EXHIBIT 4.2
SECURITIES SUBSCRIPTION AGREEMENT
THIS SECURITIES SUBSCRIPTION AGREEMENT, dated as of December 6,
1999 ("Agreement"), is executed in reliance upon the exemption from registration
afforded by Rule 504 promulgated under Regulation D by the Securities and
Exchange Commission ("SEC"), under the Securities Act of 1933, as amended.
Capitalized terms used herein and not defined shall have the meanings given to
them in Rule 504 and Regulation D.
This Agreement has been executed by the undersigned buyer ("Buyer")
in connection with the private placement of 8% Series A Senior Subordinated
Convertible Debenture of XxxxxxXxxx.xxx, Inc., a corporation organized under the
laws of Nevada, with its principal executive offices located at 000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000-0000 ("Seller"). Buyer hereby represents and
warrants to, and agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER (THE "1933 ACT"), AND RULE 504 OF REGULATION D
PROMULGATED THEREUNDER.
1. Agreement to Subscribe: Purchase Price.
(a) Subscription. The undersigned Buyer hereby subscribes for and agrees to
purchase the Seller's 8% Series A Senior Subordinated Convertible Redeemable
Debenture substantially in the form of the Debenture attached as hereto and
having an aggregate original principal face amount of Seven Hundred Fifty
Thousand United States Dollars ($750,000) (singly, a "Debenture," and
collectively, the "Debentures"), at an aggregate purchase price of 100% of the
face amount of such Debenture as set forth in subsection (b) herein.
(b) Payment. The Purchase Price for the Debenture shall be seven hundred
fifty thousand United States Dollars (U.S. $750,000) ("Purchase Price"), which
shall be payable at closing, pursuant to paragraph c herein, in accordance with
the terms and conditions of an Escrow Agreement which shall be executed
simultaneously with this Agreement ("Escrow Agreement").
(c) Closing. Subject to the satisfaction of the conditions set forth in
Sections 7 and 8 hereof, the Closing of the transactions contemplated by this
Agreement shall take place when (i) Seller delivers the Debenture to the Escrow
Agent, as defined in an Escrow Agreement among Buyer, Seller and the Escrow
Agent of even date, (ii) Seller delivers the signed Escrow Agreement and
accompanying documents, and (iii) Buyer pays $100,000 towards the Purchase Price
for the Debenture ("Closing Date").
2. Buyer Representations and Covenants;
Access to Information .
In connection with the purchase and sale of the Debenture, Buyer
represents and warrants to, and covenants and agrees with Seller as follows:
(a) Buyer is a Texas limited liability company and is not, and on the
Closing Date will not be, an affiliate of Seller;
(b) Buyer is an "accredited investor" as defined in Rule 501 of Regulation
D promulgated under the 1933 Act, and is purchasing the Shares of its own
account and Buyer is qualified to purchase the Shares under the laws of the
State of Texas;
(c) All offers and sales of any of the Debenture by Buyer shall be made in
compliance with any applicable securities laws of any applicable jurisdiction
and in accordance with Rule 504, as applicable, of Regulation D or pursuant to
registration of securities under the 1933 Act or pursuant to an exemption from
registration;
(d) Buyer understands that the Debenture is not registered under the 1933
Act and are being offered and sold to it in reliance on specific exemptions from
the registration requirements of Federal and State securities laws, and that
Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of Buyer set forth
herein in order to determine the applicability of such exemptions and the
suitability of Buyer and any purchaser from Buyer to acquire the Debenture;
(e) Buyer shall comply with Rule 504 promulgated under Regulation D;
(f) Buyer has the full right, power and authority to enter into this
Agreement and to consummate the transaction contemplated herein. This Agreement
has been duly authorized, validly executed and delivered on behalf of Buyer and
is a valid and biding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally;
(g) The execution and delivery of this Agreement and the consummation of
the purchase of the Debenture and the transactions contemplated by this
Agreement do not and will not conflict with or result in a breach by Buyer of
any of the terms or provisions of, or constitute a default under, the articles
of incorporation or by-laws (or similar constitutive documents) of Buyer
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or any indenture, mortgage, deed of trust, or other material agreement or
instrument to which Buyer is a party or by which it or any of its properties or
assets are bound, or any existing applicable law, rule or regulation of the
United States or any State thereof or any applicable decree, judgment or order
of any Federal or State court, Federal or State regulatory body, administrative
agency or other United States governmental body having jurisdiction over buyer
or any of its properties or assets;
(h) All invitations, offers and sales of or in respect of, any of the
Debenture, by Buyer and any distribution by Buyer of any documents relating to
any invitation, offer or sale by it of any of the Debenture will be in
compliance with applicable laws and regulations, will be made in such a manner
that no prospectus need be filed and no other filing need be made by Seller with
any regulatory authority or stock exchange in any country or any political
sub-division of any country, and Buyer will make no misrepresentations nor
omissions of material fact in the invitation, offer or resale of the Debenture;
(i) The Buyer (or others for whom it is contracting hereunder) has been
advised to consult its own legal and tax advisors with respect to applicable
resale restrictions and applicable tax considerations and it (or others for whom
it is contracting hereunder) is solely responsible (and the Seller is not in any
way responsible) for compliance with applicable resale restrictions and
applicable tax legislation;
(j) Buyer understands that no Federal or State or foreign government agency
has passed on or made any recommendation or endorsement of the Debenture;
(k) Buyer has had an opportunity to receive and review all material
information and financial data and to discuss with the officers of Seller, all
matters relating to the securities, financial condition, operations and
prospects of Seller and any questions raised by Buyer have been answered to
Buyer's satisfaction.
(l) Buyer acknowledges that the purchase of the Debenture involve a high
degree of risk. Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks or
purchasing the Debenture. Buyer understands that the Debenture is not being
registered under the 1933 Act, or under any state securities laws, and
therefore, Buyer must bear the economic risk of this investment for an
indefinite period of time;
(m) Buyer is not a "10-percent Shareholder" (as defined in Section
871(h)(3)(B) of the U.S. Internal Revenue Code) of Seller; and
(n) Buyer acknowledges and agrees that the transactions contemplated by
this Agreement have taken place solely and exclusively with the State of Texas.
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3. Seller Representations and Covenants.
(a) Seller is a corporation duly organized and validly existing under the
laws of the State of Nevada, and is in good standing under such laws. The Seller
has all requisite corporate power and authority to own, lease and operate its
properties and assets, and to carry on its business as presently conducted. The
Seller is qualified or is in the process of becoming qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Seller.
(b) There are 25,000,000 shares of Seller's common stock, $.001 par value
per share ("Common Stock"), authorized and approximately 16,500,000 as of
December 1, 1999 outstanding. The Common Stock is quoted on National Association
of Securities Dealers OTC Electronic Bulletin Board under the symbol "PGPG". All
issued and outstanding shares of Common Stock have been authorized and validly
issued and are fully paid and non-assessable.
(c) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to a loss of a material benefit, under, any provision of
the Articles of Incorporation, and any amendments thereto, By-Laws, Stockholders
Agreements and any amendments thereto of the Seller or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law ordinance, rule or
regulation applicable to the Seller, its properties or assets. There is no
action, suit or proceeding pending, or to the knowledge of the Seller,
threatened against the Seller, before any court or arbitrator or any government
body, agency or official, which would have a material adverse affect on Seller's
operations or financial condition.
(d) The Seller is not subject to the reporting requirements of Sections 13
or 15(d) of the Securities and Exchange Act, is not an investment company or a
developmental stage company that either has no specific business plan or
purpose. The Debenture and any shares of Common Stock when issued upon
conversion of the Debenture, will be issued in compliance with all applicable
U.S. federal and state securities laws. The Seller understands and acknowledges
that, in certain, circumstances, the issuance of the shares of Common Stock upon
conversion of the Debenture could dilute the ownership interests of other
stockholders of the Seller. The execution and delivery by the Seller of this
Agreement and the issuance of any shares of Common Stock upon conversion of the
Debenture will not contravene or constitute a default under any provision of
applicable law or regulation. The Seller is in material compliance with and
materially conforms to all statues, laws, ordinances, rules, regulations,
orders, restrictions and all other legal requirements of any domestic or foreign
government or any instrumentality thereof having jurisdiction over the conduct
of its businesses or the ownership of its properties.
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(e) There is no fact known to Seller that has not been disclosed in writing
to the Buyer which could reasonably be expected to materially and adversely
affect the ability of the Seller to perform its obligations pursuant to this
Agreement.
(f) No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Seller is required in
connection with the valid execution and delivery of this Agreement, or the
offer, sale or issuance of the Debenture or Common Stock, or the consummation of
any other transaction contemplated hereby, except the filing with the SEC of
Form D.
(g) There is no action, proceeding or investigation pending, or to the
Seller's knowledge, threatened, against the Seller which might result, either
individually or in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the Seller. The Seller
is not a party to or subject to the provision of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no action, suit proceeding or investigation by the Seller currently pending
or which the Seller intends to initiate. The SEC has not issued any order
suspending trading in the Seller's Common Stock and the Seller is not under
investigation by the SEC or the National Association of Securities Dealers, and
there are no proceedings pending or threatened before either regulatory body.
(h) There are no other material outstanding debt or equity securities
presently convertible into Common Stock other than the Debenture which are the
subject of this Agreement.
(i) The Seller has not received in excess of $250,000 from the sale of any
securities within the 12 month period prior to the date of this Agreement in
reliance on any exemption under Section 3(b) of the 1933 Act, Regulation D or
its rules or sold any securities in violation of Section 5(a) of the 1933 Act.
(j) The issuance, sale and delivery of the Debenture has been duly
authorized by all required corporate action on the part of the Seller, and when
issued, sold and delivered in accordance with the terms hereof and thereof for
the consideration expressed herein and therein, will be duly and validly issued,
fully paid and non-assessable. The Common Stock issuable upon conversion of the
Debenture has been duly and validly reserved for issuance and upon issuance in
accordance with the terms of the Debenture, shall be duly and validly issued,
fully paid, and non-assessable. There are no pre-emptive rights of any
shareholder of Seller.
(k) This Agreement has been duly authorized, validly executed and delivered
on behalf of Seller and is a valid and binding agreement in accordance with its
terms, subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally. The Seller has all
requisite right, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the
part of the Seller, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Debenture has been taken. Upon their issuance to the
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Buyer and delivery to the Escrow Agent, as defined in and pursuant to the Escrow
Agreement, the Debenture will be validly issued and nonassessable, and will be
free of any liens or encumbrances.
(l) Seller acknowledges and agrees that the transactions contemplated by
this the Agreement have taken place solely and exclusively with the State of
Texas.
4. Exemption: Reliance on Representations. Buyer understands that the offer
and sale of the Debenture is not being registered under the 1933 Act. Seller and
Buyer are relying on the rules governing offers and sales made pursuant to Rule
504 promulgated under Regulation D. The offer and sale of the Debenture are made
solely within the State and jurisdiction of Texas.
5. Transfer Agent Instructions.
(a) Debenture. Upon the conversion of the Debenture, the Buyer or holder
shall give a notice of conversion to the Seller and the Seller shall instruct
its transfer agent to issue one or more Certificates representing that number of
shares of Common Stock into which the Debenture is convertible in accordance
with the provisions regarding conversion set forth in Exhibit A. The Seller
shall act as Debenture Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture. There shall
be no requirement to surrender the Debenture upon each conversion which shall be
made as a book entry of the Debenture register. However, the Debenture shall be
surrendered to the Seller when fully converted, redeemed in full, paid in full
or cancelled under the terms of this Agreement or the Escrow Agreement, as the
case may be.
(b) Common Stock to be Issued Without Restrictive Legend. Upon the
conversion of any Debenture, Seller shall instruct Seller's transfer agent to
issue Stock Certificates up to the total of the "Conversion Amount" (as defined
in the Debenture) and any "Interest shares" (as defined in the Debenture)
without restrictive legend in the name of the Buyer (or its nominee) and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable. The Common Stock
shall be immediately freely transferable on the books and records of Seller.
Seller shall also instruct its attorney to issue and render any legal opinion
which is reasonable required at any time by Seller's transfer agent to permit
Seller's transfer agent to issue any and all Stock Certificates without a
restrictive legend as required by this Agreement.
6. Registration. If upon conversion of the Debenture effected by the Buyer
pursuant to the terms of this Agreement or payment of interest pursuant to the
Debenture the Seller fails to issue certificates for shares of Common Stock
issuable upon such conversion ("Underlying Shares") or the Interest Shares to
the Buyer bearing no restrictive legend for any reason, then the Seller shall be
required, at the request of the Buyer and at the Seller's expense, to effect the
registration of the Underlying Shares and/or Interest Shares issuable upon
conversion of the Debenture and payment of interest under the Act and relevant
Blue Sky laws as promptly as is practicable. The Seller and the Buyer shall
cooperate in good faith in connection with the
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furnishings of information required for such registration and the taking of such
other actions as may be legally or commercially necessary in order to effect
such registration. The Seller shall file such a registration statement within 30
days of Buyer's demand and shall use its good faith diligent efforts to cause
such registration statement to become effective as soon as practicable
thereafter. Such good faith diligent efforts shall include, but not be limited
to, promptly responding to all comments received from the staff of the SEC,
providing Buyer's counsel with a contemporaneous copy of all written
communications from and to the staff of the SEC with respect to such
registration statement and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received from the
staff of the SEC. Once declared effective by the SEC, the Seller shall cause
such registration statement to remain effective until the earlier of (i) the
sale by the Buyer of all Underlying Shares registered or (ii) 120 days after the
effective date of such registration statement. In the event the Seller
undertakes to file a Registration Statement in connection with the Common Stock,
upon the effectiveness of such Registration, Buyer shall have the option to sell
the Common Stock pursuant thereto.
7. Delivery Instructions. The Debenture being purchased hereunder, and the
Purchase Price, shall be delivered to the Escrow Agent pursuant to the Escrow
Agreement.
8. Conditions To Seller's Obligation to Sell. Seller's obligation to sell
the Debenture is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as executed by
Buyer.
(b) All of the representations and warranties of the Buyer contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date. The Buyer shall have
performed or complied with all agreements and satisfied all conditions on its
parts to be performed, complied with or satisfied at or prior to the Closing
Date.
(c) No order asserting that the transactions contemplated by this Agreement
are subject to the registration requirements of the Act shall have been issued,
and no proceedings for that purpose shall have been commenced or shall be
pending or, to the knowledge of the Seller, be contemplated. No stop order
suspending the sale of the Debenture or Common Stock shall have been issued, and
no proceedings for that purpose shall have been commenced or shall be pending
or, to the knowledge of the Seller, be contemplated.
(d) Receipt of the Purchase Price as provided in Section 1(c) above.
9. Conditions To Buyer's Obligation To Purchase. Buyer's obligation to
purchase the Debenture is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller of this Agreement
as evidenced by execution of this Agreement of the duly authorized officer of
Seller.
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(b) Delivery of the Debenture and the Escrow Agreement to the Escrow Agent.
10. No Shareholder Approval and No Dilution.
(a) Seller hereby agrees that from the Closing Date until the issuance of
Common Stock upon the conversion of the Debenture, Seller will not take any
action which would require Seller to seek shareholder approval of such issuance
unless such shareholder approval is required by law or regulatory body
(including but not limited to the NASDAQ Stock Market, Inc.) as a result of the
issuance of the Debenture or Common Stock hereunder.
(b) Provided the Debenture, or any Seller debentures from a series which
predate the Debenture remain outstanding and unpaid, or if there is any portion
of any such Debenture or debentures which have not been converted into the
Seller's Common Stock, then the Seller shall not split nor reverse split the
Common Stock, nor consolidate the outstanding number of shares of Common Stock
into a small number of shares, not otherwise take any similar action, directly
or indirectly, which would have a material adverse effect on the value of the
Debenture or the trading price of the Common Stock.
11. Miscellaneous.
(a) This Agreement together with the Debenture and Escrow Agreement,
constitutes the entire agreement between the parties, and neither party shall be
liable or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous agreement among
the parties related to the transactions described herein is superseded hereby.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto, and the respective successors and assigns of
the parties hereto. Nothing in this Agreement, express or implied, is intended
to confer upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided herein. Neither
party shall assign any of their rights or obligations described herein without
the prior written consent of the other party.
(b) Buyer is an independent contractor and is not the agent of Seller.
Buyer is not authorized to bind Seller or to make any representation or
warranties on behalf of Seller.
(c) All representations and warranties contained in this Agreement by
Seller and Buyer shall survive the closing of the transactions contemplated by
this Agreement.
(d) This Agreement shall be construed in accordance with the laws of Texas
applicable to contracts made and wholly to be performed within the State of
Texas and shall be binding upon the successors and assigns of each party hereto.
Buyer and Seller hereby mutually waive trial by jury and consent to exclusive
jurisdiction and venue in the courts of the State of Texas. At Buyer's election,
any dispute between the parties may be arbitrated rather than litigated
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in the courts, before the arbitration board of the American Arbitration
Association in Dallas and pursuant to its rules. Upon demand made by the Buyer
to the Seller, Seller agrees to submit to and participate in such arbitration.
This Agreement may be executed in counterparts, and the facsimile transmission
of an executed counterpart to this Agreement shall be effective as an original.
(e) Seller agrees to indemnify and hold Buyer harmless from any and all
claims, damages and liabilities arising from Seller's breach of its
representations and/or covenants set forth herein.
(f) Buyer agrees to indemnify and hold Seller harmless from any and all
claims, damages and liabilities arising from Buyer's breach of its
representations and warranties set forth in this Agreement.
(g) In the event of a conflict between the terms of this Agreement, the
Debenture executed the same date hereof and the Escrow Agreement dated the same
date hereof, the terms of the Escrow Agreement shall prevail.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first set forth above.
Official Signatory of Seller:
XXXXXXXXXX.XXX, INC.
By: /S/
---------------------------
Xxxx X. Xxxxx
Accepted this 10th day of December, 1999 Title: President
Official Signatory of Buyer:
RIM CAPITAL GROUP, L.L.C.
By: /S/
---------------------------
(Illegible)
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EXHIBIT A
DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER (THE "1933 ACT"), AND RULE 504 OF REGULATION D
PROMULGATED THEREUNDER.
A-001 US $750,000
XXXXXXXXXX.XXX, INC.
8% SERIES A SENIOR SUBORDINATED CONVERTIBLE DEBENTURE
DUE DECEMBER ___, 2001
THIS DEBENTURE of XxxxxxXxxx.Xxx, Inc., a corporation duly
organized and existing under the laws of Nevada ("Company"), designated as its
8% Series A Senior Subordinated Convertible Debenture Due December _____, 2001,
in an aggregate principal face amount not exceeding Seven Hundred Fifty Thousand
Dollars (U.S. $750,000), which Debenture is being purchased at 100% of the face
amount of such Debenture.
FOR VALUE RECEIVED, the Company promises to pay to the registered
holder hereof and his authorized successors and permitted assigns ("Holder"),
the aggregate principal face sum not to exceed Seven Hundred Fifty Thousand
Dollars (U.S. $750,000) on December ___, 2001 ("Maturity Date"), and to pay
interest on the principal sum outstanding, at the rate of 8% per annum
commencing January ___, 2000 and due in full at the Maturity Date pursuant to
paragraph 4(b) herein. The interest so payable will be paid to the person in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of the Debenture ("Debenture Register"); provided,
however, that the Company's obligation to a transferee of this Debenture arises
only if such transfer, sale or other disposition is made in accordance with the
terms and conditions of the Securities Subscription Agreement dated as of
December ___, 1999 between the Company and ________________ ("Subscription
Agreement"). The principal of, and interest on, this Debenture are payable at
the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder hereof from time to time. The Company will
pay the outstanding principal due upon this Debenture before or on the Maturity
Date, less any amounts required by law to be deducted or
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withheld, to the Holder of this Debenture by check if paid more than 10 days
prior to the Maturity Date or by wire transfer and addressed to such Holder at
the last address appearing on the Debenture register. The forwarding of such
check or wire transfer shall constitute a payment of outstanding principal
hereunder and shall satisfy and discharge the liability for principal on this
Debenture to the extent of the sum represented by such check or wire transfer.
Interest shall be payable in Common Stock (as defined below) pursuant to
paragraph 4(b) herein.
This Debenture is subject to the following additional provisions:
12. The Debenture is issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debenture is exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holders surrendering the same, but not less
than U.S. $10,000. No service charge will be made for such registration or
transfer or exchange, except that Holder shall pay any tax or other governmental
charges payable in connection therewith.
13. The Company shall be entitled to withhold from all payments any amounts
required to be withheld under the applicable laws.
14. This Debenture may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended ("Act") and applicable state securities laws.
Prior to due presentment for transfer of this Debenture, the Company and any
agent of the Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner hereof for all other
purposes, whether or not this Debenture be overdue, and neither the Company nor
any such agent shall be affected or bound by notice to the contrary. Any Holder
of this Debenture, electing to exercise the right of conversion set forth in
Section 4(a) hereof, in addition to the requirements set forth in Section 4(a),
and any prospective transferee of this Debenture, are also required to give the
Company written confirmation that the Debenture is being converted ("Notice of
Conversion") in the form annexed hereto as Exhibit I.
15. (a) The Holder of this Debenture is entitled, at its option, at any time
immediately following execution of this Agreement and delivery of the Debenture
hereof, to convert all or any amount over $10,000 of the principal face amount
of this Debenture then outstanding into shares of common stock, $.001 par value
per share, of the Company ("Common Stock"), which shall be free trading and
without restrictive legend of any kind whatsoever, at a conversion price
("Conversion Price") for each share of Common Stock equal to 75% of the lowest
closing bid price of the Common Stock as reported on the National Association of
Securities Dealers Electronic Bulletin Board ("OTC Bulletin Board") for the 3
consecutive trading days day immediately preceding the date of receipt by the
Company of a Notice of Conversion ("Conversion Shares"). If the number of
resultant Conversion Shares would as a matter of law or pursuant to regulatory
authority require the Company to seek shareholder approval of such issuance, the
Company shall, as soon as practicable, take the necessary steps to seek such
approval. Such conversion shall be effectuated, as provided in a certain Escrow
Agreement executed simultaneously with this Debenture, by the Company delivering
the Conversion Shares
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to the Holder within 5 business days of receipt by the Company of the Notice of
Conversion. Once the Holder has received such Conversion Shares, the Escrow
Agent shall surrender the Debenture to be converted to the Company, executed by
the Holder of this Debenture evidencing such Holder's intention to convert this
Debenture or a specified portion hereof, and accompanied by proper assignment
hereof in blank. Accrued but unpaid interest shall be subject to conversion. No
fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share.
(b) Interest at the rate of 8% per annum shall be paid by issuing Common Stock
of the company as follows: Based on the lowest bid price of the Common Stock as
reported on the OTC Bulletin Board for the 3 consecutive trading days
immediately preceding the date of the monthly interest payment due ("Market
Price"), the Company shall issue to the Holder shares of Common Stock in an
amount equal to the total monthly interest accrued and due divided by 75% of the
Market Price ("Interest Shares"). The dollar amount of interest payable pursuant
to this paragraph 4(b) shall be calculated based upon the total amount of
payments actually made by the Holder in connection with the purchase of the
Debenture at the time any interest payment is due. If such payment is made by
check, interest shall accrue beginning 10 days from the date the check is
received by the Company. If such payment is made by wire transfer directly into
the Company's account, interest shall accrue beginning on the date the wire
transfer is received by the Company. Common Stock issued pursuant hereto shall
be issued pursuant to Rule 504 of Regulation D in accordance with the terms of
the Subscription Agreement and shall be free trading and without restrictive
legend of any kind whatsoever.
16. No provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place, and rate, and in the form,
herein prescribed.
17. The Company hereby expressly waives demand and presentment for payment,
notice of non-payment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action to
collect amounts called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereto.
18. The Company agrees to pay all costs and expenses, including reasonable
attorneys' fees, which may be incurred by the Holder in collecting any amount
due under this Debenture.
19. If one or more of the following described "Events of Default" shall occur
and continue for 30 days, unless a different time frame is noted below:
(a) The Company shall default in the payment of principal or interest on
this Debenture; or
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(b) Any of the representations or warranties made by the Company herein,
in the Subscription Agreement, or in any certificate or financial or
other written statements heretofore or hereafter furnished by or on
behalf of the company in connection with the execution and delivery of
this Debenture or the Subscription Agreement shall be false or
misleading in any material respect at the time made or the Company
shall violate any covenants in the Subscription Agreement including
but not limited to Section 5(b) or 10; or
(c) The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or
obligation of the Company under this Debenture, the Subscription
Agreement or the Escrow Agreement and such failure shall continue
uncured for a period of thirty (30) days after notice from the Holder
of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for
its dissolution; (4) apply for or consent to the appointment of a
trustee, liquidator or receiver for its or for a substantial part of
its property or business; (5) file a petition for bankruptcy relief,
consent to the filing or such petition or have filed against it an
involuntary petition for bankruptcy relief, all under federal or state
laws as applicable; or
(e) A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its
consent and shall not be discharged within thirty (30) days after such
appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of
the whole or any substantial portion of the properties or assets of
the Company; or
(g) Any money judgment, writ or warrant of attachment, or similar process,
in excess of One Hundred Thousand ($100,000) Dollars in the aggregate
shall be entered or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of fifteen (15) days or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings, or
other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted voluntarily by or
involuntarily against the Company; or
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(i) The Company shall have its Common Stock delisted from the
over-the-counter market or other market or exchange on which the
Common Stock is or becomes listed or trading in the Common Stock shall
be suspended for more than 10 consecutive days; or
(j) The Company shall not deliver to the Buyer the Common Stock pursuant
to paragraph 4 herein without restrictive legend within 5 business
days.
Then, or at any time thereafter, unless cured, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of
acceleration), all of which are hereby expressly waived, anything herein or in
any note or other instruments contained to the contrary notwithstanding, and the
Holder may immediately, and without expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law. In the event of a default under Section
8(i), the Holder shall have no right to claim damages as a result of decrease in
the market price of the Company's stock following de-listing.
20. This Debenture represents a prioritized obligation of the Company. However,
no recourse shall be had for the payment of the principal of, or the interest
on, this Debenture, or for any claim based hereon, or otherwise in respect
hereof, against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statue or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
21. In case any provision of this Debenture is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Debenture will not in any way be affected or
impaired thereby.
22. This Debenture and the agreements referred to in this Debenture constitute
the full and entire understanding and agreement between the Company and the
Holder with respect to the subject hereof. Neither this Debenture nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the Company and the Holder.
23. This Debenture shall be governed by and construed in accordance with the
laws of Texas applicable to contracts made and wholly to be performed within the
State of Texas and shall be binding upon the successors and assigns of each
party hereto. The Holder and the Company hereby mutually waive trial by jury and
consent to exclusive jurisdiction and venue in
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the courts of the State of Texas. At Holders' election, any dispute between the
parties may be arbitrated rather than litigated in the courts, before the
American Arbitration Association in Dallas and pursuant to its rules. Upon
demand made by the Holder to the Company, the Company agrees to submit to and
participate in such arbitration. This Agreement may be executed in counterparts,
and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
24. The Holder of this Debenture, its officers and members, shall not "short"
the Company's common stock at any time during which this Debenture is
outstanding.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer thereunto duly authorized.
Dated: December , 1999
XXXXXXXXXX.XXX, INC.
By:
----------------------------------
Title: President
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SERIES A EXHIBIT I
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________ of the
above Debenture No. _________ into Shares of Common Stock of XxxxxxXxxx.xxx,
Inc. according to the conditions set forth in such Debenture, as of the date
written below.
If Shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer and other taxes and charges
payable with respect thereto.
Date of Conversion
Applicable Conversion Price
Signature
[Print Name of Holder and Title of Signer]
Address:
SSN or EIN:
Shares are to be registered in the following name:
Name:
Address:
Tel:
Fax:
SSN or EIN:
Shares are to be sent or delivered to the following account:
Account Name:
Address:
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