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Exhibit 4.1
Certificate No. ____________
DEBENTURE AGREEMENT
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9% INTEREST RATE SUBORDINATED
DEBENTURE WITH CONVERSION PRIVILEGES
AND PROVISION FOR REDEMPTION
Due December 31, 2005
New York, New York March 1, 2000
After date and for value received, Greka Energy Corporation ("Greka")
promises to pay to the Order of _________________________________ ("Holder") at
__________________________________ the sum of $_______________ pursuant to the
terms hereinafter set forth:
1. Securities Exchanged. The Holder hereof has exchanged his Saba
Petroleum Company Debenture in the principal amount of $_____________ for this
Greka Debenture ("Debenture") in the same principal amount. Each Debenture may
be converted into shares of the No Par Value Common Stock of Greka, as set forth
in section 4 below.
2. Interest. This Debenture shall be subject to an annual, simple
interest rate of 9% per annum. Greka shall be obligated to make quarterly
interest only payments (March 31, June 30, September 30 and December 31 of each
year) to holders of record on March 15, June 15, September 15 and December 15,
respectively, commencing June 30, 2000. The June 30, 2000 interest-only payment
shall include any unpaid interest on the Saba Petroleum Company Debentures
accruing after December 15, 1999. The Debenture is due in full including all
principal and accrued but unpaid interest on December 31, 2005. Interest shall
be computed on the basis of a 360-day year of twelve 30-day months.
3. Security. The Convertible Debenture is not secured by any assets of
Greka.
4. Conversion. At the sole option of the Holder, he may convert the
principal balance of his Debenture to the No Par Value Common Stock of Greka
(the "Conversion Stock") upon presenting this Debenture along with the
conversion notice which is Exhibit "A" to this Debenture duly executed to Greka
on or before the due date or redemption of the debenture by Greka in accordance
with paragraph 5 below. Upon presentation to Greka of the notice of election to
convert, properly executed, Xxxxx shall cancel the Debenture and issue to the
Debenture Holder in accordance with Paragraph 6(c) shares of the Conversion
Stock based on the Conversion Price as of the date of the receipt of the
conversion notice. The Conversion Price shall be equal to 95% of the average
closing bid price of the No Par Value Common Stock of Greka for the 30
consecutive trading days ending one day prior to the date of the receipt by
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Greka of the notice of conversion, duly executed. The Conversion Price shall in
no instance be less than $8.50 per share nor greater than $12.50 per share,
unless adjusted pursuant to Paragraph 8. At the time of issuance, the Conversion
Stock will either be registered or its resale will be registered pursuant to a
registration statement under the Securities Act of 1993, as amended, which Xxxxx
agrees it shall use its best efforts to file within ninety (90) days of the
issuance of this Debenture and cause to become effective and remain effective
for a period of not less than two years from the date of conversion unless the
Conversion Stock is earlier sold.
5. Redemption.
a) At Greka's sole option at any time during the term of this
Debenture, it may call for redemption the entire Debenture or any portion
thereof. Should a partial redemption be made, Greka will make such call on a pro
rata basis based on the percentage of the total Debentures being redeemed. Once
the Redemption Price as heretofore defined is paid, Greka will reissue new
debenture certificates for the principal amount not redeemed, upon surrender of
the original Debenture by the Holder and payment of the Redemption Price by
Xxxxx. The Redemption Price shall be 102% of the principal amount redeemed plus
any accrued but unpaid interest thereon through the date of redemption. Greka
shall provide notice of the date of the redemption (the "Redemption Date") in
writing not less than 30 days prior to the Redemption Date. Each holder, at its
sole discretion, may, prior to the Redemption Date, convert all or part of the
Debenture being redeemed to No Par Value Common Stock of Greka in accordance
with the provisions of paragraph 4 above by submitting the required notice of
conversion.
b) Commencing on August 1, 2000 each Debenture holder shall have the
right upon 30 days prior written notice to Greka to require Greka to redeem all
or a portion of his Debenture at an amount equal to the principal amount of such
Debenture redeemed plus any accrued but unpaid interest thereon through the date
of redemption.
6. Conversion Rights. In addition to the Conversion Rights discussed in
paragraph 4 above, the Holder shall have the following rights:
a) Greka represents and warrants that at the time of making this
Debenture Agreement it has sufficient authorized but unissued No Par Value
Common Stock available to satisfy its obligations pursuant to all rights of
conversion granted hereby and Xxxxx agrees to reserve sufficient Conversion
Stock during the conversion term of this Debenture to provide for the conversion
of this Debenture. Should Greka at any time during the conversion period have a
capital reorganization, merger, consolidation, stock swap or sell substantially
all of its assets to any person or corporation, then as part of such merger,
consolidation or sale, provision shall be made for the Conversion Rights to be
adjusted in such a manner as to provide for the protection of said rights so as
to permit the conversion in as nearly equivalent a manner as set forth herein as
is possible. Greka shall reserve for issuance upon conversion sufficient,
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equivalent recapitalized equity to meet its obligations hereunder during the
entire conversion period.
b) Upon presentation to Greka at the notice address of (1) a letter
requesting conversion, (2) the Conversion Form, which is Exhibit "A" attached
hereto and which provides for the cancellation of the Debenture upon issuance of
the Conversion Stock, and (3) the original Debenture Agreement all duly
executed; Greka shall within 10 business days issue a certificate for the
appropriate number of shares and send said certificate to the Holder postage
prepaid, registered mail, return receipt or any other manner agreed to by the
Xxxxxx and Xxxxx.
c) All shares of Conversion Stock or other securities delivered upon
the exercise of the rights of conversion shall be validly issued, fully paid and
non-assessable.
d) Irrespective of the date of issuance and delivery of a
certificate or certificates for any shares of Conversion Stock issuable upon the
exercise of conversion rights, each person (including a corporation) in whose
name any such certificate or certificates is to be issued will for all purposes
be deemed to have become the holder of record of the Conversion Stock, the
securities, and/or property represented thereby on the date on which a duly
executed notice of exercise of conversion rights and the canceled underlying
Debenture is delivered to Greka.
e) The Holder is not, by virtue of ownership of the Debenture,
entitled to any rights whatsoever of a stockholder of Greka.
7. Restricted Securities/Restrictions on Assignments. The undersigned
Xxxxxx acknowledges that he understands that the securities represented by this
Convertible Debenture have not been and will not be registered pursuant to the
Securities Act of 1933 or pursuant to the laws of any state, that Greka is
relying on exemptions from registration of these securities, and that Greka will
not make any effort to create a public trading market for the Debentures. Each
Debenture (and the Common Stock which may be issued as a result of the
conversion of the Debenture in the event the registration statement has not yet
been declared effective) shall be imprinted with a restrictive legend as
follows:
"This Debenture (Common Stock) and the rights hereunder have not been
registered or qualified under federal or state securities laws. This
Debenture (Common Stock) may not be assigned unless so registered or
qualified or unless an exemption exists, the availability of which is
to be established by issuer's counsel at the holder's expense;
provided, however, if the proposed assignment is made to a person or
entity outside of the United States or Canada, and not for the benefit
of or to any U.S. or Canadian person, the establishment by issuer's
counsel of the availability of an exemption from registration shall not
be necessary for the holder to make such assignment in the absence of a
change of Law or Regulation which would then require proof of exemption
or registration of
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such transaction. The assignee under any such assignment shall be
likewise subject to the terms of this restriction upon any proposed
assignment or transfer."
The undersigned Holder hereof further acknowledges that he is
purchasing this Debenture as an investment for his own account and not with a
view to distribute the Debenture.
8. Anti-Dilution Provision/Adjustments for Change in Capitalization.
The conversion ratio, and the minimum and maximum Conversion Price but only in
the event of a stock split of the Common Stock, is to be adjusted upon the
occurrence of any Extraordinary Common Stock Event as defined below for which
Greka does not receive fair value or compensation therefor in money services, or
property or upon the occurrence of certain other events described herein. The
conversion ratio shall be adjusted by multiplying the then effective Conversion
Ratio by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary Common Stock
Event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such Extraordinary Common Stock Event, and the
product so obtained shall thereafter be the new conversion ratio. The conversion
ratio, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive Extraordinary Common Stock Event or Events. "Extraordinary
Common Stock Events" shall mean (i) the issuance of Common Stock as a dividend
or other non cash distribution on outstanding Common Stock, (ii) the subdivision
of outstanding shares of Common Stock into a greater number of shares of Common
Stock, or (iii) the combination of outstanding shares of Common Stock into a
smaller number of shares of Common Stock.
Upon the occurrence of each adjustment or readjustment of the
conversion ratio, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
the Holder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
Each such certificate shall be certified by the Chief Financial Officer or
C.E.O. and Greka shall, upon written request at any time of the holder, furnish
or cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the conversion ratio, as applicable, at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
exercise of conversion rights.
9. Amendment. Neither this Debenture nor any term thereof may be
changed, waived, discharged, or terminated orally or in writing except that any
term of this Debenture may be amended and the observance of any such term may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with (and only with) the written consent of Greka and of the
holders of at least 51% in principal amount of the Debentures at the time then
outstanding, provided that no such amendment or waiver shall, without the
written consent of all the holders of the debentures at the time then
outstanding (a) change the amount or time of any payment or prepayment of any
debenture or any part thereof, or of any premium or
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interest thereon or the Conversion Price, or (b) reduce the percentage of the
principal amount of the Debentures the holders of which are required to consent
to any amendment or waiver pursuant to this paragraph.
10. Notices. All notices and communications to any party to this
Debenture shall be in writing and sent to Greka and to the Holder at the address
set forth below the Holder's signature or at such other place as may be
designated in writing by either party hereto postage prepaid, registered mail,
return receipt or any other manner agreed to by the Holder and Greka. All
notices to overseas addresses shall be by telex or overnight courier with
confirmation of receipt required.
11. General
a) This Debenture is being delivered and is intended to be
performed in the State of New York and shall be construed and enforced in
accordance with and governed by the laws of such State. All of the terms of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto whether so
expressed or not, and in particular shall inure to the benefit of and be
enforceable by any holder or holders at the time of the debentures. This
Agreement embodies the entire Convertible Debenture Agreement and understanding
between the undersigned Holder and Greka and supersedes all prior agreements and
understandings relating to the subject matter hereof.
b) The undersigned Holder acknowledges that no promises or
guarantees have been made to him concerning the total amount of Conversion Stock
which may be issued.
c) Should the Holder lose the Debenture or should it be stolen or
destroyed, Xxxxx will issue a replacement upon receipt of such assurances as may
be reasonably requested by Xxxxx.
If you agree to the foregoing terms of the Convertible Debenture,
please sign the acceptance below in the place provided for the "Holder" and
print or type your full name, address, telephone number and social security
number. No debenture will be accepted without an executed Debenture Agreement,
an executed and sworn Affidavit, and the return and cancellation of the Saba
Petroleum Company Debenture.
DATED this ___________ day of _________________________, 2000.
ATTEST:
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Secretary
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EXHIBIT "A"
(Attached to the Convertible Debenture
dated March 1, 2000)
EXERCISE AGREEMENT
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NOTICE OF CONVERSION
To: Greka Energy Corporation Dated:________________
Attn: Xx. Xxxxxxx X. Xxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
The undersigned, pursuant to the Conversion Rights set forth in the
attached Debenture (Certificate No. __________), hereby agrees to subscribe for
and purchase __________ shares of the Common Stock covered by such Xxxxxxxxx and
makes payment herewith in full therefor by assigning the attached Debenture to
Greka thereby canceling said debt.
Signature:
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Printed Name:
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Address:
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ASSIGNMENT OF DEBENTURE
FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Debenture (Certificate No. ___________) with respect to the number of
Units of the Debenture thereby set forth below, unto:
Name of Assignee Address No. of Units
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$
Dated:________ Signature:
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Witness:
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