CENTURION ENERGY INTERNATIONAL INC.
CONVERTIBLE NOTE
----------------
(OFFSHORE)
THE NOTES AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THE NOTES ARE
SUBJECT TO A "HOLD PERIOD" AND ARE NOT TRANSFERABLE UNTIL JUNE 26, 1998 EXCEPT
PURSUANT TO AN EXEMPTION FROM THE PROSPECTUS REQUIREMENTS CONTAINED IN THE
APPLICABLE CANADIAN PROVINCIAL SECURITIES LEGISLATION.
THE SECURITIES REPRESENTED BY THIS NOTE ARE NOT LISTED ON ANY STOCK EXCHANGE AND
DO NOT TRADE OVER ANY OVER-THE-COUNTER MARKET. THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THE NOTES ARE LISTED ON THE TORONTO STOCK EXCHANGE; HOWEVER, THE
NOTES AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THE NOTES WILL NOT BE
TRANSFERABLE UNTIL EXPIRY OF THE "HOLD PERIOD", EXCEPT PURSUANT TO AN EXEMPTION
FROM THE PROSPECTUS REQUIREMENTS CONTAINED IN THE APPLICABLE CANADIAN PROVINCIAL
SECURITIES LEGISLATION.
THE NOTES AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THE NOTES HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATES SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
CENTURION ENERGY INTERNATIONAL INC.
No. 8 $100,000
--------
U.S. $100,000 8% CONVERTIBLE NOTE
DUE March 26, 2000
Centurion Energy International Inc. (hereinafter referred to as the
"Corporation") for value received hereby acknowledges itself indebted to the
registered holder and promises to pay to or to the order of SAFETY BOSS
INTERNATIONAL LTD., P.O. BOX HM1154, 302 GIBSON BUILDING, 10 QUEEN STREET,
HAMILTON, BERMUDA, the registered holder hereof, on or before March 26, 2000 or
on such earlier date as the principal amount hereof may become due in accordance
with the terms and conditions annexed hereto as Appendix 1 (hereinafter referred
to as the "Terms and Conditions") of this Convertible Note (hereinafter referred
to as the "Note"), on presentation and surrender of this Note, the sum of ONE
HUNDRED THOUSAND ($100,000) DOLLARS in lawful money of the United States of
America, together with such further amount, if any, as may be payable in
accordance with the Terms and Conditions.
This Note is one of the 8% Convertible Notes (herein referred to as
the "Notes") issued by the Corporation in the maximum aggregate principal amount
of U.S. seven million dollars (U.S. $7,000,000) pursuant to an offering that
closed on March 26, 1998.
Interest shall be payable by the Corporation on the outstanding
balance of the principal amount of this Note at the rate of 8% per annum,
calculated annually and paid semi-annually on March 31 and September 30 in each
year during the term of this Note, from and including March 26, 1998 with the
first payment to be made on September 31, 1998, such interest to be payable
after as well as before default, judgment and maturity.
<PAGE>
-2-
This Note is subject to the Terms and Conditions and the holder of
this Note is entitled to the benefits of the Terms and Conditions, which shall
form an integral part hereof.
This Note may be converted into Common Shares of the Corporation at
the option of the Holder, as specified in the Terms and Conditions.
This Note may only be transferred upon compliance with the Terms and
Conditions, on the registers to be kept at the executive office of the
Corporation in the City of Calgary and at such other place or places, if any, as
the Corporation may designate, by the registered holder hereof or its executors
or administrators or other legal representatives or its or their attorney duly
appointed by an instrument in writing in form and execution satisfactory to the
Corporation, and upon compliance with such reasonable requirements as the
Corporation may prescribe.
The Corporation hereby waives presentment for payment, demand, notice
of non-payment, protest and notice of non-payment and waive any defences based
upon indulgences which may be granted by the registered holder to the
Corporation.
IN WITNESS WHEREOF the Corporation has caused its corporate seal to be
hereunto affixed and this Note to be signed by its proper officer in that behalf
as of March 26, 1998.
CENTURION ENERGY INTERNATIONAL INC.
Per: /s/ Barry Swan
---------------------------------------------
Barry Swan, Vice-President, Finance (c/s)
<PAGE>
-3-
CENTURION ENERGY INTERNATIONAL INC.
U.S. $100,000 8% CONVERTIBLE NOTE
CONVERSION FORM
TO: CENTURION ENERGY INTERNATIONAL INC.
The undersigned registered holder of the within Note hereby
irrevocably elects to convert said Note (or $____________________ principal
amount thereof*) into common shares of Centurion Energy International Inc. (the
"Corporation"), on the basis of the conversion price of U.S. $0.47 per common
share if exercised on or after the date of issuance to and including 4:30 p.m.
(Calgary time) on March 26, 1999 or if exercised thereafter until on or before
4:30 p.m. (Calgary time) on March 26, 2000 at a conversion price of U.S. $0.52
per common share, in accordance with the Terms and Conditions (as hereinafter
defined and as set out in Appendix 1 hereto) and directs that the common shares
issuable and deliverable upon the conversion be issued and delivered to the
person indicated below. (If common shares are to be issued in the name of a
person other than the registered holder, all requisite transfer taxes must be
tendered by the undersigned.)
* If less than the full principal amount of the within Note is to be
converted, indicate in the space provided the principal amount to be converted.
Dated: __________________
---------------------------------------- --------------------------------------
(SIGNATURE OF REGISTERED HOLDER) Guaranteed By:
If shares are to be issued in the
name of a person other than the holder,
the signature must be guaranteed by
a bank, trust company, member firm
of a Canadian Stock Exchange or
otherwise Medallion guaranteed
to the satisfaction of the Corporation.
Name:
----------------------------------
----------------------------------
(Address)
----------------------------------
----------------------------------
(Print name in which common shares issued on conversion are to be issued,
delivered and registered)
CONVERSION INSTRUCTIONS: The registered holder wishing to convert its Note, in
whole or in part, must return the completed conversion form along with the
certificate representing the Note to the Corporation at the following address:
Centurion Energy International Inc.
Suite 800, 205 - 5th Avenue S.W.
Calgary, Alberta
T2P 2V7
Attention: Vice-President, Finance
If registered holders convert their Notes into Common Shares prior to June 26,
1998, the Common Shares issuable will be subject to certain transfer
restrictions expiring June 26, 1998, and will be issued with a legend similar to
the legend set forth on this Note.
<PAGE>
-4-
CENTURION ENERGY INTERNATIONAL INC.
U.S. $100,000 8% CONVERTIBLE NOTE
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
(name) _________________________ (address) __________________________________
__________________________________________________ US$ ___________________ 8%
Convertible Note (or $ ___________________ principal amount thereof if less than
the full principal amount of the within Note is to be transferred) in the
principal amount of Centurion Energy International Inc. (the "Corporation")
registered in the name of the undersigned on the records of the Corporation
represented by the attached convertible note (the "Note") and irrevocably
appoints ___________________________the attorney of the undersigned to transfer
the said securities on the books or register with full power of substitution.
The Note which is being transferred (please check one):
(a) should be sent by first class mail to the following address:
-----------
--------------------------------------------------------------
--------------------------------------------------------------
OR
(b) should be held for pick up at the office of the Corporation.
-----------
If less than all the principal amount represented by the Note is being
transferred, the Note representing that portion of the principal amount not
transferred will be registered in the name appearing on the face of the Note and
such Note (please check one):
(a) should be sent by first class mail to the following address:
-----------
--------------------------------------------------------------
--------------------------------------------------------------
OR
(b) should be held for pick up at the office of the Corporation.
-----------
DATED the day of , 19 .
------ --------------- ----
--------------------- ---------------------------------------------------------
Signature Guaranteed (Signature of Note holder)
---------------------------------------------------------
Print full name
---------------------------------------------------------
Print full name
Instructions:
1. The signature of the holder of the Note must be the signature of the
----
person appearing on the face of this Note.
1. If this Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person
acting in a fiduciary or representative capacity, the certificate must
----
be accompanied by evidence of authority to sign satisfactory to the
Corporation.
2. The signature on this Transfer Form must be guaranteed by an authorized
----
officer of a bank, trust company, an investment dealer who is a member
of a recognized stock exchange or otherwise Medallion guaranteed to the
satisfaction of the Corporation.
3. Note shall only be transferrable in accordance with applicable laws.
CENTURION ENERGY INTERNATIONAL INC.
800, 205 - 5th Avenue S.W.
Calgary, Alberta T2P 2V7
Telephone: (403) 263-6002
<PAGE>
-5-
CENTURION ENERGY INTERNATIONAL INC.
U.S. $100,000 8% CONVERTIBLE NOTE
APPENDIX 1 TO CONVERTIBLE NOTE DATED MARCH 26, 1998
TERMS AND CONDITIONS OF THE CONVERTIBLE NOTE
ARTICLE I
DEFINITIONS
-----------
1.1 For the purposes of the Note and the terms and conditions thereof
-------------------------------------------------------------------
("Terms and Conditions") as hereinafter set out:
-----------------------------------------------------
"business day" means a day other than a Saturday, Sunday or any other day that
--------------
is a statutory or civic holiday in the City of Calgary, Alberta, Canada;
"Common Shares" means the common shares in the capital of the Corporation, as
---------------
such shares exist on the issue date of the Notes (as defined in Section 2.1),
provided that in the event of any adjustment of conversion rights pursuant to
Article VII hereof, "Common Shares" shall thereafter mean the shares or other
securities or property resulting from such adjustment and any shares of any
other class of the shares in the capital of the Corporation resulting from the
reclassification or change of such Common Shares;
"Commencement Date" means, in respect of the accrual of interest on the Note,
-------------------
March 26, 1998;
"Conversion Basis" means one Common Share for each U.S. $0.47 principal amount
------------------
of the Note if the Note is converted after the date of issue until on or before
4:30 p.m. (Calgary time) on March 26, 1999, or one Common Share for each U.S.
$0.52 principal amount of the Note if the Note is converted thereafter until on
or before 4:30 p.m. (Calgary time) on March 26, 2000;
"Conversion Date" means, as the context may require, 10:00 a.m. (Calgary time)
-----------------
on the effective date of conversion of the Note as provided in Article VI
hereof;
"Conversion Price" means U.S. $0.47 if the Note is converted after the date of
------------------
issuance until on or before 4:30 p.m. (Calgary time) on March 26, 1999 and shall
mean U.S. $0.52 per Common Share if the Note is converted thereafter until on or
before 4:30 p.m. (Calgary time) on March 26, 2000;
"Corporation" means Centurion Energy International Inc., a corporation formed
------------
upon the amalgamation of Eagle Energy Corp. and Canadian Leader Energy Inc. and
existing under the laws of the Province of Alberta;
"holder" or "registered holder" means the persons for the time being entered in
------- -----------------
the register of the Corporation as the holder of Note;
"Holder's Conversion Commencement Date" means the business day next following
-----------------------------------------
the date hereof;
"Interest Rate" means 8% per annum calculated annually;
---------------
"Issue Date" means March 26, 1998;
------------
"Maturity Date" means 10:00 a.m. (Calgary time) on March 26, 2000;
---------------
1.2 CURRENCY:
--------
All references to currency shall be to lawful money of the United
States of America, unless specified otherwise.
1.3 NON-BUSINESS DAYS:
------------------
In any case where the date of maturity or the payment of interest or
principal on the Note or any other action is required, permitted or contemplated
to be taken hereunder on a day that is not a business day, then payment of such
interest or principal of the Note or such other action shall be made or taken on
the next succeeding day that is a business day.
1.4 GOVERNING LAW:
--------------
The Note shall be construed in accordance with the laws of the
Province of Alberta and the laws of Canada applicable therein. The Corporation
and the holder hereby irrevocably submit to the exclusive jurisdiction of the
courts of the Province of Alberta for any dispute arising out of or in
connection with the Note.
1.5 GENERAL:
-------
The holding of the Note shall not constitute the holder hereof a
shareholder of the Corporation nor entitle such holder to any right or interest
in respect thereof except as herein expressly provided.
ARTICLE II
NOTES
-----
2.1 ISSUE:
-----
The Note is one of an issue of 8% Convertible Notes due March 26,
2000, (herein collectively called "Notes" and individually called "Note") issued
in the aggregate principal amount of up to $7,000,000.
2.2 FORM AND TERMS:
----------------
(a) The Note is dated as of the issue date, matures on the Maturity Date,
bears interest from and including the Commencement Date at a rate
equal to eight (8%) percent per annum calculated annually and payable
on a semi-annual basis on March 31 and September 30 in each year, net
of any applicable withholding taxes prescribed by Canadian law or by a
tax treaty between Canada and the jurisdiction of residence of the
registered holder; and bears interest at such annual rate after as
well as before maturity and after as well as before default, with
interest on overdue interest at the same rate. The Note shall be
convertible in accordance with Article VI hereof.
(b) The Note is in fully registered form.
(c) The principal amount of the Note, the interest payable thereon and all
sums which may at any time become payable thereon shall be payable in
lawful money of the United States of America at the principal office
of the Corporation in Calgary.
2.3 SIGNATURE OF NOTE:
-------------------
The Note may (but is not required to be) signed under the seal of the
Corporation and shall be signed (either manually or by facsimile signature) by
any one officer of the Corporation.
2.4 COMMENCEMENT AND PAYMENT OF INTEREST:
----------------------------------------
(a) Every Note, whether issued originally, upon transfer or in
substitution for another Note, shall be dated the Issue Date and shall
bear interest from and including the Commencement Date payable
semi-annually, or from the last Interest Date (as hereinafter defined)
at the Interest Rate, as applicable, and such interest shall be due
and payable, as of the relevant time and net of any applicable
withholding taxes prescribed by Canadian law or by a tax treaty
between Canada and the jurisdiction of residence of the registered
holder, only to the person in whose name such Note is registered on
the Interest Date, as hereinafter defined, the Maturity Date and the
Conversion Date, as applicable. Notwithstanding anything else herein
contained, for greater certainty, no interest will be payable in
respect of the Conversion Date, the Maturity Date or such other date
upon which all amounts under this Note become due and payable.
(b) Interest for any period of less than six (6) months shall be computed
on a pro rata basis using a 365 day year, based on the actual number
of days elapsed.
(c) The first payment of interest which is due and payable hereunder shall
be payable on September 31, 1998, and each payment of interest
thereafter shall be made on the last business day of the next
semi-annual period (each such date of payment of interest or "Interest
Date"), except the last interest payment shall be made on the
Conversion Date (if the entire principal amount is to be converted) or
the Maturity Date, as the case may be. The Corporation shall send the
interest payment by post prepaid to the address of the registered
holder contained on the Corporation's register and the interest
payment must be post marked no later than the Interest Date. The
registered holder of the Note has the option to provide wiring
instructions to the Corporation for the payment of interest and such
interest payments must be wired no later than the Interest Date.
<PAGE>
-6-
2.5 PERSONS DEEMED OWNERS:
-----------------------
(a) The Corporation may treat the person in whose name the Note is
registered as the owner and holder of the Note for the purpose of
making payments on account of the principal of and accrued interest on
the Note and for all other purposes whatsoever, and the Corporation
shall not be affected by notice to the contrary unless the Note shall
have been transferred in the manner herein provided.
(b) As any amount owing on the Note becomes due (except any amount payable
at maturity which may be paid upon presentation and surrender of the
Note for payment) the Corporation shall forward or cause to be
forwarded by prepaid post to the registered holder, at the address
appearing on the register maintained by the Corporation, a cheque for
such amount payable to the order of the registered holder.
2.6 PAYMENT ON MATURITY DATE:
---------------------------
This Note will mature on the Maturity Date, at which time the
principal amount of the Note will be due and payable, together with all accrued
and unpaid interest thereon, and all other amounts owing hereunder. The
Corporation shall make payment of principal and interest following the Maturity
Date in respect of the Note upon surrender of the Note upon or following the
Maturity Date. Upon surrender, the Corporation shall, within ten (10) business
days, forward or cause to be forwarded, by post prepaid to the address of the
registered holder of the Note, as shown in the register, a cheque for such
amount as is then due and payable. The receipt of such cheque by the registered
holder of the Note shall satisfy and discharge the Corporation's liability for
principal and interest upon the Note.
ARTICLE III
REGISTER
--------
3.1 REGISTER:
---------
(a) The Corporation shall keep at its principal office in Calgary, Alberta
a register in which shall be entered the names and addresses of the
holders of the Notes the particulars of the Notes held by them
respectively and in which all transfers of the Notes shall be
registered.
(b) The register maintained in respect of the Notes, shall be open at all
times during usual business hours to inspection by the registered
holders of Notes.
(c) The Note may only be transferred on the register to be maintained by
the Corporation at the office specified in the Transfer Form annexed
hereto by the registered holder of Note hereof (the "Current Holder")
or the Current Holder's executors or administrators or other legal
representatives, or the Current Holder's attorney duly appointed by an
instrument in writing in form and execution satisfactory to the
Corporation by completing and executing the Transfer Form or form of
transfer acceptable to the Corporation, such execution to be
guaranteed by bank, trust company, member firm of any Canadian Stock
Exchange or otherwise Medallion guaranteed to the satisfaction of the
Corporation, and upon compliance with such reasonable requirements as
the Corporation may prescribe including payment of any applicable
transfer taxes or similar taxes.
(d) The transfer of the Note to the new registered holder of the Note (a
"New Holder") will be effective on the date that the transfer is
received by the Corporation (a "Transfer Date"). Any interest accruing
prior to the Transfer Date will be payable to the Current Holder. Any
interest accruing after the Transfer Date will be payable to the New
Holder at the address indicated on the Transfer Form received. THE
TRANSFER OF THE NOTES MAY BE RESTRICTED BY APPLICABLE SECURITIES LAWS.
HOLDERS ARE ADVISED TO CONSULT THEIR LEGAL COUNSEL IN THIS REGARD.
(e) The holder may at any time prior to the Maturity Date, upon surrender
of the Note to the Corporation at its head office and upon payment of
the reasonable charges of the Corporation, exchange the Note for other
Notes entitling the registered holder in the aggregate the same
principal amount as evidenced by the Notes.
ARTICLE IV
REPLACEMENT OF NOTES
--------------------
4.1 LOSS, THEFT, DESTRUCTION:
---------------------------
In case the Note shall become mutilated, stolen, lost or destroyed,
the Corporation shall, subject to the provisions of this Article IV, issue and
deliver a new Note of like tenor and denomination as the one mutilated, stolen,
lost or destroyed in substitution for, and in place of, the mutilated, stolen,
lost or destroyed Note and shall cause such new Note to be signed by the
Corporation. All such new Notes issued pursuant to this section 4.1 shall rank
pari passu with all other issued and outstanding Notes.
4.2 In the case of the theft, loss or destruction of the Note, the
applicant for a substituted Note shall, as a condition precedent to the issue
thereof, furnish to the Corporation such evidence of ownership and of the theft,
loss or destruction of the Note as shall be satisfactory to the Corporation,
together with an indemnity in an amount and form satisfactory to the
Corporation, acting reasonably. In the case of a mutilated Note, the applicant
for a substituted Note must surrender the mutilated Note to the Corporation for
cancellation.
ARTICLE V
RANKING
-------
5.1 RANKING OF THE NOTE:
-----------------------
The Note shall rank pari passu with all other Notes and shall be
unsecured.
ARTICLE VI
CONVERSION
----------
<PAGE>
-7-
6.1 HOLDERS' RIGHT TO CONVERT
----------------------------
(a) Subject to Section 6.2 hereof, the registered holder shall have the
right at any time as and from the Holder's Conversion Commencement
Date and on or before the Maturity Date, at such holder's option, to
convert the entire principal amount (but not accrued but unpaid
interest) or any portion thereof of the Note into Common Shares on the
Conversion Basis and at the Conversion Price in effect at the time of
such conversion. No fractional Common Shares will be issued upon
conversion of the Note or any portion thereof, nor shall any
compensation be made for such fractional Common Shares, if any. To the
extent that the holder would otherwise be entitled to receive a
fraction of a Common Share, such right may be converted in combination
with other rights, if any, which in the aggregate entitle the holder
to receive a whole number of Common Shares.
6.2 CONVERSION PROCEDURE FOR HOLDERS:
------------------------------------
(a) The Note, or any portion thereof, may be converted in accordance with
the conversion terms set out herein at any time as and from the
Holder's Conversion Commencement Date by delivering to the Corporation
at its principal office in Calgary, or at such other place as the
Corporation may agree, the Note with the attached conversion form duly
completed and signed by the holder thereof or his duly authorized
attorney.
(b) The completion by the holder of the conversion form attached to the
Note and the surrender of the Note to the Corporation for conversion
shall be deemed to create and constitute a contract between the holder
of the Note and the Corporation whereby:
(i) the holder of the Note subscribes for the number of Common Shares
which he shall be entitled to receive upon such conversion;
(ii) provided the Common Shares so subscribed for are issued as fully
paid and non-assessable and are received by the holder, the
holder of the Note releases the Corporation from all liability
for the payment of the principal amount of the portion of Note so
converted and the indebtedness evidenced by the portion of the
Note so converted shall thereupon be fully satisfied and
discharged; and
(iii)the Corporation and the holder agree that the release of
liability in respect of the portion of the Note converted and
surrender for conversion constitutes full payment of the
subscription price for the Common Shares issuable on such
conversion and that, thereafter, in the event that the entire
amount of the Note is converted, the Note shall not be considered
outstanding hereunder and the holder shall have no right except
to receive his certificate for Common Shares and payment of any
interest due and payable up to the Conversion Date.
(c) On any conversion of the Note into Common Shares in accordance with
the provisions hereof, the certificate for Common Shares resulting
therefrom shall be registered in the name of the registered holder of
the Note converted or in such name or names as such registered holder
may direct in writing provided that such registered holder shall pay
any applicable security transfer taxes in the event that such holder
directs that the Common Shares be registered in a name other than the
name in which the Note converted was registered. If the Common Shares
resulting from conversion of any Notes are directed to be registered
otherwise than in the name of the registered holder of the Note, the
election form on the back of such Note shall be signed by the
registered holder of the Note or his duly authorized attorney, with
such signature guaranteed in a manner satisfactory to the Corporation.
(d) The right of a holder of the Note to convert the same into Common
Shares shall be deemed to have been exercised, and the registered
holder of the Note (or any person or persons in whose name or names
any such registered holder of the Note shall have directed
certificates representing Common Shares to be registered as provided
above) shall be deemed to have become the holder of Common Shares of
record for all purposes on the date of receipt by the Corporation of
the Note to be converted with the conversion form duly completed and
signed, notwithstanding any delay in the delivery of the certificate
representing the Common Shares into which the Note has been converted.
(e) Unless otherwise agreed between the Corporation and the holder of the
Note (or any person or persons in whose name or names any such
registered holder of the Note shall have directed certificates
representing Common Shares to be registered as provided above) the
receipt by the holder of the certificate or certificates for the
Common Shares issued upon conversion shall constitute full
satisfaction and discharge of the liability for principal upon such
portion of the Note converted. The Corporation shall, within ten
business days of receipt of the Note for conversion, forward or cause
to be forwarded, by post prepaid to the address of the registered
holder of the Note the certificate or certificates for the Common
Shares issued upon conversion and the certificate or certificates for
the principal amount of the Note not converted, if any, with the
receipt of such certificate or certificates to constitute full
satisfaction and discharge of the liability for principal upon such
Note.
(f) Unless otherwise agreed between the Corporation and the holder of the
Note (or any person or persons in whose name or names any such
registered holder of the Note shall have directed certificates
representing Common Shares to be registered as provided above) any
accrued but unpaid interest on the Note on the Conversion Date shall
be paid by the Corporation to the holder of the Note (or any such
person or persons in whose name or names any such registered holder of
the Note shall have directed certificates representing Common Shares
to be registered as provided above) on the earlier of the 30th day
following the Conversion Date or next Interest Date. The Corporation
shall send the interest payment by post prepaid to the address of the
registered holder of the Note at the time of conversion, with the
receipt of such payment to constitute full satisfaction and discharge
of the Corporation for all interest due under the Note.
(g) No fractional Common Shares will be issued upon conversion of the Note
nor shall any compensation be made for such fractional Common Shares,
if any.
6.3 CONVERSION OF NOTE:
---------------------
(a) The Note surrendered or deemed to be surrendered for conversion shall
be cancelled and, upon the issue of the Common Shares issuable upon
the conversion of the Note as herein provided, the indebtedness
evidenced by the Note if the entire amount of the Note is converted or
by the portion of the Note converted if less than the entire amount of
the Note is converted (but not the obligation to deliver such Common
Shares) shall be fully satisfied and discharged and, in the event that
the entire amount of the Note is converted, no Note shall be issued in
substitution therefor.
(b) All Common Shares resulting from conversion of the Note into Common
Shares shall be and shall be deemed to be issued as fully and
non-assessable.
ARTICLE VII
ADJUSTMENT OF CONVERSION RIGHTS
-------------------------------
7.1 ADJUSTMENT OF CONVERSION RIGHTS:
----------------------------------
(a) In case of any reclassification of the Common Shares at any time
outstanding or change of the Common Shares into other shares, or in
case of the consolidation, amalgamation, merger or similar transaction
of the Corporation with or into any other corporation (other than a
consolidation, amalgamation, merger or similar transaction which does
not result in any reclassification of the outstanding Common Shares or
a change of the Common Shares into other shares), or in case of any
transfer of the undertaking or assets of the Corporation as an
entirety or substantially as an entirety to another person, at any
time prior to the Maturity Date, the holder of the Note upon the
conversion thereof shall be entitled to receive, and shall accept, in
lieu of the number of Common Shares to which the holder was
theretofore entitled to receive upon such conversion, the kind and
amount of shares and other securities or property which such holder
would have been entitled to receive as a result of such
reclassification, change, consolidation, amalgamation, merger or
transfer if, on the effective date thereof, the holder had been the
registered holder of the number of Common Shares to which the holder
was theretofore entitled upon conversion of the Note by the holder. If
necessary, appropriate adjustments shall be made in the application of
the provisions set forth in this Article VII with respect to the
rights and interests thereafter of the holder of the Note to the end
that the provisions set forth in this Article VII shall thereafter
correspondingly be made applicable as nearly as may reasonably be
possible in relation to any shares or other securities or property
thereafter deliverable upon the conversion of any Note. The
subdivision or consolidation of the Common Shares at any time
outstanding into a greater or lesser number of Common Shares shall be
deemed not to be a reclassification of the capital of the Corporation
for the purpose of this subsection.
<PAGE>
-8-
(b) If and whenever prior to the Maturity Date (i) the Common Shares shall
be subdivided or consolidated into a greater or lesser number of
shares; (ii) a stock dividend shall be declared to all or
substantially all of the holders of Common Shares; or (iii) the
Corporation shall issue rights, options or warrants exercisable for
Common Shares, or any other securities exercisable or convertible into
Common Shares, to all or substantially all of the holders of Common
Shares (collectively the "Rights"), the holder of the Note who has not
converted the Note on or prior to the effective date or record date,
as the case may be, of any such transaction, upon the conversion of
such right thereafter, shall be entitled to receive and shall accept
in lieu of the number of Common Shares which would otherwise then have
been subscribed for by the holder at the Conversion Price determined
in accordance with Section 7.2, the aggregate number of shares and
Rights that such holder would have otherwise then have been entitled
to receive as a result of such transaction if, on such record date or
effective date, the holder had been the registered holder of the
number of Common Shares to which the holder was theretofore entitled
upon exercise.
7.2 ADJUSTMENT OF CONVERSION PRICE:
---------------------------------
(a) The Conversion Price in effect at any date shall be subject to
adjustment from time to time if and whenever at any time prior to the
Maturity Date, the Corporation effects any of the transactions set out
in subsection 7.1(b) hereof.
The Conversion Price shall, on the effective date of such transaction,
be adjusted to that amount which is in the same proportion to the
Conversion Price in effect immediately prior to such transaction as
the number of outstanding Common Shares after giving effect to such
transaction is to the number of outstanding Common Shares prior to
such transaction. Such adjustment shall be made successively whenever
any event referred to in this subsection shall occur.
(b) The adjustments provided for in this Section 7.2 are cumulative and
shall, in the case of adjustments to the Conversion Price, be computed
to the nearest one-tenth of one cent and shall apply (without
duplication) to successive transactions; provided that,
notwithstanding any other provision of this Section, no adjustment of
the Conversion Price shall be required unless such adjustment would
require an increase or decrease of at least 2% in the Conversion Price
then in effect (provided, however, that any adjustments which by
reason of this subsection are not required to be made shall be carried
forward and taken into account in any subsequent adjustment).
7.3 NOTICE OF ADJUSTMENT OF SUBSCRIPTION RIGHTS:
------------------------------------------------
(a) As soon as practicable after the effective date, or earlier if
determined by the Corporation to be appropriate, of any event which
requires an adjustment in any of the conversion rights pursuant to any
of the Notes, including an adjustment to the Conversion Price or the
number of Common Shares which are to be received upon the exercise
thereof, the Corporation shall forthwith give notice to the registered
holders of Note of the particulars of such event and the required
adjustment.
(b) In the event of any question arising with respect to the adjustments
provided for herein, such questions shall be conclusively determined
by the Corporation's auditor or, if they are unwilling to act another
firm of auditors satisfactory to the Corporation who shall have access
to all necessary records of the Corporation and such determination
shall be binding upon the Corporation, the holders of the Notes and
all other interested persons.
ARTICLE VIII
COVENANTS OF THE CORPORATION
----------------------------
8.1 COVENANTS OF THE CORPORATION:
--------------------------------
The Corporation shall:
(a) so long as the Notes are outstanding, not effect any special
distribution of securities, evidences of indebtedness, or property or
assets, other than a distribution of securities contemplated by
subsection 7.1(b) hereof, to all or substantially all of the holders
of Common Shares;
(b) so long as the Notes are outstanding, maintain its status as a
reporting issuer within the meaning of the Securities Act (Alberta),
Securities Act (Ontario), Securities Act (British Columbia),
Securities Act (Saskatchewan), Securities Act (Manitoba) and
Securities Act (Quebec);
(c) so long as the Notes are outstanding, use its best efforts to cause
the Common Shares, including the Common Shares to be issued from time
to time upon conversion of the Notes, to be and remain listed and
posted for trading on The Toronto Stock Exchange;
(d) reserve and keep available out of its authorized Common Shares, solely
for the purpose of issue upon conversion of the Notes contemplated
herein, a sufficient number of Common Shares to be issued upon the
full conversion of the Notes. All such Common Shares which shall be so
issuable shall be duly and validly issued as fully paid and
non-assessable; and
(e) duly and punctually pay to the Holder the principal of and any accrued
interest on the Note and any other amounts payable on the Note on the
date and at the place, in the currency and in the manner prescribed
herein; and
(f) provide written notice to the Holder forthwith upon becoming aware of
any Event of Default on the Note or any event or circumstance that,
with the giving of notice or the lapse of time or both could
constitute an Event of Default.
ARTICLE IX
NOTICES
-------
<PAGE>
-9-
9.1 NOTICE TO THE CORPORATION:
----------------------------
(a) Any notice or other communication to the Corporation under the
provisions hereof shall be valid and effective if in writing and
delivered by personal delivery or prepaid courier or if sent by mail,
postage prepaid, to:
Centurion Energy International Inc.
Suite 800, 205 - 5th Avenue S.W.
Calgary, Alberta T2P 2V7
Attention: Barry Swan, Vice-President, Finance
Telecopier No: (403) 263-5998
Subject as provided in this Section 9.1, notice shall be deemed to
have been given at the time of delivery or if mailed in Canada, on the
fifth business day after mailing. Any delivery made on a day other
than a business day, or after 3:00 p.m. (Calgary time) on a business
day, shall be deemed to be received on the next following business
day. In the case of disruption in postal services, any notice, if
mailed, shall not be deemed to have been given until it is actually
delivered to the Corporation.
9.2 NOTICE TO NOTE HOLDERS:
-------------------------
(a) Any notice or other communication to the holder under the provisions
hereof shall be valid and effective if in writing and delivered by
personal delivery or prepaid courier or if sent by mail, postage
prepaid to the address of such holder as set out in the register of
holders maintained by the Corporation pursuant to section 3.1 hereof.
Subject as provided in this Section 9.2, notice shall be deemed to
have been given at the time of delivery, or if mailed in Canada, on
the fifth business day after mailing. Any delivery made on a day other
than a business day, or after 3:00 p.m. (Calgary time) on a business
day, shall be deemed to be received on the next following business
day. In the case of disruption in postal services, any notice, if
mailed, shall not be deemed to have been given until it is actually
delivered to the Corporation.
(b) All notices to joint holders of the Note may be given to whichever one
of the holders thereof is named first in the registers hereinbefore
mentioned, and any notice so given shall be sufficient notice to all
holders of such Note.
9.3 The Corporation or the Holder may at any time notify the other of a change
of address which thereafter, until changed by like notice, will be the
address of the Corporation or the Holder, as the case may be, for all
purposes hereunder.
ARTICLE X
DEFAULT
10.1 ACCELERATION OF MATURITY
--------------------------
Each of the following shall constitute an event of default ("Event of
Default") hereunder:
(a) if the Corporation fails to make punctual payment of the principal on
the Note when the same becomes due and payable;
(b) if the Corporation fails to make a punctual payment of interest on the
Note and any such default continues for a period of fifteen (15) days;
(c) if the Corporation fails in the observance or performance of any of
the terms, conditions or covenants herein contained on its part to be
observed or performed and after notice in writing has been given by
the holder to the Corporation specifying such default and requiring
the Corporation to put an end to the same, the Corporation shall fail
to make good such default within a period of thirty (30) days unless
the holder shall have agreed to a longer period;
(d) if the Corporation shall cease, or threaten to cease, to carry on
business or shall make a general assignment for the benefit of
creditors; or any proceeding or filing shall be instituted or made
(including the filing of a notice of intention to file a proposal or
the filing of a proposal) by the Corporation seeking relief on its
behalf as debtor, or to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding-up, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or relief of debtors (including, without
limitation, the Bankruptcy and Insolvency Act (Canada) (the "BIA") and
the Companies Creditors Arrangement Act (Canada) (the "CCAA")), or
seeking appointment of a receiver, trustee, liquidator, custodian or
other similar official for it or for any part of its properties or
assets; or if the Corporation shall take any corporate action to
authorize any of the actions set forth in this subsection;
(e) if any proceeding or filing shall be instituted or made against the
Corporation seeking to have an order for relief entered against it as
debtor or to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment or
composition of it or its debts under any law now or hereafter in
effect relating to bankruptcy, insolvency, reorganization or relief of
debtors (including, without limitation, the BIA and the CCAA), or
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for any part of its properties or assets; or by any
act or failure to act, the Corporation shall indicate its consent to,
approval of, or acquiescence in, any such proceedings for it or any
part of its property; or
(f) if a receiver, liquidator, trustee or other person or officer with
like powers shall be appointed with respect to, or an encumbrancer
shall take possession of, any part of the property of the Corporation,
or if distress or execution or similar process is levied against such
property and remains unsatisfied or outstanding for a period of thirty
(30) days.
Upon the occurrence of an Event of Default, the registered holder of this Note
may, by notice in writing to the Corporation, declare the principal of and
interest on the Note then outstanding and all other monies outstanding hereunder
to be due and payable and the same shall forthwith become immediately due and
payable to the registered holder and the Corporation shall forthwith pay to the
registered holder such principal and accrued and unpaid interest and all other
monies outstanding hereunder together with interest at the rate set out above on
such principal, interest and other monies from the day of the said declaration
until payment is received by the registered holder.
<PAGE>
