicable
and in no event later than three (3) Business Days after
receipt of this Note and at its own expense, issue and deliver
to the holder a new Note (in accordance with Section 21(d))
representing the outstanding Principal not
converted. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion
of this Note shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the
Conversion Date.
(ii)
Company's
Failure to Timely Convert . If within three
(3) Trading Days after the Company's receipt of the facsimile
copy of a Conversion Notice the Company shall fail to issue
and deliver a certificate to the Holder or credit the Holder's
balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon such holder's
conversion of any Conversion Amount (a " Conversion Failure
"), and if on or after such Trading Day the Holder purchases
(in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by the Holder of Common
Stock issuable upon such conversion that the Holder
anticipated receiving from the Company (a " Buy-In "), then
the Company shall, within three (3) Business Days after the
Holder's request and in the Holder's discretion, either (i)
pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions and
other out of pocket expenses, if any) for the shares of Common
Stock so purchased (the "Buy-In Price" ),
at which point the Company's obligation to deliver such
certificate (and to issue such Common Stock) shall terminate,
or (ii) promptly honor its obligation to deliver to the Holder
a certificate or certificates representing such Common Stock
and pay cash to the Holder in an amount equal to the excess
(if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Bid
Price on the Conversion Date.
(iii)
Book-Entry
. Notwithstanding anything to the contrary set forth herein,
upon conversion of any portion of this Note in accordance with
the terms hereof, the Holder shall not be required to
physically surrender this Note to the Company unless (A) the
full Conversion Amount represented by this Note is being
converted or (B) the Holder has provided the Company with
prior written notice (which notice may be included in a
Conversion Notice) requesting reissuance of this Note upon
physical surrender of this Note. The Holder and the
Company shall maintain records showing the Principal, Interest
and Late Charges converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical
surrender of this Note upon conversion.
(iv)
Pro
Rata Conversion; Disputes . In the event
that the Company receives a Conversion Notice from more than
one holder of Notes for the same Conversion Date and the
Company can convert some, but not all, of such portions of the
Notes submitted for conversion, the Company, subject to
Section 3(d), shall convert from each holder of Notes electing
to have Notes converted on such date a pro rata amount of such
holder's portion of its Notes submitted for conversion based
on the principal amount of Notes submitted for conversion on
such date by such holder relative to the aggregate principal
amount of all Notes submitted for conversion on such
date. In the event of a dispute as to the number of
shares of Common Stock issuable to the Holder in connection
with a conversion of this Note, the Company shall issue to the
Holder the number of shares of Common Stock not in dispute and
resolve such dispute in accordance with Section
26.
(d)
Limitations on
Conversions : Beneficial
Ownership . The Company shall not effect any
conversion of this Note or otherwise issue shares of Common
Stock pursuant to Section 3(c) hereof or Sections 9 or 10
hereof, and the Holder of this Note shall not have the right
to convert any portion of this Note pursuant to Section 3(a),
to the extent that after giving effect to such conversion, the
Holder (together with the Holder's affiliates) would
beneficially own in excess of 1.247% (the " Maximum Percentage
") of the number of shares of Common Stock outstanding
immediately after giving effect to such
conversion. For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the
Holder and its affiliates shall include the number of shares
of Common Stock issuable upon conversion of this Note with
respect to which the determination of such sentence is being
made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) conversion of the remaining,
nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates and (B) exercise or conversion
of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any
Other Notes or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 3(d), beneficial
ownership shall be calculated in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "
1934
Act "). For purposes of this Section 3(d),
in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company's most recent
Form 10-KSB, Form 10-QSB or Form 8-K, as the case may be (y) a
more recent public announcement by the Company or (z) any
other notice by the Company or the Transfer Agent setting
forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the
written request of the Holder, the Company shall within one
(1) Business Day confirm in writing to the Holder the number
of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or
exercise of securities of the Company, including this Note, by
the Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was
reported. By written notice to the Company, the
Holder may increase or decrease the Maximum Percentage to any
other percentage not in excess of 9.99% specified in such
notice; provided that (x) any such increase will not be
effective until the sixty-first (61 st
) day after such notice is delivered to the Company, and (y)
any such increase or decrease will apply only to the Holder
and not to any other holder of Notes.
(4)
EXCHANGE OF
NOTES . In addition to the rights of the
Holder under Section 3 hereof, at any time after the
consummation of the Share Exchange (as defined in the
Amendment and Exchange Agreements), this Note shall be
exchangeable into the PNG Shares (as defined in the Amendment
and Exchange Agreements) on the terms and conditions set forth
in this Section 4.
(a)
Exchange
Right . Subject to the provisions of Section
4(d), at any time or times on or after the consummation of the
Share Exchange, the Holder shall be entitled to exchange any
portion of the outstanding and unpaid Exchange Amount (as
defined below) into fully paid and nonassessable shares of PNG
Shares in accordance with Section 4(c), at the Exchange Rate
(as defined below). The Company shall not deliver
any fraction of a share of PNG Shares upon any
exchange. If the delivery would result in the
transfer of a fraction of a share of PNG Shares, the Company
shall round such fraction of a share of PNG Shares up to the
nearest whole share. The Company shall pay any and
all taxes that may be payable with respect to the transfer and
delivery of PNG Shares upon exchange of any Exchange Amount
for PNG Shares.
(b)
Exchange
Rate . The number of shares of PNG Shares
transferable upon exchange of any Exchange Amount pursuant to
Section 4(a) shall be determined by dividing (x) such Exchange
Amount by (y) the Exchange Price (as defined below) (the
"Exchange
Rate" ).
(i)
"Exchange
Amount" means the portion of the outstanding Principal
to be exchanged with respect to which this determination is
being made.
(ii)
"Exchange
Price" means $10.00, subject to adjustment as provided
herein.
(c)
Mechanics of
Exchange .
(i)
Optional
Exchange . To exchange any Exchange Amount
into shares of PNG Shares on any date (an "Exchange Date" ),
the Holder shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59
p.m., New York Time, on such date, a copy of an
executed notice of exchange in the form attached hereto as
Exhibit
II (the "Exchange Notice"
) to the Company, (B) if required by Section 4(c)(iii),
surrender this Note to a common carrier for delivery to the
Company as soon as practicable on or following such date (or
an indemnification undertaking with respect to this Note
reasonably satisfactory to the Company in the case of its
loss, theft or destruction) and (C) deliver to the transfer
agent for LNG (the "LNG Transfer
Agent" ) a copy of such Exchange Notice along with the
original stock certificate held by the Holder in accordance
with the Security Documents evidencing the Holder's pro rata
allocation of the PNG Shares. On or before the
first (1 st
) Business Day following the date of receipt by the Company of
an Exchange Notice, the Company shall transmit by facsimile a
confirmation of receipt of such Exchange Notice to the Holder
and the LNG Transfer Agent. On or before the second
(3 rd
) Business Day following the date of receipt by the Company of
an Exchange Notice (the "LNG Share Delivery
Date" ), the Company shall (1) use its reasonable best
efforts to cause LNG or the LNG Transfer Agent to (X) transfer
and deliver to the address as specified in the Exchange
Notice, a certificate, registered in the name of
the
Holder or its designee, for the number of shares of PNG Shares
to which the Holder shall be entitled, or (Y) provided that
the LNG Transfer Agent is participating in DTC Fast Automated
Securities Transfer Program and such shares of PNG Shares,
credit such aggregate number of shares of PNG Shares to which
the Holder shall be entitled certificates shall not bear any
restrictive legends to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent
Commission system; and (2) either (A) pay to the Holder in
cash an amount equal to the accrued and unpaid Interest on the
Exchange Amount up to and including the Exchange Date (the "
Exchange
Interest Amount ") or (B) deliver a number of shares of
PNG Shares equal to the Exchange Interest Amount divided by
the Interest Exchange Conversion Price. Upon any
such transfer of any PNG Shares to the Holder, the Holder
shall have good and marketable title to such shares, free and
clear of any liens, encumbrances, restrictions, rights of
first refusal or rights of any other Person and such shares of
PNG Shares shall be unrestricted and freely tradable on the
Principal Market without any delivery or other requirements
whatsoever and without the need for registration under the
Securities Act or any state securities laws. If
this Note is physically surrendered for exchange as required
by Section 4(c)(iii) and the outstanding Principal of this
Note is greater than the Principal portion of the Exchange
Amount being exchanged, then the Company shall as soon as
practicable and in no event later than three (3) Business Days
after receipt of this Note and at its own expense, issue and
deliver to the holder a new Note (in accordance with Section
21(d)) representing the outstanding Principal not
exchanged. The Company shall use its reasonable
best efforts to cause LNG and the LNG Transfer Agent to treat
for all purposes the Person or Persons entitled to receive the
shares of PNG Shares issuable upon an exchange of this Notes
as the transferee or transferees of such shares of PNG Shares
on the Exchange Date.
(ii)
Company's
Failure to Timely Exchange . If the Company
shall fail to transfer and deliver to the Holder or have
credited to the Holder's balance account with DTC the number
of shares of PNG Shares to which the Holder is entitled
(provided that the Holder has delivered its original stock
certificate evidencing the Holder's pro rata allocation of the
PNG Shares to the LNG Transfer Agent as required by Section
4(c)(i)) upon exchange of any Exchange Amount on or prior to
the date which is three (3) Trading Days after the Exchange
Date (an " Exchange Failure
"), then (A) the Company shall pay damages to the Holder for
each date of such Exchange Failure in an amount equal to 1.0%
of the product of (I) the sum of the number of shares of PNG
Shares not transferred and delivered to the Holder on or prior
to the LNG Share Delivery Date and to which the Holder is
entitled and (II) the Closing Sale Price of the PNG Shares on
the LNG Share Delivery Date and (B) the Holder, upon written
notice to the Company, may void its Exchange Notice with
respect to, and retain or have returned, as the case may be,
any portion of this Note surrendered by the Holder to the
Company that has not been exchanged pursuant to such Exchange
Notice; provided that the voiding of an Exchange Notice shall
not affect the Company's obligations to make any payments
which have accrued prior to the date of such notice pursuant
to this Section 4(c)(ii) or otherwise. In addition to the
foregoing, if upon or after such Exchange Failure the Holder
purchases (in an open market transaction or otherwise) PNG
Shares to deliver in satisfaction of a sale by the Holder of
PNG Shares issuable upon such exchange that the Holder
anticipated receiving from the Company (a " LNG Buy-In "),
then the Company shall, within three (3) Business Days after
the Holder's request and in the Holder's discretion, either
(i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions and
other out of pocket expenses, if any) for the shares of PNG
Shares so purchased (the " LNG Buy-In Price"
), at which point the
Company's
obligation to deliver such certificate (and to issue such PNG
Shares) shall terminate, or (ii) promptly honor its obligation
to deliver to the Holder a certificate or certificates
representing such PNG Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the LNG Buy-In Price
over the product of (A) such number of shares of PNG Shares,
times (B) the Closing Bid Price of PNG Shares on the Exchange
Date.
(iii)
Book-Entry
. Notwithstanding anything to the contrary set forth herein,
upon exchange of any portion of this Note in accordance with
the terms hereof, the Holder shall not be required to
physically surrender this Note to the Company unless (A) the
full Conversion Amount represented by this Note is being
exchanged or (B) the Holder has provided the Company with
prior written notice (which notice may be included in an
Exchange Notice) requesting physical surrender and reissue of
this Note. The Company shall maintain records
showing the Principal, Interest and Late Charges exchanged and
the dates of such exchanges or shall use such other method,
reasonably satisfactory to the Holder, so as not to require
physical surrender of this Note upon exchange.
(iv)
Disputes
. In the event of a dispute as to the number of
shares of PNG Shares transferable to the Holder in connection
with an exchange of this Note, the Company shall transfer and
deliver to the Holder the number of shares of PNG Shares not
in dispute and resolve such dispute in accordance with Section
26.
(d)
Limitations on
Exchanges .
(i)
Beneficial
Ownership . Upon delivery by the Holder to
the Company of a written notice stating that the Holder will
be subject to this Section 4(d), the Company shall not effect
any exchange of this Note, and the Holder of this Note shall
not have the right to exchange any portion of this Note,
pursuant to Section 4(a), Section 10 or otherwise, to the
extent that after giving effect to such exchange, the Holder
(together with the Holder's affiliates), as set forth on the
applicable Exchange Notice, would beneficially own in excess
of 1.247% of the number of shares of PNG Shares outstanding
immediately after giving effect to such
exchange. For purposes of the foregoing sentence,
the number of shares of PNG Shares beneficially owned by the
Holder and its affiliates shall include the maximum number of
shares of PNG Shares deliverable upon exchange of this Note
with respect to which the determination of such sentence is
being made, but shall exclude the number of shares of PNG
Shares which would be deliverable upon (A) exchange of the
remaining, nonexchanged portion of this Note beneficially
owned by the Holder or any of its affiliates and (B) exercise,
conversion or exchange of the unexercised, unconverted or
nonexchanged portion of any other securities (including,
without limitation, any Other Notes or warrants) subject to a
limitation on exchange, conversion or exercise analogous to
the limitation contained herein beneficially owned by the
Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section
4(d)(i), beneficial ownership shall be calculated in
accordance with Section 13(d) of the 1934 Act. For
purposes of this Section 4(d)(i), in determining the number of
outstanding shares of PNG Shares, the Company and the Holder
may rely on the number of outstanding shares of PNG Shares as
reflected in (x) the most recent Form 10-Q or Form 10-K of
LNG, as the case may be, or (y) a more recent public
announcement by LNG. In any case, the number of
outstanding shares of PNG Shares shall be determined after
giving effect to the exchange, conversion or exercise of
securities of the Company or LNG, including this Note, by the
Holder or its affiliates since the
date
as of which such number of outstanding shares of PNG Shares
was reported. By written notice to the Company, the
Holder may increase or decrease the Maximum Percentage to any
other percentage specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first
(61 st
) day after such notice is delivered to the Company, and (ii)
any such increase or decrease will apply only to the Holder
and not to any other holder of Notes. ]
(ii)
Maximum LNG
Shares . The Company shall not be obligated
to deliver any shares of PNG Shares upon exchange of this Note
or any 2008 Amendment Note, whether pursuant to this Section
4, the Security Documents (as defined in the Amendment and
Exchange Agreements) or otherwise, if the delivery of such
shares of PNG Shares would require the delivery of more than
7,000,000 shares of PNG Shares in the aggregate (as adjusted
for any stock dividend, stock split, stock combination or
other similar transaction affecting the PNG Shares after the
Amendment Date) (the "LNG Exchange Cap"
). No Purchaser shall have delivered to it, upon
exchange of 2008 Amendment Notes, a number of shares of PNG
Shares in an amount greater than the product of the LNG
Exchange Cap multiplied by a fraction, the numerator of which
is the principal amount of 2008 Amendment Notes issued to such
Purchaser pursuant to the Amendment and Exchange Agreements on
the Amendment Date and the denominator of which is the
aggregate principal amount of all 2008 Amendment Notes issued
to the Purchasers pursuant to the Amendment and Exchange
Agreements on the Amendment Date (with respect to each
Purchaser, the "LNG Exchange Cap
Allocation" ). In the event that any
Purchaser shall sell or otherwise transfer any of such
Purchaser's 2008 Amendment Notes, the transferee shall be
allocated a pro rata portion of such Purchaser's LNG Exchange
Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of
the LNG Exchange Cap Allocation allocated to such
transferee. In the event that any such holder shall
have converted and exchanged such holder's 2008 Amendment
Notes in their entirety (such that such holder no longer has
any 2008 Amendment Notes) and such holder shall have received
a number of shares of PNG Shares which, in the aggregate, is
less than such holder's LNG Exchange Cap Allocation, then the
difference between such holder's LNG Exchange Cap Allocation
and the number of shares of PNG Shares actually delivered to
such holder shall be allocated to the respective LNG Exchange
Cap Allocations of the remaining holders of 2008 Amendment
Notes on a pro rata basis in proportion to the aggregate
principal amount of the 2008 Amendment Notes then held by each
such holder.
(5)
RIGHTS UPON
EVENT OF DEFAULT .
(a)
Event of
Default . Each of the following events shall
constitute an " Event of Default
":
(i) the
suspension from trading or failure of the Common Stock to be
listed on an Eligible Market for a period of five (5)
consecutive Trading Days or for more than an aggregate of ten
(10) Trading Days in any 365-day period;
(ii) the
Company's (A) failure to cure a Conversion Failure by delivery
of the required number of shares of Common Stock within ten
(10) Business Days after the applicable Conversion Date, (B)
failure to cure an Exchange Failure by delivery of
the
required
number of shares of PNG Shares within ten (10) Business Days
after the applicable Exchange Date or (C) notice, written or
oral, to any holder of the Notes, including by way of public
announcement, at any time, of its intention not to comply with
a request for conversion or exchange of any Notes into shares
of Common Stock or PNG Shares, as applicable, that is tendered
in accordance with the provisions of the Notes, other than
pursuant to Sections 3(d) or 4(d);
(iii) at
any time following the tenth (10 th
) consecutive Business Day following the Authorized Share
Failure Deadline that the Holder's Authorized Share Allocation
is less than the number of shares of Common Stock that the
Holder would be entitled to receive upon a conversion of the
full Conversion Amount of this Note (without regard to any
limitations on conversion set forth in Section 3(d) or
otherwise);
(iv) the
Company's failure to pay to the Holder any amount of
Principal, Interest, Late Charges or other amounts when and as
due under this Note (including, without limitation, the
Company's failure to pay any redemption payments or amounts
hereunder) or any other Transaction Document or any other
agreement, document, certificate or other instrument delivered
in connection with the transactions contemplated hereby and
thereby to which the Holder is a party, except, in the case of
a failure to pay Interest and Late Charges when and as due, in
which case only if such failure continues for a period of at
least ten (10) Business Days;
(v) the
occurrence of any default under, redemption of or acceleration
prior to maturity of any Indebtedness of the Company or any of
its Subsidiaries (as defined in Section 3(a) of the Securities
Purchase Agreement) which, individually or in the aggregate,
exceeds $500,000, other than with respect to any Other
Notes;
(vi) the
Company or LNG or any of their Subsidiaries, pursuant to or
within the meaning of Title 11, U.S. Code, or any similar
Federal, foreign or state law for the relief of debtors
(collectively, " Bankruptcy Law "),
(A) commences a voluntary case, (B) consents to the entry of
an order for relief against it in an involuntary case, (C)
consents to the appointment of a receiver, trustee, assignee,
liquidator or similar official (a " Custodian "), (D)
makes a general assignment for the benefit of its creditors or
(E) admits in writing that it is generally unable to pay its
debts as they become due;
(vii) a
court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (A) is for relief against the
Company or LNG or any of their Subsidiaries in an involuntary
case, (B) appoints a Custodian of the Company or LNG or any of
their Subsidiaries or (C) orders the liquidation of the
Company or LNG or any of their Subsidiaries;
(viii) a
final judgment or judgments for the payment of money
aggregating in excess of $1,500,000 are rendered against the
Company or any of its Subsidiaries and which judgments are
not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay;
provided, however, that any judgment which is covered by
insurance or an indemnity from a credit worthy party shall not
be included in calculating the $1,500,000 amount set
forth above
so
long as the Company provides the Holder a written statement
from such insurer or indemnity provider (which written
statement shall be reasonably satisfactory to the Holder) to
the effect that such judgment is covered by insurance or an
indemnity and the Company will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance
of such judgment;
(ix) the
Company breaches any representation, warranty, covenant
or other term or condition of any Transaction Document, which
breach has or is likely to have a cost or adverse impact on
the Company or the Holders (including by reduction in the
value of the shares of Common Stock or PNG Shares deliverable
in connection with the Transaction Documents) in excess of
$250,000, except, in the case of a breach of a covenant or
other term or condition of any Transaction Document which is
curable, only if such breach continues for a period of at
least ten (10) consecutive Business Days;
(x) any
breach or failure in any respect to comply with either of
Sections 9 or 15 of this Note or Sections 1(h) and 1(i) of the
Amendment and Exchange Agreement;
(xi) the
Company or any Subsidiary shall fail to perform or comply with
any covenant or agreement contained in any Security Document
(as defined in the Amendment and Exchange Agreements) to which
it is a party;
(xii) any
material provision of any Security Document (as determined by
the Collateral Agent (as defined in the Amendment and Exchange
Agreements)) shall at any time for any reason (other than
pursuant to the express terms thereof) cease to be valid and
binding on or enforceable against the Company or any
Subsidiary intended to be a party thereto, or the validity or
enforceability thereof shall be contested by any party
thereto, or a proceeding shall be commenced by the Company or
any Subsidiary or any governmental authority having
jurisdiction over any of them, seeking to establish the
invalidity or unenforceability thereof, or the Company or any
Subsidiary shall deny in writing that it has any liability or
obligation purported to be created under any Security
Document;
(xiii) any
Security Document, after delivery thereof pursuant hereto,
shall for any reason fail or cease to create a valid and
perfected and, except to the extent permitted by the terms
hereof or thereof, (I) first priority Lien in favor of the
Collateral Agent for the Collateral (as defined in the
Security Documents) described on Schedule
5(a)(xiii)(I) attached hereto, (II) a second priority
Lien in favor of the Collateral Agent for the Collateral
described on Schedule
5(a)(xiii)(II) attached hereto, and (III) a third
priority Lien in favor of the Collateral Agent for the
Collateral described on Schedule
5(a)(xiii)(III) attached hereto, in each case for the
benefit of the holders of the Notes;
(xiv) any
bank at which any deposit account, blocked account, or lockbox
account of the Company or any Subsidiary is maintained shall
fail to comply with any material term of any deposit account,
blocked account, lockbox account or similar agreement to which
such bank is a party or any securities intermediary, commodity
intermediary or other financial institution at any time in
custody, control or possession of any investment property of
the Company or any Subsidiary shall fail to comply with any of
the terms of any investment
property
control agreement to which such Person is a party (it being
understood that only accounts pursuant to which the Collateral
Agent has requested account control agreements should be
subject to this clause (xiv));
(xv) any
material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty which causes, for more than fifteen
(15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of
the Company or any Subsidiary, if any such event or
circumstance could reasonably be expected to have a Material
Adverse Effect (as defined in the Securities Purchase
Agreement);
(xvi) upon
failure to deliver to the Collateral Agent no later than five
(5) Business Days after the Amendment Date, the shares of
Common Stock required to be delivered to the Collateral Agent
pursuant to the Senior Pledge Agreement (as defined in the
Amendment and Exchange Agreements) along with duly executed
blank stock powers;
(xvii) any
Event of Default (as defined in the Other Notes) occurs with
respect to any Other Notes.
(b)
Redemption
Right . Upon the occurrence of an Event of
Default with respect to this Note or any Other Note, the
Company shall within one (1) Business Day deliver written
notice thereof via facsimile and overnight courier (an "
Event of
Default Notice ") to the Holder. At any time
after the earlier of the Holder's receipt of an Event of
Default Notice and the Holder becoming aware of an Event of
Default, the Holder may require the Company to redeem all or
any portion of this Note by delivering written notice thereof
(the " Event
of Default Redemption Notice ") to the Company, which
Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem. Each
portion of this Note subject to redemption by the Company
pursuant to this Section 5(b) shall be redeemed by the Company
at a price equal to the greater of (i) the product of (A) the
sum of the Conversion Amount to be redeemed together with
accrued and unpaid Interest with respect to such Conversion
Amount and accrued and unpaid Late Charges with respect to
such Conversion Amount and Interest and (B) the Redemption
Premium and (ii) the product of (A) the Conversion Rate with
respect to such sum of the Conversion Amount together with
accrued and unpaid Interest with respect to such Conversion
Amount and accrued and unpaid Late Charges with respect to
such Conversion Amount and Interest in effect at such time as
the Holder delivers an Event of Default Redemption Notice and
(B) the product of (1) the Equity Value Redemption Premium and
(2) the greater of (x) the Closing Sale Price of the Common
Stock on the date immediately preceding such Event of Default,
(y) the Closing Sale Price of the Common Stock on the date
immediately after such Event of Default and (z) the Closing
Sale Price of the Common Stock on the date the Holder delivers
the Event of Default Redemption Notice (the " Event of Default
Redemption
Price "). Redemptions required by this
Section 5(b) shall be made in accordance with the provisions
of Section 11. To the extent redemptions required
by this Section 5(b) are deemed or determined by a court of
competent jurisdiction to be prepayments of the Note by the
Company, such redemptions shall be deemed to be voluntary
prepayments. The parties hereto agree that in the
event of the Company's redemption of any portion of the Note
under this Section 5(b), the Holder's damages would be
uncertain and difficult to estimate because of the parties'
inability to predict future interest rates and
the
uncertainty
of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any
Redemption Premium due under this Section 5(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate
of the Holder's actual loss of its investment opportunity and
not as a penalty.
(6)
RIGHTS UPON
FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL
.
(a)
Assumption
. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity
assumes in writing all of the obligations of the Company under
this Note and the other Transaction Documents in accordance
with the provisions of this Section 6(a) pursuant to written
agreements in form and substance reasonably satisfactory to
the Required Holders and approved by the Required Holders
prior to such Fundamental Transaction, including agreements to
deliver to each holder of Notes in exchange for such Notes a
security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the
Notes, including, without limitation, having a principal
amount and interest rate equal to the principal amounts and
the interest rates of the Notes then outstanding held by such
holder, having similar conversion and exchange rights and
having similar ranking to the Notes, and reasonably
satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed
for trading on an Eligible Market (a " Public Successor
Entity "). Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of
such Fundamental Transaction, the provisions of this Note
referring to the "Company" shall refer instead to the
Successor Entity), and may exercise every right and power of
the Company and shall assume all of the obligations of the
Company under this Note with the same effect as if such
Successor Entity had been named as the Company
herein. Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion of
this Note at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of the
Company's Common Stock (or other securities, cash, assets or
other property) issuable upon the conversion of the Notes
prior to such Fundamental Transaction, such shares of the
publicly traded common stock (or their equivalent) of the
Successor Entity (including its Parent Entity), as adjusted in
accordance with the provisions of this Note. The
provisions of this Section 6 shall apply similarly and equally
to successive Fundamental Transactions and shall be applied
without regard to any limitations on the conversion of this
Note.
(b)
Redemption
Right . No sooner than twenty (20) Trading
Days nor later than ten (10) Trading Days prior to the
consummation of a Change of Control, but not prior to the
public announcement of such Change of Control, the Company
shall deliver written notice thereof via facsimile and
overnight courier to the Holder (a " Change of Control
Notice
"). At any time during the period beginning after
the Holder's receipt of a Change of Control Notice and ending
on the later of (A) one (1) Business Day prior to consummation
of such Change of Control or (B) twenty (20) Trading Days
after the date of receipt of such Change of Control Notice,
the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof ("
Change of
Control Redemption Notice ") to the Company, which
Change of Control Redemption Notice shall indicate the
Conversion Amount the Holder is electing to
redeem. The portion of this Note subject to
redemption pursuant to this Section 6
shall
be redeemed by the Company in cash at a price equal to the
greater of (i) the sum of (x) the product of the Change of
Control Redemption Premium and the Conversion Amount being
redeemed and (y) the amount of any accrued but unpaid Interest
on such Conversion Amount being redeemed and accrued and
unpaid Late Charges, if any, with respect to such Conversion
Amount and Interest through the date of such redemption
payment and (ii) the product of (x) the Equity Value
Redemption Premium and (y) the sum of (1) the product of (A)
the Conversion Amount being redeemed multiplied by (B) the
quotient determined by dividing (I) the aggregate cash
consideration and the aggregate cash value of any non-cash
consideration per Common Share to be paid to the holders of
the Common Shares upon consummation of the Change of Control
(any such non-cash consideration to be valued at the higher of
the Closing Sale Price of such securities as of the Trading
Day immediately prior to the consummation of such Change of
Control, the Closing Sale Price on the Trading Day immediately
following the public announcement of such proposed Change of
Control and the Closing Sale Price on the Trading Day
immediately prior to the public announcement of such proposed
Change of Control) by (II) the Conversion Price plus (2) the
amount of any accrued but unpaid Interest on such Conversion
Amount being redeemed and accrued and unpaid Late Charges, if
any, with respect to such Conversion Amount and Interest
through the date of such redemption payment, (the "
Change of
Control Redemption Price "). Redemptions
required by this Section 6 shall be made in accordance with
the provisions of Section 11 and shall have priority to
payments to stockholders in connection with a Change of
Control. To the extent redemptions required by this
Section 6(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary
prepayments. Notwithstanding anything to the
contrary in this Section 6, but subject to Section 3(d), until
the Change of Control Redemption Price (together with any
interest thereon) is paid in full, the Conversion Amount
submitted for redemption under this Section 6(b) (together
with any interest thereon) may be converted, in whole or in
part, by the Holder into Common Stock pursuant to Section
3. The parties hereto agree that in the event of
the Company's redemption of any portion of the Note under this
Section 6(b), the Holder's damages would be uncertain and
difficult to estimate because of the parties' inability to
predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity
for the Holder. Accordingly, any Change of Control
Redemption Premium due under this Section 6(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate
of the Holder's actual loss of its investment opportunity and
not as a penalty.
(7)
RIGHTS UPON
ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS
.
(a)
Purchase
Rights . If at any time the Company or LNG
grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other
property pro rata to the record holders of any class of Common
Stock or PNG Shares, as applicable (the " Purchase Rights
"), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the
Holder had held the number of shares of Common Stock or PNG
Shares, as applicable, acquirable upon complete conversion or
exchange of this Note (without taking into account any
limitations or restrictions on the convertibility or
exchangeability of this Note) immediately before the date on
which a record is taken for the grant, issuance or sale
of
such
Purchase Rights, or, if no such record is taken, the date as
of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase
Rights.
(b)
Other Corporate
Events . In addition to and not in
substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for
shares of Common Stock (a " Corporate Event
"), the Company shall make appropriate provision to insure
that the Holder will thereafter have the right to receive upon
a conversion of this Note, at the Holder's option, (i) in
addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the
Holder would have been entitled with respect to such shares of
Common Stock had such shares of Common Stock been held by the
Holder upon the consummation of such Corporate Event (without
taking into account any limitations or restrictions on the
convertibility of this Note) or (ii) in lieu of the shares of
Common Stock otherwise receivable upon such conversion, such
securities or other assets received by the holders of shares
of Common Stock in connection with the consummation of such
Corporate Event in such amounts as the Holder would have been
entitled to receive had this Note initially been issued with
conversion rights for the form of such consideration (as
opposed to shares of Common Stock) at a conversion rate for
such consideration commensurate with the Conversion
Rate. The provisions of this Section 7 shall apply
similarly and equally to successive Corporate Events and shall
be applied without regard to any limitations on the conversion
or redemption of this Note.
(8)
RIGHTS UPON
ISSUANCE OF OTHER SECURITIES .
(a)
Adjustment of
Conversion Price upon Issuance of Common Stock
. If and whenever on or after the Amendment Date,
the Company issues or sells, or in accordance with this
Section 8(a) is deemed to have issued or sold, any shares of
Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the
Company, but excluding shares of Common Stock deemed to have
been issued or sold by the Company in connection with any
Excluded Security) for a consideration per share (the "
New Issuance
Price ") less than a price equal to the Conversion
Price in effect immediately prior to such issue or sale (such
price the " Applicable Price
") (the foregoing a " Dilutive Issuance
"), then immediately after such Dilutive Issuance the
Conversion Price then in effect shall be reduced to an amount
equal to the New Issuance Price. For purposes of
determining the adjusted Conversion Price under this Section
8(a), the following shall be applicable:
(i)
Issuance of
Options . If the Company in any manner
grants or sells any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise
of any such Option or upon conversion or exchange or exercise
of any Convertible Securities issuable upon exercise of such
Option is less than the Applicable Price, then such share of
Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the
granting or sale of such Option for such price per
share. For purposes of this Section 8(a)(i), the
"lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon
conversion or exchange or exercise of any Convertible
Securities issuable upon exercise of such Option" shall be
equal to the sum
of
the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of
Common Stock upon granting or sale of the Option, upon
exercise of the Option and upon conversion or exchange or
exercise of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the
Conversion Price shall be made upon the actual issuance of
such share of Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance
of such Common Stock upon conversion or exchange or exercise
of such Convertible Securities.
(ii)
Issuance of
Convertible Securities . If the Company in
any manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is
issuable upon such conversion or exchange or exercise thereof
is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or
sale of such Convertible Securities for such price per
share. For the purposes of this Section 8(a)(ii),
the "lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange or
exercise" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon the
issuance or sale of the Convertible Security and upon the
conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion
Price shall be made upon the actual issuance of such share of
Common Stock upon conversion or exchange or exercise of such
Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options
for which adjustment of the Conversion Price had been or are
to be made pursuant to other provisions of this Section 8(a),
no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii)
Change in Option
Price or Rate of Conversion . If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion,
exchange or exercise of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into
or exchangeable or exercisable for Common Stock changes at any
time, the Conversion Price in effect at the time of such
change shall be adjusted to the Conversion Price which would
have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase
price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or
sold. For purposes of this Section 8(a)(iii), if
the terms of any Option or Convertible Security that was
outstanding as of the Issuance Date are changed in the manner
described in the immediately preceding sentence, then such
Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such
change. No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price
then in effect.
(iv)
Calculation of
Consideration Received . In case any Option
is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be
deemed to have been
issued
for the difference of (x) the aggregate fair market value of
such Options and other securities issued or sold in such
integrated transaction, less (y) the fair market value of the
securities other than such Option, issued or sold in such
transaction and the other securities issued or sold in such
integrated transaction will be deemed to have been issued or
sold for the balance of the consideration received by the
Company. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received
therefor will be deemed to be the gross amount raised by the
Company; provided, however, that such gross amount is not
greater than 110% of the net amount received by the Company
therefor. If any Common Stock, Options or
Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than
cash received by the Company will be the fair value of such
consideration, except where such consideration consists of
securities, in which case the amount of consideration received
by the Company will be the Closing Sale Price of such
securities on the date of receipt. If any Common
Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may
be. The fair value of any consideration other than
cash or securities will be determined jointly by the Company
and the Required Holders. If such parties are
unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the " Valuation Event
"), the fair value of such consideration will be determined
within five (5) Business Days after the tenth (10 th
) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the
Required Holders. The determination of such
appraiser shall be deemed binding upon all parties absent
manifest error and the fees and expenses of such appraiser
shall be borne by the Company.
(v)
Record
Date . If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the
date of the issue or sale of the Common Stock deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the
case may be.
(b)
Adjustment of
Conversion Price upon Subdivision or Combination of Common
Stock . If the Company at any time on or
after the Amendment Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately
prior to such subdivision will be proportionately
reduced. If the Company at any time on or after the
Amendment Date combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination will be
proportionately increased.
(c)
Other
Events . If any event occurs of the type
contemplated by the provisions of Section 8(a) or (b) but not
expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom
stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights
of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 8.
(d)
V
oluntary
Adjustment By Company . The Company may at any time
during the term of this Note reduce the then current
Conversion Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the
Company.
(e)
[Reserved]
(f)
Adjustment of
Exchange Price upon Issuance of PNG Shares
. If and whenever on or after the date of the
consummation of the Share Exchange, LNG issues or sells, or in
accordance with this Section 8(f) is deemed to have issued or
sold, any shares of PNG Shares (including the issuance or sale
of shares of PNG Shares owned or held by or for the account of
LNG, but excluding shares of PNG Shares deemed to have been
issued or sold by LNG in connection with any LNG Excluded
Security) for a consideration per share (the " LNG New Issuance
Price ") less than a price equal to the Exchange Price
in effect immediately prior to such issue or sale (such price
the " LNG
Applicable Price ") (the foregoing a " LNG Dilutive
Issuance "), then immediately after such LNG Dilutive
Issuance the Exchange Price then in effect shall be reduced to
an amount equal to LNG New Issuance Price. For
purposes of determining the adjusted Exchange Price under this
Section 8(f), the following shall be applicable:
(i)
Issuance of LNG
Options . If LNG in any manner grants or
sells any LNG Options and the lowest price per share for which
one share of PNG Shares is issuable upon the exercise of any
such LNG Option or upon conversion or exchange or exercise of
any LNG Convertible Securities issuable upon exercise of such
LNG Option is less than LNG Applicable Price, then such share
of PNG Shares shall be deemed to be outstanding and to have
been issued and sold by LNG at the time of the granting or
sale of such LNG Option for such price per
share. For purposes of this Section 8(f)(i), the
"lowest price per share for which one share of PNG Shares is
issuable upon the exercise of any such LNG Option
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