EXHIBIT 4.8
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 $256,105
DEBENTURE NUMBER June 2005 -101
ISSUANCE DATE June 10, 2005
MATURITY DATE June 10, 2008
FOR VALUE RECEIVED, ▇▇▇▇ ▇▇▇▇▇ Corporation or the successor to ▇▇▇▇ ▇▇▇▇▇
Corporation, a Florida corporation (the "Company"), hereby promises to pay ▇▇▇▇
▇▇▇▇▇, a New Mexico resident ("Holder") on June 10, 2008, (the "Maturity Date"),
the principal amount of Two Hundred and Fifty-Six Thousand One Hundred and Five
Dollars ($256,105) 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 six percent (6%) annual coupon, compounded annually
on the unpaid principal amount of this Debenture (the "Debenture") paid
quarterly in the amount of three thousand eight hundred and forty-one dollars
and fifty-eight cents ($3,841.58). The first payments shall commence on
September 1, 2005 and be at the beginning of each quarter thereafter (January 1,
2006, April 1, 2006, and July 1, 2006). The Debenture is subject to automatic
conversion at the end of three (3) years from the date of issuance at which time
all Debenture outstanding will be automatically converted based upon the formula
set forth in Section 3.2.
Article 2 Method of Payment
Payments made by the Company in satisfaction of this Debenture (each a
"Payment," and collectively, the "Payments") shall be made upon each Conversion
as defined below in Article 3. The Company agrees to make Payments in the total
aggregate amount of fifty thousand dollars ($50,000.00) based on the following
schedule:
- Twenty-five thousand dollars ($25,000) shall be paid at such time as ▇▇▇▇
▇▇▇▇▇ and the current board resign and the completion of the Stock Purchase
Agreement with Geneva Atlantic Capital Corp. and ▇▇▇▇ ▇▇▇▇▇ has been executed.
- Fifteen thousand dollars ($15,000) shall be paid on forty-five (45) days
from Closing.
- Ten Thousand dollars ($10,000) shall be paid upon the latter of 1) ninety
(90) days from Closing or 2) the Effective Date of the registration statement
covering the underlying shares for the equity line of credit between Dutchess
Private Equities and JBTL.
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.
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.
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 one year anniversary of the Closing Date ("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 Payment to the Holder in
lieu of a Conversion. A Payment shall be equal to the number of shares being
converted multiplied by the Conversion Price as defined in Section 3.2 (c)
below.
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 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 an exemption under Rule 144A or Rule 144K applies (or with proper
restrictive legend if Rule 144 shall not apply), 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, if any, 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) 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.
(h) 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.
(i) 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 Conversions and Sales. 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 an exemption from the Act.
The Shares are subject to the conversion and sale restrictions in this Section
3.5. During the two-year period following with the 144A Date ("Bleed-Out
Period"), under no circumstance may the Holder convert or sell Shares of Common
Stock greater than one twenty-fourth (1/24) of the Face Amount in any one month.
Under no circumstance may the Holder loan, hypothecate, pledge, in part or in
whole, this Debenture or the Shares underlying the Debenture.
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 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 by the Company. 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 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 in Common Stock. Upon such declaration, the
remaining principal amount shall be due and payable immediately. The Holder
shall not be entitled to take any additional actions under an Event of Default
by the Company.
Section 6.3 Events of Default by the Holder. The Holder acknowledges
that it has prior intimate knowledge of the Company, and shall be deemed an
insider for a period of three (3) months from the date of resignation from the
Board of Directors pursuant to Rule 144. Any actions, statements or
communication by Holder that is in violation of Rule 144 or other SEC Rules
governing Insiders (as determined by the SEC), shall be an Event of Default by
the Holder and remedies under Section 6.5 may be taken by the Company.
Section 6.4 Undisclosed Prior Obligations Default. Except as set forth
on Schedule A (a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company or any of its Subsidiaries is a party or by which it is bound which
may involve: (i) any and all obligations (contingent or otherwise) of, including
but not limited to: payments due, debts owed or ▇▇▇▇▇, the Company for an
aggregate amount in excess of one thousand dollars ($1,000) ("Undisclosed
Obligation Threshold"); or (ii) indemnification by the Company with respect to
infringements of proprietary rights. Holder will also comply with the delivery
of any and all past documents required by the Company during the Holder's tenure
at the Company within two (2) business days of a request. The Holder will also
agree to immediately cooperate fully with any commercially reasonable requests
by the Company including comments that may arise either from the SEC during
registration for the equity line of credit with Dutchess. Any instance resulting
in breach of this Section 6.4 shall be considered an Event of Default by the
Holder.
Section 6.5 Remedies of Default by Holder. An Event of Default by the
Holder as outlined in Section 6.3 above shall constitute an immediate forfeiture
of this Debenture and no additional obligations shall due to Holder by the
Company under the Agreement. For EACH Event of Default under Section 6.4 above,
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shall cause the Face Amount of this Debenture to be decreased by the amount of
the Undisclosed Prior Obligation subtracted by the Undisclosed Obligation
Threshold, or five thousand dollars ($5,000). For example, in the event that a
prior obligation arises in the amount of ten thousand dollars, the Face Amount
of this Debenture shall be reduced by nine thousand dollars ($5,000) ($10,000
minus $5,000 = $5,000).
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 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 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
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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,
MA 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.
*.*.*
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
▇▇▇▇ ▇▇▇▇▇ CORP.
By/s/ ▇▇▇▇▇▇▇ D'Agata
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Name: ▇▇▇▇▇▇▇ D'Agata
Title: Director, Interim CEO
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Director
▇▇▇▇ ▇▇▇▇▇, AN INDIVIDUAL
By: /s/▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇
Title: an Individual Former CEO
& Former Director
Schedule A
PRIOR OBLIGATIONS
I, ▇▇▇▇ ▇▇▇▇▇, do hereby attest to the fact that these are the full amount of
current obligations due to the Company. In the event that any additional
obligations arise that are not disclosed on this Schedule A, I do hereby consent
to lower the Face Amount of this Debenture by the amount of the dispute arising
from an undisclosed obligation.
/s/▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇, Individual
Former CEO & Former Director