Exhibit 4.1
CONVERTIBLE DEBENTURE AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FACE AMOUNT $710,000
DEBENTURE NUMBER June ▇▇▇▇-▇▇▇
▇▇▇▇▇▇▇▇ DATE June 21, 2005
MATURITY DATE June 21, 2008
FOR VALUE RECEIVED, ▇▇▇▇ ▇▇▇▇▇ Corporation, a Florida corporation (the
"Company"), hereby promises to pay 21st Century Technologies ("Holder") on June
21, 2008, (the "Maturity Date"), the principal amount of Seven Hundred and Ten
Thousand Dollars ($710,000) U.S., and to pay interest on the principal amount
hereof, in such amounts, at such times and on such terms and conditions as are
specified herein.
Article 1 Interest
The Company shall pay eight percent (8%) annual coupon on the unpaid
principal amount of this Debenture (the "Debenture") at such times and in such
amounts as outlined in this Debenture
The Debenture is subject to automatic conversion at the end of three (3) years
from the date of issuance at which time all Debentures outstanding will be
automatically converted based upon the formula set forth in Section 3.2.
Article 2 Method of Payment
Section 2.1. Payments made by the Company in satisfaction of this Debenture
(each a "Payment," and collectively, the "Payments") shall be made monthly on a
the first calendar date of the month, provided US banks are open and available
to transfer funds, ("Payment Date") following the U.S. Securities and Exchange
Commission declaring the registration statement for the underlying common stock
of the Company pursuant to the Equity Line of Credit with Dutchess Private
Equities Fund, II, ("Dutchess"), effective ("Effective Date"). In the event the
registration statement for the underlying common stock of the Company pursuant
to the Equity Line of Credit with Dutchess is not deemed effective by the United
States Securities and Exchange Commission within twelve (12) months of the
Issuance Date, regular monthly Payments shall commence on the first calendar
date of the thirteenth month following the Issuance Date ("144A Date"). In the
event US Banks are not open and available to transfer Payment, funds shall be
immediately paid on the next business day funds are available to transfer.
Payments shall be in the amount of Twenty-six thousand one hundred and fifty
dollars and thirty cents ($26,150.30). THE PAYMENTS SHALL BE GUARANTEED BY
DUTCHESS AS OUTLINED IN SECTION 2.2 BELOW. Notwithstanding any provision to the
contrary in this Note, the Company may pay in full to the Holder the Face
Amount, or any balance remaining thereof, in readily available funds at any time
and from time to time without penalty. Except for the first twelve (12) payments
made following the Effective Date which shall be made in cash (the "Cash Only
Payments"), the Company shall retain the right to make a Payment in either a)
readily available funds; or, b) the Company's Common Stock priced pursuant to
Section 3.2 (c) below.
Section 2.2. The Payments shall commence on the first calendar date after
the Effective Date and continue for twelve (12) consecutive months ("Cash Only
Payment Termination Date"). Regular monthly Payments (i.e. Payments not defined
as Cash Only Payments herein) shall commence on the first calendar date in the
month following the Cash Only Payment Termination Date and shall continue until
the total amount due and owing is paid in full. In the event the registration
statement for the underlying common stock of the Company pursuant to the Equity
Line of Credit with Dutchess is not deemed effective by the United States
Securities and Exchange Commission within twelve (12) months of the Issuance
Date, regular monthly Payments shall commence on the 144A Date and shall
continue until the total amount due and owing is paid in full. The Cash Only
Payments shall be guaranteed to the Holder by Dutchess from proceeds raised off
the equity line of credit between Dutchess and JBTL, from the Effective Date
through the Cash Only Payment Termination Date. Dutchess shall not be held
accountable or liable for Payments before the Effective Date or after the Cash
Only Payment Termination Date.
The Payments (Cash Only Payments and the remaining monthly Payments) shall
increase based on the following schedule, based on the net proceeds received by
the Company from the Equity Line:
Over $1,000,000 to $2,000,000 Payments shall increase to thirty-five
thousand dollars ($35,000)
Over $2,000,000 to $3,000,000 Payments shall increase to forty-five
thousand dollars ($45,000)
Over $3,000,000 Payment shall increase to fifty-five thousand
dollars ($55,000)
Article 3 Conversion
Section 3.1 Conversion Privilege
(a) The Holder of this Debenture, with written consent of the Company shall
have the right to convert it into shares of Common Stock at any time following
the 144A Date and before the close of business on the Maturity Date. The number
of shares of Common Stock issuable upon the conversion of this Debenture is
determined pursuant to Section 3.2 and rounding the result to the nearest whole
share.
(b) This Debenture may not be converted, whether in whole or in part,
except in accordance with this Article 3.
(c) In the event all or any portion of this Debenture remains outstanding
on the Maturity Date, the unconverted portion of such Debenture will
automatically be converted into shares of Common Stock on such date in the
manner set forth in Section 3.2.
(d) The Company retains the right to make a cash Payment, as outlined in
Article 2 above, to the Holder in lieu of a Conversion.
Section 3.2 Conversion Procedure.
(a) Conversion Procedures. The Face Amount of this Debenture may be
converted by the Holder, in whole or in part, any time following the 144A Date.
Such conversion shall be effectuated by surrendering to the Company this
Debenture to be converted together with a facsimile of the signed Notice of
Conversion which evidences Holder's intention to convert the Debenture
indicated. The date on which the Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Holder has delivered to the
Company a facsimile of the signed Notice of Conversion.
(b) Common Stock to be Issued. Upon the conversion of any Debenture and
upon receipt by the Company of a facsimile of Holder's signed Notice of
Conversion, the Company shall instruct its transfer agent to issue stock
certificates without restrictive legend or stop transfer instructions, if at
that time Rule 144, Rule 144A or Rule 144K sales apply (or with proper
restrictive legend if the Registration Statement has not as yet been declared
effective), in such denominations to be specified at conversion representing the
number of shares of Common Stock issuable upon such conversion, as applicable.
The Company shall act as Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture. The Company
warrants that no instructions, other than these instructions, have been given or
will be given to the transfer agent and that the Common Stock shall otherwise be
freely resold, except as may be set forth herein.
(c) Conversion Rate. Holder is entitled to convert the Face Amount of this
Debenture, plus accrued interest, anytime following the Closing Date, at 100% of
the closing bid price of the common stock on the date of conversion ("Conversion
Price"). No fractional shares or scrip representing fractions of shares will be
issued on conversion, but the number of shares issuable shall be rounded up, as
the case may be, to the nearest whole share.
(d) Nothing contained in this Debenture shall be deemed to establish or
require the payment of interest to the Holder at a rate in excess of the maximum
rate permitted by governing law. In the event that the rate of interest required
to be paid exceeds the maximum rate permitted by governing law, the rate of
interest required to be paid thereunder shall be automatically reduced to the
maximum rate permitted under the governing law and such excess shall be returned
with reasonable promptness by the Holder to the Company.
(e) It shall be the Company's responsibility to take all necessary actions
and to bear all such costs to issue the Common Stock as provided herein,
excluding the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date.
(f) Within ten (10) business days after receipt of the documentation
referred to above in Section 3.2(a), the Company shall deliver a certificate, in
accordance with Section 3.2(c) for the number of shares of Common Stock issuable
upon the conversion.
(g) Prospectus and Other Documents. The Company shall furnish to Holder
such number of prospectuses and other documents incidental to the registration
of the shares of Common Stock underlying the Debentures, including any amendment
of or supplements thereto. Any filings submitted via ▇▇▇▇▇ will constitute
fulfillment.
(h) Limitation on Issuance of Shares. If the Company's Common Stock becomes
listed on the Nasdaq SmallCap Market after the issuance of the Debenture, the
Company may be limited in the number of shares of Common Stock it may issue by
virtue of (X) the number of authorized shares or (Y) the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, including, but not necessarily limited to, NASDAQ Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable (collectively, the
"Cap Regulations"). Without limiting the other provisions thereof, (i) the
Company will take all steps reasonably necessary to be in a position to issue
shares of Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still cannot
issue such shares of Common Stock without violating the Cap Regulations, the
holder of a Debenture which cannot be converted as result of the Cap Regulations
(each such Debenture, an "Unconverted Debenture") shall have the right to elect
either of the following remedies:
(x) if permitted by the Cap Regulations, require the Company to issue
shares of Common Stock in accordance with such holder's Notice of
Conversion at a conversion purchase price equal to the average of the
closing bid price per share of Common Stock for any five (5) consecutive
Trading Days (subject to certain equitable adjustments for certain events
occurring during such period) during the sixty (60) Trading Days
immediately preceding the Conversion Date; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Redemption Amount"), payable in cash, equal to the sum of (i)
one hundred percent (100%) of the principal of an Unconverted Debenture,
plus (ii) any accrued but unpaid interest thereon through and including the
date (the "Redemption Date") on which the Redemption Amount is paid to the
holder.
A holder of an Unconverted Debenture may elect one of the above remedies
with respect to a portion of such Unconverted Debenture and the other remedy
with respect to other portions of the Unconverted Debenture. The Debentures
shall contain provisions substantially consistent with the above terms, with
such additional provisions as may be consented to by the Holder. The provisions
of this section are not intended to limit the scope of the provisions otherwise
included in the Debentures.
(i) Limitation on Amount of Conversion and Ownership. Notwithstanding
anything to the contrary in this Debenture, in no event shall the Holder be
entitled to convert that amount of Debenture, and in no event shall the Company
permit that amount of conversion, into that number of shares, which when added
to the sum of the number of shares of Common Stock beneficially owned, (as such
term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange
Act of 1934, as may be amended, (the "1934 Act")), by the Holder, would exceed
4.99% of the number of shares of Common Stock outstanding on the Conversion
Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. In the
event that the number of shares of Common Stock outstanding as determined in
accordance with Section 13(d) of the 1934 Act is different on any Conversion
Date than it was on the Closing Date, then the number of shares of Common Stock
outstanding on such Conversion Date shall govern for purposes of determining
whether the Holder would be acquiring beneficial ownership of more than 4.99% of
the number of shares of Common Stock outstanding on such Conversion Date.
The Holder shall only be allowed to convert that amount of Common
Stock per month equal to a Payment (as outlined in Article 2 above).
(j) Legend. The Holder acknowledges that each certificate representing the
Debentures, and the Common Stock unless registered pursuant to the Registration
Rights Agreement, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) IF AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
Section 3.3 Fractional Shares. The Company shall not issue fractional
shares of Common Stock, or scrip representing fractions of such shares, upon the
conversion of this Debenture. Instead, the Company shall round up or down, as
the case may be, to the nearest whole share.
Section 3.4 Taxes on Conversion. The Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon the conversion of this Debenture. However, the Holder shall pay any
such tax which is due because the shares are issued in a name other than its
name.
Section 3.5 Restrictions on Sale. This Debenture has not been registered
under the Securities Act of 1933, as amended, (the "Act") and is being issued
under Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the
Act. This Debenture and the Common Stock issuable upon the conversion thereof
may only be sold pursuant to registration under or an exemption from the Act.
Article 4 Registration
The Company shall not register the Shares underlying the Debenture for the
Holder. The Holder may elect to convert any shares and sell them pursuant to
Rule 144, Rule 144A or Rule 144K using the original date of this Debenture as
the date of consideration for the investment.
Article 5 No Assignment
This Debenture shall not be assignable.
Article 6 Defaults and Remedies
Section 6.1 Events of Default. An "Event of Default" occurs if the Company
pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
defined): (i) commences a voluntary case; (ii) consents to the entry of an order
for relief against it in an involuntary case; (iii) consents to the appointment
of a Custodian (as hereinafter defined) of it or for all or substantially all of
its property or (iv) makes a general assignment for the benefit of its creditors
or (v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its property or (C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for sixty (60) calendar days,
As used in this Section 6.1, the term "Bankruptcy Law" means Title 11 of the
United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law. A default under clause (c) above
is not an Event of Default until the holders of at least one hundred percent
(100%) of the aggregate principal amount of the Debentures outstanding notify
the Company of such default and the Company does not cure it within five (5)
business days after the receipt of such notice, unless the Company commences to
cure such default within such period, which must specify the default, demand
that it be remedied and state that it is a "Notice of Default". Prior to the
expiration of the time for curing a default as set forth in the preceding
sentence, the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding (exclusive of Debentures then owned by the
Company or any subsidiary or affiliate) may, on behalf of the holders of all of
the Debentures, waive any past Event of Default hereunder (or any past event
which, with the lapse of time or notice and lapse of time designated in
subsection (a), would constitute an Event of Default hereunder) and its
consequences, except a default in the payment of the principal of or interest on
any of the Debentures. In the case of any such waiver, such default or Event of
Default shall be deemed to have been cured for every purpose of this Debenture
and the Company and the holders of the Debentures shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
Section 6.2. No Waiver of Rights and Remedies. The failure of the Company
to make any Payment as required hereunder shall constitute a default. Holder
retains the right to seek any and all redress and remedies provided at law or in
equity for any such default. Any forbearance and/or waiver by Holder with
respect to the failure of the Company to make timely payment of any single
Payment shall not constitute a waiver with respect to any subsequent Payments or
default.
Article 7 Registered Debentures
Section 7.1 Record Ownership. The Company, or its attorney, shall maintain
a register of the holders of the Debentures (the "Register") showing their names
and addresses and the serial numbers and principal amounts of Debentures issued
to them. The Register may be maintained in electronic, magnetic or other
computerized form. The Company may treat the person named as the Holder of this
Debenture in the Register as the sole owner of this Debenture. The Holder of
this Debenture is the person exclusively entitled to receive payments of
interest on this Debenture, receive notifications with respect to this
Debenture, convert it into Common Stock and otherwise exercise all of the rights
and powers as the absolute owner hereof.
Section 7.2 Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the Debenture if the Holder so requests by written notice to the
Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
Article 8 Notice.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Debenture 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 a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) 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 the Company:
If to the Holder:
At the address listed in the Questionnaire.
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
Article 9 Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. A "business day"
shall mean a day on which the banks in New York are not required or allowed to
be closed.
Article 10 Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 11 Governing Law
The validity, terms, performance and enforcement of this Debenture shall be
governed and construed by the provisions hereof and in accordance with the laws
of the Commonwealth of Massachusetts applicable to agreements that are
negotiated, executed, delivered and performed solely in the Commonwealth of
Massachusetts.
Article 12 Litigation
DISPUTES SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS LAW
All disputes arising under this agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws. The parties to this agreement
will submit all disputes arising under this agreement to arbitration in
Commonwealth of Massachusetts or the State of Nevada before a single arbitrator
of the American Arbitration Association ("AAA"). The arbitrator shall be
selected by application of the rules of the AAA, or by mutual agreement of the
parties, except that such arbitrator shall be an attorney admitted to practice
law in the Commonwealth of Massachusetts or the State of Nevada, respectively.
No party to this agreement will challenge the jurisdiction or venue provisions
as provided in this section.
*.*.*
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above and duly authorized to sign.
By ▇▇▇▇ ▇▇▇▇▇ CORP.
By /s/ ▇▇▇▇▇▇▇ D'Agata
Name: ▇▇▇▇▇▇▇ D'Agata
Title: Interim Chief Executive Officer
By 21st Century Technologies, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
By Dutchess:
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Member Dutchess Capital Management,
General Partner to Dutchess Private
Equities I & II