Exhibit 4.2

 

This convertible debenture has not been registered under the Securities Act of 1933, as amended (the “1933 Act”), or under the provisions of any applicable state securities laws, but has been acquired by the registered holder hereof for purposes of investment and in reliance on statutory exemptions under the 1933 Act, and under any applicable state securities laws. This Debenture may not be sold, pledged, transferred or assigned except in a transaction which is exempt under provisions of the 1933 Act and any applicable state securities laws or pursuant to an effective registration statement; and in the case of an exemption, only if the Company has received an opinion of counsel satisfactory to the Company that such transaction does not require registration of this Debenture.

 

CLEAN WIND ENERGY TOWER, INC.

 

Date: _____ __, 2012

$____,000

 

 

CONVERTIBLE DEBENTURE

 

Clean Wind Energy Tower, Inc. (the “Company”) for value received, hereby promises to pay to ________________, or registered assigns (the "Holder") on or before December 31, 2014 (collectively, the "Maturity Date"), at the principal offices of the Company, the principal sum owed Holder on such date, and to pay interest on the outstanding principal sum hereof at the rate of eight percent (8%) (the "Debenture"). All principal shall be payable on the Maturity Date in cash or shares of common stock, at the discretion of the Investor; and interest shall commence accruing on the date hereof, computed on the basis of a 365-day year and the actual number of days elapsed, provided that any payment otherwise due on a Saturday, Sunday or legal Bank holiday may be paid on the following business day. Interest shall be payable on the Maturity Date. All payments due hereunder, to the extent not converted into common stock in accordance with the terms hereof, shall be made in lawful money of the United States of America. In the event that for any reason whatsoever any interest or other consideration payable with respect to this Debenture shall be deemed to be usurious by a court of competent jurisdiction under the laws of the State of Maryland or the laws of any other state governing the repayment hereof, then so much of such interest or other consideration as shall be deemed to be usurious shall be held by the holder as security for the repayment of the principal amount hereof and shall otherwise be waived. This Debenture is part of a series of Debentures described in that Confidential Information Memorandum. All terms not defined herein shall have the meaning as set forth in the Securities Purchase Agreement.

 

1.                  Transfers of Debenture to Comply with the 1933 Act

 

The Holder agrees that this Debenture may not be sold, transferred, pledged, hypothecated or otherwise disposed of except as follows: (1) to a person whom the Debenture may legally be transferred without registration and without delivery of a current prospectus under the 1933 Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 1 with respect to any resale or other disposition of the Debenture; or (2) to any person upon delivery of a prospectus then meeting the requirements of the 1933 Act relating to such securities and the offering thereof for such sale or disposition, and thereafter to all successive assignees.

 

 

2.                  Right of Prepayment. The Company may prepay a portion or all outstanding principal and interest of the Debenture at any time.

 

3.                  Conversion

 

(a) Principal. At any time prior to or at the time of repayment of this Debenture by the Company on the Maturity Date, with respect to the outstanding principal on this Debenture, the Holder may elect to convert some or all of the principal owing on this Debenture into shares of the Company’s common stock at a price of $0.[ ] per share (the “Conversion Rate”). Such election to convert shall be evidenced by completion of the conversion notice attached hereto and delivery of such notice to the Company. The Holder’s right to convert the principal due under this Debenture to common stock shall supersede the Company’s right to repay such obligations in cash.

 

(b) Stock Splits; Adjustments Due to Dilutive Issuance. If the Company subdivides its outstanding common shares, by split-up or otherwise, or combines its outstanding common shares, the Conversion Rate then applicable to shares covered by this Debenture shall forthwith be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination.

 

(c) Reserve of Shares for Conversion. The Company covenants that it will at all times reserve and keep available a number of its authorized common shares, free from all preemptive rights, which will be sufficient to permit the exercise of the conversion of this Debenture. The Company further covenants that such shares as may be issued pursuant to the conversion of this Debenture will be, upon issuance, duly and validly issued, fully paid and non-assessable and free from all taxes, liens, and charges.

 

4                   Waiver and Consent. To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Debenture.

 

5                  Costs, Indemnities and Expenses. In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Holder in collecting or securing or attempting to collect or secure this Debenture, including reasonable attorneys’ fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Debenture or any payment made in respect of this Debenture, and the Company agrees to indemnify and hold the Holder harmless from and against any liability, costs, attorneys’ fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred.

 

6                    Intentionally left blank.

 

 

 

7                    Event of Default. An “Event of Default” shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make any payment of the principal, interest, costs, indemnities, or expenses pursuant to this Debenture within ten (10) days of the date due as prescribed herein; (ii) any default, whether in whole or in part, in the due observance or performance of any obligations or other covenants, terms or provisions to be performed by the Holder under this Debenture, or (iii) the Holder shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties; (3) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction. Upon an Event of Default (as defined above), the entire principal balance and accrued interest outstanding under this Debenture, and all other obligations of the Company under this Debenture, shall be immediately due and payable without any action on the part of the Holder, interest shall accrue on the unpaid principal balance at fifteen percent (15%) per year and the Holder shall be entitled to seek and institute any and all remedies available to it.

 

8                    Maximum Interest Rate. In no event shall any agreed to or actual interest charged, reserved or taken by the Holder as consideration for this Debenture exceed the limits imposed by Maryland law. In the event that the interest provisions of this Debenture shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Holder in excess of those lawfully collectible as interest shall be applied against the principal of this Debenture immediately upon the Holder’s receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Holder had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments.

 

 

9                    Cancellation of Debenture. Upon the repayment by the Company of all of its obligations hereunder to the Holder, including, without limitation, the principal amount of this Debenture, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Debenture, payments received by the Holder hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Debenture, and next in reduction of the outstanding principal balance of this Debenture.

 

10                Severability. If any provision of this Debenture is, for any reason, invalid or unenforceable, the remaining provisions of this Debenture will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Debenture that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect.

 

 

11                Amendment and Waiver. This Debenture may be amended, or any provision of this Debenture may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by Holders that participated in the Offering representing a minimum of 50.1% of the principal outstanding under the Debentures. The waiver by any such party hereto of a breach of any provision of this Debenture shall not operate or be construed as a waiver of any other breach.

 

12                Successors. Except as otherwise provided herein, this Debenture shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns.

 

13                Assignment. This Debenture shall not be directly or indirectly assignable or delegable by the Company or the Holder.

 

14                No Strict Construction. The language used in this Debenture will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party.

 

15                Further Assurances. Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Debenture.

 

16                Notices, Consents, etc.  Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

 

If to Company:	Clean Wind Energy Tower, Inc. 1997 Annapolis Exchange Parkway, Suite 300 Annapolis, Maryland 21401
	Attention: Ronald Pickett, CEO
	Telephone:410-972-4713
	Facsimile: 410-972-4701
If to the Holder:	To the address set forth in the Securities Purchase Agreement

 

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

 

 

17

Governing Law; Jurisdiction. THIS DEBENTURE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF Maryland APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN BALTIMORE, MARYLAND WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS DEBENTURE, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS DEBENTURE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

 

18

No Inconsistent Agreements. None of the parties hereto will hereafter enter into any agreement, which is inconsistent with the rights granted to the parties in this Debenture.

 

19

Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Debenture and their respective permitted successor and assigns, any rights or remedies under or by reason of this Debenture.

 

20

Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE HOLDER TO LOAN TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

 

 

21

Entire Agreement.  This Debenture (including any recitals hereto) set forth the entire understanding of the parties with respect to the subject matter hereof, and shall not be modified or affected by any offer, proposal, statement or representation, oral or written, made by or for any party in connection with the negotiation of the terms hereof, and may be modified only by instruments signed by all of the parties hereto.

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, this Convertible Debenture is executed by the undersigned as of the date hereof.

 

Clean Wind Energy Tower, Inc.
By:_____________________________
Name: Ronald Pickett
Title:   Chief Executive Officer

 

 

ADDENDUM

 

NOTICE OF CONVERSION

 

(To be executed by the Registered Holder in order to convert the Debenture)

 

 

The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Debenture issued by Clean Wind Energy Tower, Inc. into Shares of Common Stock according to the conditions set forth in such Debenture, as of the date written below.

 

 

 

Date of Conversion:____________________________________________________________________

 

 

Conversion Price: $0.____

 

 

Shares To Be Delivered:_________________________________________________________________

 

 

Signature:______________________________________________________________________

 

 

Print Name:__________________________________________________________________________

 

 

Address:______________________________________________________________________

 

____________________________________________________________________________