EXHIBIT NUMBER 2.01
CONVERTIBLE DEBENTURE AGREEMENT
This Convertible Debenture Agreement (Agreement) is made by and
between CROWN ENERGY CORPORATION, (hereafter the "Borrower") and
ORIENTAL NEW INVESTMENTS, LTD., (the Lender).
WHEREAS, the Borrower desires to borrow $150,000 U.S. from the
Lender or the Lender's Assigns in accordance with the terms and
conditions set forth herein, and
WHEREAS, the Lender desires to lend or arrange for the loan of
$150,000 to the Borrower in accordance with the terms and
conditions set forth herein.
THEREFORE, the Lender and the Borrower agree as follows:
1. ACQUISITION OF A CONVERTIBLE DEBENTURE. The Borrower hereby
agrees to sell and the Lender agrees to buy a Convertible Debenture
of the Borrower in the form attached hereto as Exhibit A. The
Convertible Debenture shall have the principal amount of $150,000
(Principal). The Convertible Debenture Principal shall be payable
to the Borrower within five (5) business days following execution
of this Agreement by the Lender and against delivery of a duly
executed Convertible Debenture.
2. CONVERTIBLE DEBENTURE TERM AND INTEREST RATE. The
Convertible Debenture Principal shall be due and payable to the
holder thereof on the next business day after six months from the
date of payment of the Principal to the Borrower. The holder
thereof may at its election extend the term of the Convertible
Debenture for successive six month periods upon written notice
thereof to the Borrower.
Interest on the Convertible Debenture shall accrue from the
date of payment of the Convertible Debenture Principal to the
Borrower at the rate of nine percent (9%) per annum until paid or
converted. Interest shall be due and payable to the Lender
quarterly, beginning July 31, 1997. (The last day of the third full
calendar month following payment of the Principal).
3. REDEMPTION. The Borrower may elect to redeem the Convertible
Debenture by pre-paying the Principal and accrued interest of the
Convertible Debenture at any time prior to the end of the term
thereof upon fifteen (15) days written notice to the holder thereof
of its intent to pre-pay the Convertible Debenture. The foregoing
notwithstanding, the Lender may convert the Principal and accrued
interest into common stock of the Borrower pursuant Paragraph 5
below and the Holder's three day written notice of conversion into
common stock.
4. NEGOTIABILITY. The Convertible Debenture shall be assignable
by the holder thereof for value, to a Holder in Due Course as
defined by the Uniform Commercial Code upon written notification to
Borrower of the Assignee and its address. The Borrower hereby
makes an unconditional promise to repay the Principal and accrued
interest of the Convertible Debenture on or before the date due to
any such Holder in Due Course. The Borrower acknowledges that
repayment to a Holder in Due Course is not subject to any claims or
defenses the Borrower may have against the Lender.
5. CONVERSION OF DEBT INTO COMMON STOCK. At any time after July
13, 1997 (sixty days from the date the Principal of the
Convertible Debenture is paid to the Borrower), the Lender may
elect to convert the Principal and interest accrued (to the date
prior to the date Notice of Conversion is given to the Borrower) in
whole or in part, or solely the accrued interest in whole or in
part into as many shares of common stock of the Borrower as equals
the dollar amount to be converted divided by sixty-five percent
(65%) of the average closing bid price for common stock of the
Borrower as reported by NASDAQ for the ten (10) business days prior
to the date the Lender's Notice of Conversion to the Borrower.
6. DEFAULT. Each of the following events shall be and shall
constitute an event of default under an outstanding Convertible
Debenture and this Agreement:
(a) Any default by the Borrower in the punctual payment of
the Principal and accrued interest of the outstanding
Convertible Debenture when and as the same shall become due
and payable;
(b) Any default by the Borrower under or breach by the
Borrower in the performance of any covenant, agreement,
warranty, representation or condition contained in this
Agreement or the Convertible Debenture;
(c) If the Borrower shall:
(i) apply for, or consent to, the appointment of a
receiver, trustee, or liquidator of the Borrower for all
or substantially all assets of the Borrower; (ii) file
or be served with any petition for relief under the
Bankruptcy Code or any similar federal or state law or
admit in writing its inability to pay its debts as they
become due; (iii) make a general assignment to
creditors;
(d) If any pleading shall be filed in any court or other
forum seeking the adjudication of the Borrower as a bankrupt
or insolvent, the appointment of a receiver, trustee, or
liquidator of the Borrower or of all or substantially all of
their assets which pleading shall not be dismissed within
thirty (30) days; or
(e) The filing of any tax lien respecting any of the assets
of the Borrower;
(f) The failure to file the Borrower's periodic reports with
the U.S. Securities and Exchange Commission when due including
any available extension periods;
(g) The foregoing notwithstanding, the Borrower shall have
thirty (30) days from the date of such default to cure said
default. Upon such cure the terms of the Convertible
Debenture shall continue in effect.
7. REMEDIES UPON DEFAULT. Upon the occurrence of any one or more
of the events of default described in Section 6 of this Agreement
and subject solely to the Borrower's actual cure of the default
pursuant to Section 6(g), the Holder of the Convertible Debenture
at its option, and in its sole discretion, may declare the unpaid
balance of the Principal and accrued interest immediately due and
payable as fully and as completely as if said aggregate sum was
originally agreed to be paid at such time, all without notice or
demand, which are hereby expressly waived by the Borrower. In
addition, upon the occurrence of any one or more of such events of
default, the holder may proceed to enforce payment of the Principal
and accrued interest, accelerated as above provided, and any and
all other duties, obligations and liabilities secured by this
Agreement and the Convertible Debenture.
8. LOCATION OF TRANSACTION. The offer and acceptance of the
Convertible Debenture and any subsequent election to convert a
Convertible Debenture into common stock as provided by Section 4
above shall be deemed concluded at the office of the Lender, ▇/▇
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9. RELIANCE UPON REGULATION S. The Borrower and the Lender agree
that the offer and acceptance of the Convertible Debenture is
exempt from the registration requirements of Section 5 of the
Securities Act of 1933, pursuant to the exemption provided by Rule
903 of Regulation S. The Regulation S Restricted Period shall
commence upon the date on which the Lender has tendered the
Principal of the Convertible Debenture to the Borrower.
10. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower
represents and warrants to the Lender as follows:
(a) The Borrower shall maintain accurate records and books of
account, in accordance with generally acceptable accounting
principles, consistently applied throughout the periods
included therein, and the Lender shall have the right to
receive and review Borrower's SEC filings and financial
statements contained therein;
(b) The Borrower shall pay and discharge when due all taxes,
levies and other charges which are or, if they remain unpaid,
may become a lien against its properties or assets;
(c) The Borrower shall maintain adequate insurance against
loss or damage to all of its properties and assets and will
maintain insurance deemed by the Borrower to be adequate
against loss or damage to all of its properties and assets and
liability for damage to the person or property of others;
(d) The Borrower shall notify the Lender if, at any time, it
changes the address of the office where it keeps its books and
records.
(e) The Borrower shall maintain its corporate existence and
comply with all valid and applicable statutes, rules,
ordinances, regulations or orders, federal, state and local,
and maintain its properties in good operating conditions;
(f) The Borrower shall at all times that the Convertible
Debenture is outstanding, maintain an adequate number of
authorized but unissued shares of common stock necessary for
the conversion of the Principal and accrued interest;
(g) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of
UTAH and is qualified or authorized to do business as foreign
corporations and are in good standing in all jurisdictions in
which qualification or authorization may be required and has
all requisite corporate power and authority, licenses and
permits to own or lease and operate their properties and carry
on their business as presently being conducted and to execute,
deliver and perform this Agreement and consummate the
transactions contemplated hereby.
(h) The Borrower has not engaged in "Directed Selling
Efforts" as defined in Regulation S, being such activity
undertaken for the purpose of, or that could reasonably be
expected to have the effect of, conditioning the market in the
United States for the Shares being offered in reliance on
Regulation S. Such activity including but not limited to
advertising the sale of the Shares in a newspaper or other
publication of general distribution in the United States.
(i) The Borrower is a Reporting Company whose common stock is
registered with the U.S. Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 as amended.
The Borrower represents and warrants that it has filed all
such reports required of it over the past twelve months and
that it will file all reports as required and that the
information contained therein does not and will not contain
any misstatement of material information or any omission of
information necessary to make the information provided not
misleading. The Borrower specifically agrees to file a Form
8-K reporting this Regulation S transaction.
(j) The Borrower has disclosed to the Lender, all sales of
unregistered common stock or securities convertible into
common stock which Borrower has made during the ninety (90)
days prior to the date of this Agreement including the number
of shares and consideration received therefore. The Borrower
furthermore represents and warranty that so long as the
Convertible Debenture issued pursuant to Paragraph 1 above
remains outstanding, the Borrower shall not make any further
sales of unregistered common stock or securities convertible
into common stock pursuant to Regulation "S" without first
offering such unregistered securities to the Lender on
substantial the same terms as to offered to a bona fide third
party. The Lender shall have twenty days from the date of
such offer to accept and purchase such securities. Thereafter
the Borrower may sell such securities to any bona fide third
party.
(k) Maintenance of Market Listing. It will maintain the
listing of its Common Stock on the NASD Electronic Bulletin
Board Market.
(l) Prohibition on Stop Transfer Instructions. The Borrower
will not issue stop transfer instructions to its transfer
agent with respect to and will not after expiration of the
Regulation S Restricted Period, place a restrictive legend on
the certificates representing the Shares of Common Stock
issuable upon the conversion of the Convertible Debenture for
any reason other than the Company's reasonable good faith
belief that the representations and warranties made by the
Lender or contained in the Notice of Conversion are untrue or
as required by applicable federal or state securities laws.
(m) Registration Rights. If within five business days of
receipt of a Notice of Conversion, the Company fails to
instruct its transfer agent to issue certificates for the
Shares required by such Notice or issues certificates with a
restrictive legend after the expiration of the Regulation S
Restricted Period, for any reason other than the Company's
reasonable good faith belief that the representations and
warranties made by the Lender or contained in the Notice of
Conversion are untrue, then the Company shall be required at
the Company's expense and at the request of the Lender to
effect the registration of the Shares under the Act and
relevant Blue Sky laws as promptly as is practicable and in no
event later than 90 days from the date of the Holder's demand
therefor.
The Company shall also register a sufficient number of
additional shares of common stock for the purpose of a
recalculation of the number of shares to be issued pursuant to
the conversion such that in the event the average closing bid
price for common stock of the Borrower as reported by NASDAQ
for the ten (10) days prior to the anticipated effective date
of the registration statement is less than the average closing
bid price set forth in the Lender's Notice of Conversion to
the Borrower. If the average closing bid price for common
stock of the Borrower as reported by NASDAQ for the ten (10)
days prior to the anticipated effective date of the
registration statement is less than the average closing bid
price as set forth in the Lender's Notice of Conversion to the
Borrower, then the Company shall issue such number of shares
as calculated on the average closing bid price for common
stock of the Borrower as reported by NASDAQ for the ten (10)
days prior to the anticipated effective date of the
registration statement.
The Company and the Lender shall cooperate in good faith
in connection with the furnishing of information required for
such registration and the taking of such other actions as may
be legally or commercially necessary in order to effect such
registration. The Company shall file a registration statement
within 60 days of Lender's Notice of Conversion and shall use
its best efforts to cause such registration statement to
become effective as soon as practicable thereafter. Such best
efforts shall include, but not be limited to, promptly
responding to all comments received from the staff of the
Securities and Exchange Commission, providing Lender's counsel
with a contemporaneous copy of all written communications from
and to the staff of the Securities and Exchange Commission
with respect to such registration statement and promptly
preparing and filing amendments to such registration statement
which are responsive to the comments received from the staff
of the Securities and Exchange Commission.
Once declared effective by the Securities and Exchange
Commission, the Company shall cause such registration
statement to remain effective until the earlier of (i) the
sale by the Lender of all Shares registered or (ii) 120 days
after the effective date of such registration statement.
(n) Registration in the Event of Amendments to Regulation S.
In the event that Regulation S is amended in such a manner as
to increase the Restricted Period for more than its present
time period or to otherwise substantially diminish the
liquidity of the Lender's investment as determined in its sole
discretion, the Lender shall have the option to require the
Borrower to register the Underlying Shares in the manner as
set forth in (m) above.
(o) Penalty for Failure to Convert. If within five business
days to receipt of a Notice of Conversion, the Company fails
to instruct its transfer agent to issue certificates for the
Shares required by such Notice or issues certificates with a
restrictive legend after the expiration of the restricted
Period, for any reason other than the Company's reasonable
good faith belief that the representations and warranties made
by the lender or contained in the Notice of Conversion are
untrue, then the Company shall pay to the Lender by wire
transfer, as liquidated damages for such failure and not as a
penalty, an amount in cash equal to the lesser of $25,000 or
twenty-five percent (25%) of the outstanding Principal and
accrued interest. Such liquidated damages shall be added to
the Principal and accrued interest of the Convertible
Debenture and subject to the Default Provisions thereof.
However, accrual or payment of such liquidated damages shall
not relieve the Borrower from its obligations to register the
Shares pursuant to paragraph (m) above.
11. REPRESENTATIONS AND WARRANTIES OF LENDER. The Lender
represents and warrants to the Borrower as follows:
(a) The Lender is a corporation organized under the laws of
Hong Kong and is not a U.S. Person as defined by Regulation S
as: (1) Any natural person resident in the United States, its
territories or possessions; (2) Any partnership or corporation
organized or incorporated under the laws of the United States;
(3) Any estate of which any executor or administrator is a
U.S. Person; (4) Any trust of which any trustee is a U.S.
Person; (5) Any agency or branch of a foreign entity located
in the United States; (6) Any non-discretionary account or
similar account (other than an estate or trust) held for the
benefit of a U.S. Person; (7) Any fiduciary organized,
incorporated or (if an individual) resident in the United
States; and (8) Any foreign entity organized or incorporated
by a U.S. Person principally for the purpose of investing in
unregistered securities, unless it is organized or
incorporated and owned by "Accredited Investors" (as defined
in Regulation D) who are not natural persons, estates or
trusts.
(b) The offer and acceptance of the Convertible Debenture and
any Shares received upon conversion thereof shall have taken
place outside of the United Sates of America or any of its
territories or possessions and the purchase of the Shares
shall take place outside of the United States of America or
any of its territories or possessions.
(c) The Lender is aware that the Convertible Debenture and
Shares received upon conversion thereof have not been and may
not be registered with the U.S. Securities & Exchange
Commission and accordance with Regulation S and cannot be sold
to any U.S. Person or for the account or benefit of a U.S.
Person during the restricted period beginning on the day of
the final payment of Principal is paid upon the Convertible
Debenture. The Lender further acknowledges that after the
restricted period, the Shares may only be sold to U.S. Persons
or in U.S. based securities markets pursuant to an effective
registration statement covering the Shares or pursuant to an
exemption from the registration requirements of Section 5 of
the Securities Act of 1933, as amended, and applicable state
laws.
(d) The Lender is acquiring the Convertible Debenture and
Shares received upon conversion thereof for investment and not
with a view to the distribution thereof and has not entered
into any agreement or other arrangement or understanding with
any party regarding the resale of the shares. The foregoing
notwithstanding, the Lender represents that its investment
intent is to bear the investment risk of bearing an unsecured
creditor of the Borrower for at least six months in
expectation of market appreciation for the underlying common
stock.
(e) Any offer, sale or pledge of the Convertible Debenture
and Shares received upon conversion thereof with which Lender
is involved, whether made subsequent to or during the pendency
of any applicable "restricted period", will be made in
accordance with the provisions and requirements of Regulation
S, or pursuant to registration under the Securities Act of
1933, as amended, or an available exemption therefrom.
12. ACCEPTANCE OF INVESTMENT INTENT AND ESTOPPEL. In reliance
upon the representations and warranties of the Lender, the Borrower
affirmatively accepts and acknowledges: the Lender's investment
intent; that the Lender is not an "underwriter" as defined by
Section 2(11) of the Securities Act of 1933; and that the Borrower
shall be estopped from asserting as either a claim or defense that
the Lender is an underwriter as a result of the purchase of the
Convertible Debenture or conversion thereof.
13. BROKERAGE FEES AND OTHER EXPENSES. The Borrower and Lender
agree that there are no brokerage fees or commissions due upon the
sale of the Shares and that each shall bear their own incidental
expenses of the transaction including any attorneys fees.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Representations and Warranties set forth above shall survive the
execution of this Agreement and may be relied upon by either Party
so long as the relying Party does not have actual knowledge of the
invalidity or inaccuracy of said representations and warranties.
15. INDEMNIFICATION. The Parties agree to indemnify and hold
harmless each other for any liability arising from this Agreement
or reliance upon the Representations and Warranties of the other
after Closing.
16. COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be
executed in counterpart signatures and the Parties agree that a
facsimile signature transmitted from a known telephone number of
either Party shall be deemed to be an original signature.
17. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the United States and the State of
Utah without regard to conflicts of law.
18. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to
have been duly given (a) on date of delivery if delivered
personally or (b) on the fifth day after being sent by certified
mail, return receipt requested, with postage prepaid as follows:
Borrower: ▇▇▇ ▇▇▇▇▇▇, President
Crown Energy Corporation
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▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Lender: Oriental New Investments, Ltd.
▇/▇ ▇▇▇▇▇
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19. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior
agreements, understandings and arrangements, oral or written,
between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended or modified, except by
a written agreement signed by all parties hereto.
EXECUTED AND ACKNOWLEDGED THIS 6TH DAY OF MAY, 1997.
CROWN ENERGY CORPORATION ORIENTAL NEW INVESTMENTS, LTD.
/s/ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, President Authorized Representative
THIS CONVERTIBLE DEBENTURE AND THE UNDERLYING SHARES OF COMMON
STOCK HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). ANY RESALE THEREAFTER
MUST BE PURSUANT TO REGISTRATION UNDER THE ACT OR AN AVAILABLE
EXEMPTION.
CROWN ENERGY CORPORATION
A Utah Corporation
Dated: May 13, 1997
Crown Energy Corporation, a Utah corporation (the
"Corporation"), is indebted and, for value received, promises to
pay to the order of ORIENTAL NEW INVESTMENTS, LTD., (the "Holder"),
on November 13, 1997 (the "Due Date"), (unless this Debenture shall
have been sooner called for redemption as herein provided), upon
presentation of the Debenture, one hundred fifty thousand dollars,
($150,000) (the "Principal") and to pay interest on the Principal
as provided herein.
The Corporation covenants, promises and agrees as follows:
1. Interest. Interest on this Convertible Debenture shall
accrue from May 13, 1997 at a rate of nine percent (9%) per annum
until paid or converted. Interest shall be due and payable
quarterly beginning July 31, 1997 (the last day of the third full
month following payment of the Principal).
All accrued and unpaid interest shall be payable on the Due
Date. All payments of principal and interest or principal or
interest shall be made to the Holder at the offices of the Holder,
▇/▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, or at such
other place as may be designated in writing by the holder.
2. Redemption.
2.1. This Debenture may be redeemed at the option of the
Corporation in whole or in part prior to the Due Date at any
time and from time to time without penalty or premium. The
Corporation may exercise its right to redeem this Debenture
prior to maturity by giving notice (the "Redemption Notice")
thereof to the Holder. The Redemption Notice shall set forth
the amount of Principal and unpaid accrued interest of the
Debenture to be redeemed (the "Redemption Amount") and shall
fix a date for redemption (the "Redemption Date"). The
Redemption Date shall not be less than 15 days nor more than
60 days after the date of the Redemption Notice.
2.2. On the Redemption Date, the Corporation shall pay to the
holder hereof a dollar amount equal to the Redemption Amount.
2.3 The foregoing Redemption Notice notwithstanding, the
Holder may convert this Debenture and accrued interest into
common stock of the Corporation pursuant to the Holder's
Rights of Conversion set forth below.
3. Conversion. At any time sixty (60) days after the date
the Principal of the Debenture was paid to the Corporation, the
Holder may elect to convert the Principal and accrued interest (to
the date prior to the date Notice of Conversion is given to the
Corporation), in whole or in part, or solely the accrued interest
in whole or in part into as many shares of common stock of the
Corporation as equals the dollar amount to be converted divided by
sixty-five percent (65%) of the average closing bid price for
common stock of the Corporation as reported by NASD Electronic
Bulletin Board for the ten (10) business days prior to the date the
Holder's Conversion Notice is received by the Corporation.
3.1. Conversion Notice. The holder may exercise the
conversion rights by giving written notice (the "Conversion
Notice") to the Corporation of the exercise of such right.
The Conversion Notice must be received by the Corporation at
least three business days prior to the Conversion Date and
will state the ten business day average closing bid price, the
amount of principal and or interest being converted and the
delivery instructions for certificates registered in the name
of the Holder.
3.2 Prohibition on Stop Transfer Instructions. The
Corporation shall not issue stop transfer instructions to its
transfer agent with respect to certificates to be issued upon
conversion. In addition, the Corporation shall not place a
restrictive legend on the certificates to be issued upon
conversion after expiration of the Regulation S Restricted
Period for any reason other than the Corporation's reasonable
good faith belief that the representations and warranties made
by the Lender or contained in the Holder's Notice of
Conversion are untrue or applicable provisions of federal or
state securities laws, rules or regulations.
3.3 Registration Rights. If within five business days of
receipt of a Notice of Conversion, the Corporation fails to
issue certificates for the Shares required by such Notice or
issues certificates with a restrictive legend after the
expiration of the Regulation S Restricted Period, for any
reason other than the Corporation's reasonable good faith
belief that the representations and warranties made by the
Lender or contained in the Holder's Notice of Conversion are
untrue, then the Corporation shall be required at its expense
and at the request of the Holder to effect the registration of
the Shares under the Act and relevant Blue Sky laws as
promptly as is practicable and in no event later than 90 days
from the date of the Holder's demand therefor. The
Corporation and the Holder shall cooperate in good faith in
connection with the furnishing of information required for
such registration and the taking of such other actions as may
be legally or commercially necessary in order to effect such
registration. The Corporation shall file a registration
statement within 60 days of Holder's Notice of Conversion and
shall use its best efforts to cause such registration
statement to become effective as soon as practicable
thereafter. Such best efforts shall include, but not be
limited to, promptly responding to all comments received from
the staff of the Securities and Exchange Commission, providing
Holder's counsel with a contemporaneous copy of all written
communications from and to the staff of the Securities and
Exchange Commission with respect to such registration
statement and promptly preparing and filing amendments to such
registration statement which are repsonsive to the comments
received from the staff of the Securities and Exchange
Commission. Once declared effective by the Securities and
Exchange Commission, the Corporation shall cause such
registration statement to remain effective until the earlier
of (i) the sale by the Lender of all Shares registered or (ii)
120 days after the effective date of such registration
statement.
The Company shall also register a sufficient number of
additional shares of common stock for the purpose of a
recalculation of the number of shares to be issued pursuant to
the conversion such that in the event the average closing bid
price for common stock of the Borrower as reported by NASDAQ
for the ten (10) days prior to the anticipated effective date
of the registration statement is less than the average closing
bid price set forth in the Lender's Notice of Conversion to
the Borrower. If the average closing bid price for common
stock of the Borrower as reported by NASDAQ for the ten (10)
days prior to the anticipated effective date of the
registration statement is less than the average closing bid
price as set forth in the Lender's Notice of Conversion to the
Borrower, then the Company shall issue such number of shares
as calculated on the average closing bid price for common
stock of the Borrower as reported by NASDAQ for the ten (10)
days prior to the anticipated effective date of the
registration statement.
3.4 Registration in the Event of Amendments to Regulation S.
In the event that Regulation S is amended in such a manner as
to increase the Restricted Period for more than its present
time period or to otherwise substantially deminish the
liquiditiy of the Holder's investment as determined in its
sole discretion, the Holder shall have the option to require
the Corporation to register the Shares in the manner as set
forth in (l) above.
3.5 Penalty for Failure to Convert. If within five business
days of receipt of a Notice of Conversion, the Corporation
fails to issue certificates for the Shares required by such
Notice or issues certificates with a restrictive legend after
the expiration of the Restricted Period, for any reason other
than the Corporation's reasonable good faith belief that the
representations and warranties made by the Lender or contained
in the Holder's Notice of Conversion are untrue, then the
Corporation shall pay to the Holder by wire transfer, as
liquidated damages for such failure and not as a penalty, an
amount in cash equal to the lesser of $25,000 or twenty-five
percent (25%) of such outstanding Principal and accrued
interest. Such liquidated damages shall be added to the
Principal and accrued interest of the Convertible Debenture
and subject to the Default Provisions thereof. However,
accrual or payment of such liquidated damages shall not
relieve the Corporation from its obligations to register the
Shares pursuant to paragraph 3.2 above.
4. Default. Upon the occurrence of one or more of the
Events of Default set forth below and subject solely to the
Corporation's actual cure of the default, the Holder at its option
and in its sole discretion, may declare the unpaid Principal and
accrued interest immediately due and payable as completely as if
said aggregate sum was originally agreed to be paid at such time.
The declaration of a default shall be without demand for payment,
which is hereby expressly waived by the Corporation. In addition,
upon the occurrence of any one or more of such Events of Default,
the Holder may proceed to enforce payment of the Principal and
accrued interest, as accelerated as above provided, and any and all
other duties, obligations and liabilities contained in the
Convertible Debenture Agreement and the Convertible Debenture. The
Events of Default are as follows:
4.1 The entire unpaid and unredeemed balance of the Principal
and all unpaid, accrued interest shall, at the election of the
Holder, be and become immediately due and payable upon the
occurrence of any of the following events (a "Default Event"):
(a) Any default by the Corporation in the punctual
payment of the Principal and accrued interest of the
outstanding Convertible Debenture when and as the same
shall become due and payable;
(b) Any default by the Corporation under or breach by
the Corporation in the performance of any covenant,
agreement, warranty, representation or condition
contained in this Agreement or the Convertible Debenture;
(c) If the Corporation shall:
(i) apply for, or consent to, the appointment of a
receiver, trustee, or liquidator of the Corporation
for all or substantially all assets of the
Corporation; (ii) file or be served with any
petition for relief under the Bankruptcy Code or
any similar federal or state law or admit in
writing its inability to pay its debts as they
become due; (iii) make a general assignment to
creditors;
(d) If any pleading shall be filed in any court or other
forum seeking the adjudication of the Corporation as a
bankrupt or insolvent, the appointment of a receiver,
trustee, or liquidator of the Corporation or of all or
substantially all of their assets which pleading shall
not be dismissed within thirty (30) days; or
(e) The filing of any tax lien respecting any of the
assets of the Corporation;
(f) The failure to file the Corporation's periodic
reports with the U.S. Securities and Exchange Commission
when due;
4.2 Right to Cure Default. The foregoing notwithstanding,
the Corporation shall have thirty (30) days from the date of
such default to cure said default. Upon such cure the terms
of the Convertible Debenture shall continue in effect.
4.3. Rights and Remedies. Each right, power or remedy of the
Holder upon the occurrence of any Default Event as provided
for in this Debenture, or now or hereafter existing at law or
in equity, or by statute shall be cumulative and concurrent
and shall be in addition to every other right, power of remedy
provided for in this Debenture or now or hereafter existing at
law or in equity or by statute, and the exercise or beginning
of the exercise by the Holder or transferee hereof of any one
or more of such rights, powers or remedies shall not preclude
the simultaneous or later exercise by the holder hereof of any
or all such other rights, powers or remedies.
5. Failure to Act and Waiver. No failure or delay by the
Holder to insist upon the strict performance of any term of this
Debenture or to exercise any right, power or remedy consequent upon
a Default Event hereunder shall constitute a waiver of any such
term or of any such breach, or preclude the Holder hereof from
exercising any such right, power or remedy at any later time or
times. By accepting payment after the due date of any amount
payable under this Debenture, the Holder hereof shall not be deemed
to waive the right either to require payment when due of all other
amounts payable under this Debenture, or to declare a Default Event
for failure to effect such payment of any such other amount.
6. Consent to Jurisdiction. The Corporation and Holder
hereby agree and consent that any action, suit or proceeding
arising out of this Debenture shall be brought in any appropriate
court in the State of UTAH, including the United States District
Court for the State of UTAH or in any other Utah court having
jurisdiction over the subject matter, all at the sole election of
the Holder hereof, and by the issuance and execution of this
Debenture the Corporation and Holder irrevocably consents to the
jurisdiction of Utah courts.
7. Transfer/Negotiability. This Debenture shall be
transferred on the books of the Corporation only by the registered
Holder or by his/her attorney duly authorized in writing and only
in accordance with applicable laws, rules and regulations.
Transfer shall be effected by delivery to the Corporation of a duly
executed Assignment, substantially in the form attached hereto as
Exhibit A. The foregoing notwithstanding, the Corporation shall
not transfer this Debenture nor any of the shares of common stock
to be issued upon conversion in the United States or to a "U.S.
Person" (as defined in Regulation S promulgated under the Act) or
for the account and benefit of any U.S. Person, except as provided
in said Regulation S until forty-one days from the date of issuance
of this Debenture. The Corporation shall be entitled to treat any
Holder of record of the Debenture as the Holder in fact thereof and
shall not be bound to recognize any equitable or other claim to or
interest in this Debenture in the name of any other person, whether
or not it shall have express or other notice thereof, save as
expressly provided by the Laws of UTAH. Subject to receipt of a
duly executed Assignment, the Debenture shall be assigned by the
Holder for value, to a Holder in Due Course as defined by the
Uniform Commercial Code. The Corporation hereby makes an
unconditional promise to repay the Principal and accrued interest
of this Debenture on or before the date due to any such Holder in
Due Course and acknowledges that repayment to a Holder in Due
Course is not subject to any claims or defenses the Corporation may
have against the original Holder.
8. Notices. All notices and communications under this
Debenture shall be in writing and shall be deemed delivered (a) on
date of facsimile transmission, provided the document(s) sent by
facsimile transmission is sent by overnight delivery service with
package tracking capabilities or (b) on the date of receipt of
notice sent by overnight delivery service with package tracking
capabilities to:
The Corporation: ▇▇▇ ▇▇▇▇▇▇, President
CROWN ENERGY CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Voice telephone: ▇▇▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇▇▇ ▇▇▇▇
and, if to the Holder, to the address of such holder as it appears
in the books of the Corporation. Any notice of communication shall
be deemed given and received as of the date of such delivery or
three days after deposit with an overnight courier service or after
five (5) days after deposit with U.S. Postal Service as first class
air mail.
9. Governing Law. This Debenture shall be governed by and
construed and enforced in accordance with the laws of the State of
UTAH, or, where applicable, the laws of the United States, without
regard to conflicts of law.
10. Incorporation by Reference. The terms, Representations
and Warranties set forth in the Convertible Debenture Agreement
between the Corporation and ORIENTAL NEW INVESTMENTS, LTD., dated
May 13, 1997, are incorporated herein by this reference, and any
transferee or subsequent Holder of this Debenture (or the shares of
common stock issued upon conversion thereof during the Restricted
Period as defined by Regulation S) shall be subject to and bound by
the provisions of such agreement.
IN WITNESS WHEREOF, the Corporation has caused this Debenture
to be duly executed.
ATTEST: CROWN ENERGY CORPORATION
/s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, Secretary ▇▇▇ ▇▇▇▇▇▇, President
EXHIBIT A
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns to:
the 10% Convertible Debenture of CROWN
ENERGY CORPORATION, No. and hereby irrevocably appoints
, Attorney, to
transfer said debenture on the books of the within named
corporation, with full power of substitution in the premises.
WITNESS my hand and seal this day
of , 199 .
(SEAL)
(SEAL)
WITNESS: