AGREEMENT TO CONVERT DEBT
This Agreement to Convert Debt (the "Agreement") is made as of the 3rd day
of August 2004 by and between Xxxx Xxxxxxxx (referred to herein as the "Holder")
and US Global Nanospace, Inc., a Delaware corporation (referred to herein as the
"Company").
RECITALS
A. The Holder has loaned money to the Company. The Company and the Holder
agree that, as of the date of this Agreement, the total amount of
principal owed on all promissory notes entered into by the Holder and the
Company, (that certain promissory note dated April 30, 2003 in the amount
of $10,000.00, and that certain revolving promissory note dated August 7,
2003 for amounts up to $500,000.00 ("the Notes"), is $531,500.00 (the
"Amount Owed"). The Company and the Holder agree that the Notes became due
and payable on June 30, 2004, and as of the date of this Agreement, the
total amount of principal and accrued interest owed pursuant to the Notes
is $563,943.71.
B. The Company wishes to pay the Amount Owed by issuing shares of its
Common Stock, $0.001 par value, to the Holder and the Holder has agreed to
accept shares of the Company's Common Stock as full and final payment of
the Amount Owed, in accordance with the terms of this Agreement. In
addition to the Amount Owed, the Holder has agreed to accept shares of the
Company's Common Stock in full and final payment of expenses incurred
through August 3, 2004 totaling $43,359.54 for which the Holder is
entitled to be reimbursed (the "Expenses").
Therefore, the Company and the Holder agree as follows:
AGREEMENT
1. Transfer of Securities and Cancellation of Debt.
(a) Securities to be Issued. The Holder agrees to accept, and the
Company agrees to issue and transfer to the Holder, shares of the
Company's Common Stock. The number of shares of Common Stock to be
issued shall be determined by dividing the total of the Amount Owed
and the Expenses by the closing price of the Common Stock on the
trading date immediately prior to the date of this Agreement. The
Common Stock issued in payment of the Amount Owed and as
reimbursement for the Expenses shall be referred to in this
Agreement as the "Shares".
(b) Exchange of Documents. The certificate representing the Shares
shall be delivered to the Holder as soon as practicable. Upon
transfer of the Shares to the Holder, both the Note and the Expenses
will be paid in full and the Company shall have no further
obligation to the Holder either under the Note or for reimbursement
of the Expenses.
2. Representations by Company.
The Company hereby represents and warrants to the Holder as follows:
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(i) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(ii) The Company has all requisite power and authority (corporate or
otherwise) to execute, deliver and perform this Agreement and the
transactions contemplated thereby, and the execution, delivery and
performance by the Company of this Agreement has been duly authorized by
all requisite action by the Company and this Agreement, when executed and
delivered by the Company, constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors' rights
and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(iii) The execution, delivery and performance by the Company of this
Agreement have been duly authorized by all requisite corporate action of
the Company; and this Agreement has been duly executed and delivered by
the Company.
(iv) The Shares will be duly and validly issued, fully paid and
nonassessable, and free of any liens or encumbrances.
3. Representations by the Holder.
The Holder hereby represents and warrants to the Company as follows:
(i) The Holder has all requisite power and authority (corporate or
otherwise) to execute, deliver and perform this Agreement and the
transactions contemplated thereby, and the execution, delivery and
performance by the Holder of this Agreement has been duly authorized by
all requisite action by the Holder and this Agreement, when executed and
delivered by the Holder, constitutes a valid and binding obligation of the
Holder, enforceable against the Holder in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors' rights
and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(ii) The Holder has a pre-existing personal or business relationship
with the Company and its officers and directors.
(iii) The Holder is an "accredited investor", as that term is
defined in Rule 501 of Regulation D in that the Holder is a director and
officer of the Company.
(iv) The Holder has complied with all applicable investment laws and
regulations in force relating to the legality of an investment in the
Shares in the jurisdiction in which he is subject, and the Holder has
obtained any consent, approval or permission required in that
jurisdiction.
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(v) The Holder understands and acknowledges that the Shares have not
been registered with the Securities and Exchange Commission under Section
5 of the of the Securities Act or registered or qualified with any
applicable state or territorial securities regulatory agency in reliance
upon one or more exemptions afforded from registration or qualification.
(vi) The Holder understands and acknowledges that the Shares are
deemed to be "restricted" securities under the Securities Act, and may be
re-sold only pursuant to exemptions provided by the Securities Act. The
Holder understands and acknowledges that the Company is required to place
a legend on each certificate stating that the Shares have not been
registered under the Securities Act.
(vii) The Holder understands and acknowledges that: (i) prior to any
sale, transfer, assignment, pledge, hypothecation or other disposition of
the Shares, he must either: (1) furnish the Company with an opinion of
counsel, in form and substance reasonably satisfactory to the Company and
to its legal counsel, to the effect that such disposition is exempted from
the registration and prospectus delivery requirement under the Securities
Act and the securities laws of the jurisdiction in which the Holder
resides, and legal counsel for the Company shall have concurred in such
opinion; or (2) satisfy the Company that a registration statement on Form
SB-2 under the Securities Act (or any other form appropriate under the
Securities Act, or any form replacing any such form) with respect to the
securities proposed to be so disposed of shall then be effective; and that
such disposition shall have been appropriately qualified or registered in
accordance with the applicable securities laws of the jurisdiction in
which the Holder resides.
(viii) The Holder is entering into this transaction for the Holder's
own account, own risk and own beneficial interest, is not acting as an
agent, representative, intermediary, nominee or in a similar capacity for
any other person or entity, nominee account or beneficial owner, whether a
natural person or entity (each such natural person or entity, an
"Underlying Beneficial Owner") and no Underlying Beneficial Owner will
have a beneficial or economic interest in the Shares (whether directly or
indirectly, including without limitation, through any option, swap,
forward or any other hedging or derivative transaction) and does not have
the intention or obligation to sell, pledge, distribute, assign or
transfer all or a portion of the Shares to any Underlying Beneficial Owner
or any other person.
(ix) The Holder hereby represents and warrants that the proposed
investment in the Company does not directly or indirectly contravene
United States federal, state, local or international laws or regulations
applicable to the Holder, including anti-money laundering laws (a
"Prohibited Investment").
(x) Federal regulations and Executive Orders administered by the
U.S. Treasury Department's Office of Foreign Assets Control ("OFAC")
prohibit, among other things, the engagement in transactions with, and the
provision of services to, certain foreign countries, territories, entities
and individuals. The lists of OFAC prohibited countries, territories,
persons and entities can be found on the OFAC website at
{xxx.xxxxx.xxx/xxxx}. The Holder hereby represents and warrants that the
Holder is not a country, territory, person or entity named on an OFAC
list, nor is the Holder a natural person or entity with whom dealings are
prohibited under any OFAC regulations.
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(xi) The Holder represents and warrants that neither the Holder nor
any Underlying Beneficial Owner is a senior foreign political figure, or
any immediate family member or close associate of a senior foreign
political figure within the meaning of, and applicable guidance issued by
the Department of the Treasury concerning, the U.S. Bank Secrecy Act (31
U.S.C. ss.5311 et seq.), as amended, and any regulations promulgated
thereunder.
(xii) The Holder agrees promptly to notify the Company should the
Holder become aware of any change in the information set forth in
subparagraphs (viii) through (xi).
(xiii) The Holder agrees to indemnify and hold harmless the Company,
its affiliates, their respective directors, officers, shareholders,
employees, agents and representatives from and against any and all losses,
liabilities, damages, penalties, costs, fees and expenses (including legal
fees and disbursements) which may result, directly or indirectly, from the
Holder's misrepresentations or misstatements contained herein or breaches
hereof relating to paragraphs (viii) through (xi).
(xiv) The Holder understands and agrees that, notwithstanding
anything to the contrary contained in any document (including any side
letters or similar agreements), if, following the Holder's investment in
the Company, it is discovered that the investment is or has become a
Prohibited Investment, such investment may immediately be redeemed by the
Company or otherwise be subject to the remedies required by law, and the
Holder shall have no claim against the Company for any form of damages as
a result of such forced redemption or other action.
(xv) Upon the written request from the Company, the Holder agrees to
provide all information to the Company to enable the Company to comply
with all applicable anti-money laundering statutes, rules, regulations and
policies, including any policies applicable to a portfolio investment held
or proposed to be held by the Company. The Holder understands and agrees
that the Company may release confidential information about the Holder and
any Underlying Beneficial Owner(s) to any person if the release of such
information is necessary to comply with applicable statutes, rules,
regulations and policies.
4. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the same
shall be in writing and signed by the Company and the Holder.
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(b) Notices. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder shall be in writing and
delivered personally, by facsimile or sent by a nationally recognized
overnight courier service, addressed to the Company at 0000 X. Xxxxxx Xx.,
#0000, Xxxxxx Xxxx, Xxxxxx, facsimile number (000) 000-0000, Attn:
Controller or such other address or facsimile number as the Company may
specify for such purposes by notice to the Holder delivered in accordance
with this Section. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to the Holder at an address and
facsimile number to be provided by Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 5:30 p.m. (Central time), (ii) the date
after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in
this Section later than 5:30 p.m. (Central time) on any date and earlier
than 11:59 p.m. (Central time) on such date, (iii) the second Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties. Neither the Holder nor the Company may assign his or
its rights or obligations hereunder without the prior written consent of
the other.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of
the party executing (or on whose behalf such signature is executed) the
same with the same force and effect as if such facsimile signature were
the original thereof.
(e) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement to Convert
Debt as of the date first written above.
US GLOBAL NANOSPACE, INC.
By: /s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx, President
/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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