Exhibit 4.1
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.
AMOUNT $250,000
DEBENTURE NUMBER ▇▇▇▇▇▇▇-▇▇▇▇-▇▇▇
▇▇▇▇▇▇▇▇ DATE January 5, 2004
MATURITY DATE January 5, 2009
FOR VALUE RECEIVED, Utah Clay Technology, Inc., a Utah corporation (the
"Company"), hereby promises to pay DUTCHESS PRIVATE EQUITIES FUND, L.P. (the
"Holder") on January 5, 2009, (the "Maturity Date"), the principal amount of Two
Hundred Fifty Thousand Dollars ($250,000) 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 interest on the unpaid principal amount of this
Debenture (the "Debenture") at the time of each conversion until the principal
amount hereof is paid in full or has been converted. The Debentures shall pay
six percent (6%) cumulative interest, in cash or in shares of common stock, par
value $.001 per share, of the Company ("Common Stock"), at the Company's option,
at the time of each conversion. The closing shall be deemed to have occurred on
the date the funds (less escrow fees, attorney fees and those amounts payable
pursuant to the terms sheet) are received by the Company (the "Closing Date").
If the interest is to be paid in cash, the Company shall notify Investor on the
date of conversion, and make such payment on the next business day following the
date of conversion. If the interest is to be paid in Common Stock, said Common
Stock shall be delivered to the Holder, or per Holder's instructions, within
three (3) business days of the date of conversion. The Debentures are subject to
automatic conversion at the end of five (5) 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
This Debenture must be surrendered to the Company in order for the Holder
to receive payment of the principal amount hereof. The Company shall have the
option of paying the interest on this Debenture in United States dollars or in
Common Stock upon conversion pursuant to Article 1 hereof. The Company may draw
a check for the payment of interest to the order of the Holder of this Debenture
and mail it to the Holder's address as shown on the Register (as defined in
Section 8.2 below). Interest and principal payments shall be subject to
withholding under applicable United States Federal Internal Revenue Service
Regulations.
Article 3 Conversion
Section 3.1 Conversion Privilege
(a) The Holder of this Debenture shall have the right to convert it into
shares of Common Stock at any time following the Closing Date and which is
before the close of business on the Maturity Date, except as set forth in
Section 3.1(c) below. The number of shares of Common Stock issuable upon the
conversion of this Debenture is determined pursuant to Section 4.2 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 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.
Section 3.2 Conversion Procedure.
(a) Conversion Procedures. The face amount of this Debenture may be
converted, in whole or in part, any time following the Closing Date. Such
conversion shall be effectuated by surrendering to the Company, or its attorney,
this Debenture to be converted together with a facsimile or original 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 or original of the signed Notice of
Conversion, as long as the original Debenture(s) to be converted are received by
the Company within five (5) business days thereafter. At such time that the
original Debenture has been submitted to the Company, the Holder can elect to
whether a reissuance of the debenture is warranted, or whether the Company can
retain the Debenture as to a continual conversion by Holder. Notwithstanding
the above, any Notice of Conversion received by 5:00 P.M. EST, shall be deemed
to have been received the previous business day. Receipt being via a
confirmation of time of facsimile of the Holder.
(b) Common Stock to be Issued. Upon the conversion of any Debentures and
upon receipt by the Company or its attorney of a facsimile or original 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 the Registration Statement has been declared
effective (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 the
lesser of (i) 75% of the lowest closing bid price during the fifteen (15) days
of full trading, defined as standard market hours from 9:30 AM to 4:00 PM EST,
partial trading days will not be counted for calculation purposes only ("Trading
Days") prior to the Conversion Date or (ii) 100% of the average of the five
lowest closing bid prices for the thirty (30) Trading Days immediately following
the first reverse split in the stock price after the date in the preamble.
("Fixed Conversion Price"), each being referred to as the "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 or down, as
the case may be, to the nearest whole share. The Holder shall retain all rights
of conversions during any partial trading days.
(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,
including 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. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
(f) Within three (3) 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. In the event the Company does not make delivery
of the Common Stock, as instructed by Holder, within three (3) business days
after the Conversion Date, then in such event the Company shall pay to Holder
one percent (1%) in cash, of the dollar value of the Debentures being converted,
compounded daily, per each day after the third (3rd) business day following the
Conversion Date that the Common Stock is not delivered to the Purchaser.
The Company acknowledges that its failure to deliver the Common
Stock within three (3) business days after the Conversion Date will cause the
Holder to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Debenture a provision for liquidated damages. The parties acknowledge and agree
that the liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to deliver the Common Stock pursuant to the terms
of this Debenture.
To the extent that the failure of the Company to issue the Common
Stock pursuant to this Section 3.2(f) is due to the unavailability of authorized
but unissued shares of Common Stock, the provisions of this Section 3.2(f) shall
not apply but instead the provisions of Section 3.2(g) shall apply.
The Company shall make any payments incurred under this Section
3.2(f) in immediately available funds within three (3) business days from the
date the Common Stock is fully delivered. Nothing herein shall limit a Holder's
right to pursue actual damages or cancel the conversion for the Company's
failure to issue and deliver Common Stock to the Holder within three (3)
business days after the Conversion Date.
(g) The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Debentures by all Holders of
the entire amount of Debentures then outstanding. If, at any time Holder submits
a Notice of Conversion and the Company does not have sufficient authorized
but unissued shares of Common Stock (or alternative shares of Common Stock as
may be contributed by Stockholders) available to effect, in full, a conversion
of the Debentures (a "Conversion Default", the date of such default being
referred to herein as the "Conversion Default Date"), the Company shall issue to
the Holder all of the shares of Common Stock which are available, and the Notice
of Conversion as to any Debentures requested to be converted but not converted
(the "Unconverted Debentures"), may be deemed null and void upon written notice
sent by the Holder to the Company. The Company shall provide notice of such
Conversion Default ("Notice of Conversion Default") to all existing Holders of
outstanding Debentures, by facsimile, within three (3) business day of such
default (with the original delivered by overnight or two day courier), and the
Holder shall give notice to the Company by facsimile within five business days
of receipt of the original Notice of Conversion Default (with the original
delivered by overnight or two day courier) of its election to either nullify or
confirm the Notice of Conversion.
The Company agrees to pay to all Holders of outstanding Debentures payments
for a Conversion Default ("Conversion Default Payments") in the amount of
(N/365) x (.24) x the initial issuance price of the outstanding and/or tendered
but not converted Debentures held by each Holder where N = the number of days
from the Conversion Default Date to the date (the "Authorization Date") that the
Company authorizes a sufficient number of shares of Common Stock to effect
conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder's accrued Conversion Default Payments. The accrued
Conversion Default shall be paid in cash or shall be convertible into Common
Stock at the Conversion Rate, upon written notice sent by the Holder to the
Company, which Conversion Default shall be payable as follows: (i) in the event
Holder elects to take such payment in cash, cash payments shall be made to such
Holder of outstanding Debentures by the fifth day of the following calendar
month, or (ii) in the event Holder elects to take such payment in stock, the
Holder may convert such payment amount into Common Stock at the conversion
rate set forth in Section 3.2(c) at any time after the 5th day of the calendar
month following the month in which the Authorization Notice was received, until
the expiration of the mandatory four (4) year conversion period.
The Company acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of the Debentures will cause the Holder to suffer damages in an amount that will
be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Agreement a provision for liquidated damages.
The parties acknowledge and agree that the liquidated damages provision set
forth in this section represents the parties' good faith effort to quantify such
damages and, as such, agree that the form and amount of such liquidated damages
are reasonable and will not constitute a penalty. The payment of liquidated
damages shall not relieve the Company from its obligations to deliver the Common
Stock pursuant to the terms of this Debenture. Nothing herein shall limit the
Holder's right to pursue actual damages for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock.
(h) If, by the third (3rd) business day after the Conversion Date of any
portion of the Debentures to be converted (the "Delivery Date"), the transfer
agent fails for any reason to deliver the Common Stock upon conversion by the
Holder and after such Delivery Date, the Holder purchases, in an open market
transaction or otherwise, shares of Common Stock (the "Covering Shares") solely
in order to make delivery in satisfaction of a sale of Common Stock by the
Holder (the "Sold Shares"), which delivery such Holder anticipated to make using
the Common Stock issuable upon conversion (a "Buy-In"), the Company shall
pay to the Holder, in addition to any other amounts due to Holder pursuant to
this Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as
defined below). The "Buy In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by the Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Holder in
immediately available funds within five (5) business days of written demand by
the Holder. By way of illustration and not in limitation of the foregoing, if
the Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which the Company will be required to pay to the Holder will
be $1,000.
(i) 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.
(j) Limitation on Issuance of Shares. If the Company's Common Stock becomes
listed on the Nasdaq SmallCap Market after the issuance of the Debentures, 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
thirty-three percent (133%) 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.
(k) 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.
(l) 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.
(m) Prior to conversion of all the Debentures, if at any time the
conversion of all the Debentures and exercise of all the Warrants outstanding
would result in an insufficient number of authorized shares of Common Stock
being available to cover all the conversions, then in such event, the Company
will move to call and hold a shareholder's meeting or have shareholder action
with written consent of the proper number of shareholders within thirty (30)
days of such event, or such greater period of time if statutorily required or
reasonably necessary as regards standard brokerage house and/or SEC requirements
and/or procedures, for the purpose of authorizing additional shares of Common
Stock to facilitate the conversions. In such an event management of the
Company shall recommend to all shareholders to vote their shares in favor of
increasing the authorized number of shares of Common Stock. Management of the
Company shall vote all of its shares of Common Stock in favor of increasing the
number of shares of authorized Common Stock. Company represents and warrants
that under no circumstances will it deny or prevent Holder's right to convert
the Debentures as permitted under the terms of this Subscription Agreement or
the Registration Rights Agreement. Nothing in this Section shall limit the
obligation of the Company to make the payments set forth in Section 3.2(g). The
investor, at their option, may request the company to authorize and issue
additional shares if the investor feels it is necessary for conversions in the
future In the event the Company's shareholder's meeting does not result in the
necessary authorization, the Company shall redeem the outstanding Debentures for
an amount equal to (x) the sum of the principal of the outstanding Debentures
plus accrued interest thereon multiplied by (y) 133%.
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 Company to Reserve Stock. The Company shall reserve the number
of shares of Common Stock required pursuant to and upon the terms set forth in
the Subscription Agreement to permit the conversion of this Debenture. All
shares of Common Stock which may be issued upon the conversion hereof shall upon
issuance be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
Section 3.6 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.
Section 3.7 Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to
receive stock, securities or property in respect of or in exchange for Common
Stock, then as a condition of such merger, consolidation, sale or transfer, it
may thereafter be converted on the terms and subject to the conditions set forth
above into the kind and amount of stock, securities or property receivable upon
such merger, consolidation, sale or transfer by a holder of the number of shares
of Common Stock into which this Debenture might have been converted immediately
before such merger, consolidation, sale or transfer, subject to adjustments
which shall be as nearly equivalent as may be practicable to adjustments
provided for in this Article 3.
Article 4 Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes in
writing the obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference herein to the
Company shall refer to such surviving or transferee corporation and the
obligations of the Company shall terminate upon such written assumption.
Article 5 Reports
The Company will mail to the Holder hereof at its address as shown on the
Register a copy of any annual, quarterly or current report that it files with
the Securities and Exchange Commission promptly after the filing thereof and a
copy of any annual, quarterly or other report or proxy statement that it gives
to its shareholders generally at the time such report or statement is sent to
shareholders.
Article 6 Defaults and Remedies
Section 6.1 Events of Default. An "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture by
conversion into Common Stock within ten (10) business days of the Maturity Date,
upon redemption or otherwise, (b) the Company does not make a payment,
other than a payment of principal, for a period of three (3) business days
thereafter, (c) any of the Company's representations or warranties contained in
the Subscription Agreement or this Debenture were false when made or the Company
fails to comply with any of its other agreements in the Subscription Agreement
or this Debenture and such failure continues for the period and after the notice
specified below, (d) 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, (e) the Company's Common Stock is suspended
or no longer listed on any recognized exchange including electronic
over-the-counter bulletin board for in excess of five (5) consecutive Trading
Days. As used in this Section 7.1, 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 25% of the aggregate
principal amount of the Debentures outstanding notify the Company of such
default and the Company does not cure it within thirty (30) 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 Acceleration. If an Event of Default occurs and is continuing,
the Holder hereof by notice to the Company may declare the remaining principal
amount of this Debenture, together with all accrued interest and any liquidated
damages, to be due and payable. Upon such declaration, the remaining principal
amount shall be due and payable immediately.
Section 6.3 Seniority, No indebtedness of the Company is senior to this
Debenture in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise.
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 original 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:
▇▇▇▇▇▇ ▇▇▇▇, President
Utah Clay Technology, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Investor:
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 No Assignment
This Debenture shall not be assignable.
Article 11 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 12 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 13 Litigation
DISPUTES SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS LAW
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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 Boston,
Massachusetts 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. No
party to this agreement will challenge the jurisdiction or venue provisions as
provided in this section.
Article 14 Investor Shares
As an additional inducement to Holder, the Company shall issue one share of
its Class C Preferred Stock ("Preferred") shall to the Holder . The Preferred
shall have piggy-back registration rights.
Article 15 Use of Proceeds
The Company shall use the entire proceeds from this Debenture exclusively
to satisfy obligations and expenses incurred with its "Merger" with NeWave, Inc.
d/b/a Online Supplier ("NeWave"). The distribution of proceeds in its entirety,
shall be made pursuant to the "Funds Authorization Distribution Agreement"
(Exhibit B) executed in conjunction with this Debenture. Any other use of the
funds contemplated herein, shall be considered a breach of contract and an event
of Default.
Article 16 Conditions to Closing
The Company represents that its Merger with NeWave has been fully
consummated except for the filing of an amendment to the Company's articles of
incorporation changing its name and providing for a reverse stock split. The
Company shall have also issued the Purchaser Shares outlined in Article 14,
within one (1) business day of Closing. The Holder shall have the right to
appoint a majority of "Directors" to the Company's Board of Directors (Exhibit
C). The Company shall provide for the immediate resignation of the number of
directors which shall constitute a majority. The newly appointed Directors shall
serve on the Company's board post-Merger.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
UTAH CLAY TECHNOLOGY, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: President
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: A Managing Member