PROMISSORY NOTE CANCELLATION AND REISSUANCE AGREEMENT
Exhibit
4.2
THIS
PROMISSORY NOTE CANCELLATION AND REISSUANCE AGREEMENT (“Agreement”) is made and
entered into as of March 28, 2006 (the “Effective Date”), by and between Execute
Sports, Inc., a Nevada corporation (“Maker”), and Xxx
& Xxxx Xxxx,
individuals residing at ________________, California (“Holder”).
RECITALS
A. On
the
terms and conditions set forth herein, (i) Maker and Holder (the “Parties”)
agree to cancel that certain promissory note between Maker and Holder dated
February 28, 2005 bearing interest at two percent (2%) monthly (a copy of which
is attached as Exhibit A) (the “2005 Note”); and (ii) Maker will issue Holder a
new interest bearing promissory note (the “New Note”) (a copy of which is
attached as Exhibit B).
B. This
Agreement,
together with Exhibits A and B, each of which are attached hereto and
incorporated herein by this reference, and any additional exhibits, schedules,
or attachments as set forth herein, are referred to collectively herein as
the
“PCRA”.
AGREEMENT
1. CANCELLATION
OF ORIGINAL NOTE AND RELEASE. Subject to the terms and conditions set forth
herein, Holder agrees to deliver to Maker at Closing (defined below) the 2005
Note marked across its face "CANCELLED" and upon such delivery thereby shall
forever release and discharge Maker of any and all of its obligations under
the
Note, including any obligation to pay principal and interest, except as set
forth in this Agreement.
2. ISSUANCE
OF NEW NOTE. Subject to the terms and conditions set forth herein, Maker agrees
to deliver to Holder at Closing (defined below) the New Note and upon such
delivery thereby shall be obligated to pay the principal of the New Note on
the
terms of the New Note.
3. CLOSING;
CLOSING DATE. The closing of the transactions contemplated hereby shall be
effective as of the delivery date of the closing deliveries described below
(“Closing”) at the offices of Execute Sports, Inc. at 10:00 a.m. on March 15,
2006, or at such time and place as the Parties mutually agree (“Closing Date”).
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Holder
shall deliver to Maker the 2005 Note marked across the face “Cancelled”
(incorporated by reference herein as Exhibit A); and
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b. Maker
shall deliver to Holder the New Note (attached hereto as Exhibit B); and
4. WAIVERS.
No action taken pursuant to this Agreement, including any investigation by
or on
behalf of any party will be deemed to constitute a waiver by the party taking
such action, or compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any
subsequent breach. The waiver by any party hereto at or before the Closing
Date
of any condition to its obligations hereunder which is not fulfilled shall
preclude such party from seeking redress from the other party hereto for breach
of any representations, warranty, covenant or agreement contained in this
Agreement.
5. RELEASES.
a. The
Holder jointly and severally hereby forever release, discharge, acquit and
forgive from any and all claims, actions, suits, demands, agreements, and each
of them, if more than one, liabilities, judgments, and proceedings both at
law
and in equity arising from the beginning of time to the date of these presents
and as more particularly related to or arriving from the issuance and subsequent
cancellation of the 2005 Note and the non-payment of Unpaid Interest in cash.
In
regard to the 2005 Note, the Parties, and each of them, agree to and do hereby
waive and relinquish all rights and benefits afforded under the provisions
of
Section1542 of the Civil Code of the State of California, which provides as
follows:
"A
general release does not extend to claims which the creditor does not know
or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the
debtor."
b. If
the
Holder has instituted any legal proceedings against the Maker settled by this
release, the Holder covenants to have them dismissed at the Holder's cost with
express prejudice to bringing further proceedings against the Maker arising
out
of the same matter.
c. The
Holder also covenants not to make any claim or institute any proceedings against
any person who might claim over against or claim contribution or indemnity
from
the Maker in connection with any matter for which this release is
given.
d. The
Holder also acknowledges that the Maker does not admit liability to the Holder
in connection with any matter for which this release is given.
e. This
release shall be binding upon and inure to the benefit of the parties, their
successors, assigns and personal representatives.
f. This
release applies only to the foregoing, and no other debt, obligation, agreement
or liability by and between the parties, which, if existing, shall survive
this
release.
6. BINDING
EFFECT: BENEFITS. This Agreement shall inure to the benefit of the Parties
hereto and shall be binding upon the parties hereto and their respective
successors and assigns, heirs and legal representatives. Except as otherwise
set
forth herein, nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
of by reason of this Agreement.
7. GOVERNING
LAW; JURISDICTION; VENUE; REMEDIES; INDEPENDENT LEGAL COUNSEL. This Agreement
shall be interpreted and construed as to both validity and performance and
enforced in accordance with and governed by the laws of the State of California,
without giving effect to the choice of law principles thereof. The Parties
agree
that any action hereunder will be held exclusively in the courts in the State
of
California. The Parties acknowledge that remedies at law, including monetary
damages, may be inadequate to remedy a breach of certain material terms herein,
including Holder's delivery of the Note, and the Parties agree that equitable
remedies may be necessary to enforce such terms and covenants, including
specific performance. Holder and Maker acknowledge that the terms of this
Agreement have been negotiated by the Parties hereto and each of them has had
a
full opportunity to receive independent business, tax and legal counsel with
respect to this Agreement and the transactions contemplated herein.
8. COUNTERPARTS.
This Agreement may be executed in counterpart 2005s, each of which shall
constitute an executed 2005 and together shall constitute a fully-executed
document.
11.
NOTICES.
All notices, requests, demands, and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given on the date
of
service if served personally on the party to whom notice is to be given, or
within 72 hours after mailing, if mailed to the party to whom notice is to
be
given, by first-class mail, registered or certified, postage prepaid, and
properly addressed to the party at the address set forth below, or any other
address that a party may designate by written notice to the others.
Maker: Holder:
Execute
Sports, Inc. ________________
0000
Xxxxxx Xxx Xxx, Xxxxx
000
________________
Xxx
Xxxxxxxx, XX
00000 ________________
Phone:
000-000-0000
Phone:
Fax:
000-000-0000 Fax:
Attn:
Xxxx X.
Xxxxxxx Attn:
Exhibits:
Exhibit
A: 2005
Promissory Note
Exhibit
B: New
Promissory Note
IN
WITNESS WHEREOF, the parties have executed and delivered the PCRA for all
purposes as of the Effective Date.
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Maker:
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Holder:
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By:
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Signature
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Signature
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Name:
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Name:
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Print
or Type Name
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or Type Name
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PAYMENT
IN KIND PROMISSORY NOTE
$38,284.08
March
28, 0000
Xxx
Xxxxxxxx, Xxxxxxxxxx
FOR
VALUE
RECEIVED, the undersigned, Execute Sports, Inc., a Nevada corporation ("Maker"),
hereby promise to pay, to Xxx & Xxxx Xxxx, or order ("Payee"), the principal
sum of
Thirty
Eight Thousand, Two Hundred and Eighty Four and 08/100 Dollars ($38,284.08),
with interest on the unpaid principal at the rate of four percent (4%) per
annum
until March 28, 2007 (“due date”). Principal and interest shall be payable as
follows: Interest only shall be paid annually; at Payee’s option, either in
Maker’s common stock or cash until the due date, at which time the remaining
outstanding balance of the principal, any accrued but unpaid interest and all
other sums hereunder shall be payable in full.
If
Payee
elects for Maker to make an interest payment in its common stock, Maker shall
calculate the amount of interest due on the anniversary of the date of this
Note
and convert such amount into the Maker’s common stock at a conversion price of
price of $0.50 per share for every one dollar ($1.00) of Interest owed to the
Holder. If not so paid and at the option of Holder, or its assigns, all
principal and interest shall become immediately due and payable.
Interest
shall be computed on the basis of a 365-day year and actual days lapsed. Maker
shall have the privilege of prepaying the principal under this Note in whole
or
in part, without penalty or premium at any time. All payments hereunder shall
be
applied first to interest, then to principal.
Maker
shall pay upon demand any and all expenses, including reasonable attorney fees,
incurred or paid by Holder of this Note without suit or action in attempting
to
collect funds due under this Note. In the event an action is instituted to
enforce or interpret any of the terms of this Note, including but not limited
to
any action or participation by Maker in, or in connection with, a case or
proceeding under the Bankruptcy Code or any successor statute, the prevailing
party shall be entitled to recover all expenses reasonably incurred at, before
and after trial and on appeal or review, whether or not taxable as costs,
including, without limitation, attorney fees, witness fees (expert and
otherwise), deposition costs, copying charges and other expenses.
This
Note
is executed in connection with the transaction set out in that certain
Promissory Note Cancellation and Re-issuance Agreement of even date, by and
among the Maker and Holder and is subject to the terms thereof.
All
parties to this Note hereby waive presentment, dishonor, notice of dishonor,
and
protest. All parties hereto consent to, and Holder is hereby expressly
authorized to make, without notice, any and all renewals, extensions,
modifications, or waivers of the time for or the terms of payment of any sum
or
sums due hereunder, or under any documents or instruments relating to or
securing this Note, or of the performance of any covenants, conditions or
agreements hereof or thereof or the taking or release of collateral securing
this Note. Any such action taken by Holder shall not discharge the liability
of
any party to this Note.
This
Note
has been executed and delivered in the State of California and shall be governed
and construed in accordance with the laws of the State of
California.
Execute
Sports, Inc.
A
Nevada
corporation
____________________________________________
By:
Its:
EXHIBIT
A
The
2005 Note
FORM
OF WARRANT
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
COMMON
STOCK PURCHASE WARRANT
1. Issuance.
In
consideration of good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged by EXECUTE
SPORTS, INC.,
a
Nevada corporation (the “Company”), Xxx
and Xxxx Xxxx., registered
assigns (the “Holders”) is hereby granted the right to purchase at any time, on
or after the Issue Date (as defined below) until 5:00 P.M., San Diego time,
on
the Expiration Date (as defined below), Twenty Eight Thousand Five Hundred
and
Seventy One (28,571) fully paid and nonassessable shares of the Company’s Common
Stock, par value $.001 per share (the “Common Stock”), at an exercise price per
share (the “Exercise Price”) of $0.35. This Warrant is being issued as an
inducement for the Holders to extend the terms of their loan to the Company
(the
“Promissory Note Cancellation and Reissuance Agreeement”), dated as of March 28,
2006 (the “Agreement”), to which the Company and Holder (or Holder’s predecessor
in interest) are parties. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Agreement. This Warrant was originally
issued to the Holder or the Holder’s predecessor on March 28, 2006 (the “Issue
Date”).
2. Exercise
of Warrants.
2.1 General.
(a)
This
Warrant is exercisable in whole or in part at any time and from time to time
commencing on the Issue Date. Such exercise shall be effectuated by submitting
to the Company (either by delivery to the Company or by facsimile transmission
as provided in Section 8 hereof) a completed and duly executed Notice of
Exercise (substantially in the form attached to this Warrant Certificate) as
provided in the Notice of Exercise (or revised by notice given by the Company
as
contemplated by the Section headed "NOTICES" in the Agreement). The date such
Notice of Exercise is faxed to the Company shall be the “Exercise Date,”
provided that, if such exercise represents the full exercise of the outstanding
balance of the Warrant, the Holder of this Warrant tenders this Warrant
Certificate to the Company within five (5) Trading Days thereafter. The Notice
of Exercise shall be executed by the Holder of this Warrant and shall indicate
(i) the number of shares then being purchased pursuant to such exercise and
(ii)
if applicable (as provided below), whether the exercise is a cashless
exercise.
(b)
The
Exercise Price per share of Common Stock for the shares then being exercised
shall be payable, at the election of the Holder, in cash or by certified or
official bank check or by wire transfer in accordance with instructions provided
by the Company at the request of the Holder.
(c)
Upon
the appropriate payment of the Exercise Price for the shares of Common Stock
purchased, together with the surrender of this Warrant Certificate, the Holder
shall be entitled to receive a certificate or certificates for the shares of
Common Stock so purchased. The Company shall deliver such certificates
representing the Warrant Shares in accordance with the instructions of the
Holder as provided in the Notice of Exercise (the certificates delivered in
such
manner, the “Warrant Share Certificates”) within three (3) Trading Days (such
third Trading Day, a “Warrant Share Delivery Date”) of the date the payment of
the Exercise Price for the relevant Warrant Shares is received by the
Company.
(d)
The
Holder shall be deemed to be the holder of the shares issuable to it in
accordance with the provisions of this Section 2.1 on the Exercise Date.
(e)
The
Holder may elect to exercise a portion of this Warrant without electing to
redeem the balance of this Warrant.
2.2 Certain
Definitions.
As used
herein, each of the following terms has the meaning set forth below, unless
the
context otherwise requires:
(a)
“Expiration Date” means the date on which the last calendar day of the
eighteenth month after the Issue Date of the Warrants, or March 28, 2006.
3. Reservation
of Shares.
The
Company hereby agrees that at all times during the term of this Warrant there
shall be reserved for issuance upon exercise of this Warrant, the Reservation
Percentage of the number of shares of its Common Stock as shall be required
for
issuance of the Warrant Shares for the then unexercised portion of this Warrant.
For the purposes of such calculations, the Company should assume that the
outstanding portion of this Warrants were exercisable in full at any time,
without regard to any restrictions which might limit the Holder’s right to
exercise any portion of this Warrant held by the Holder.
4. Mutilation
or Loss of Warrant.
Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft
or
destruction) receipt of reasonably satisfactory indemnification, and (in the
case of mutilation) upon surrender and cancellation of this Warrant, the Company
will execute and deliver a new Warrant of like tenor and date and any such
lost,
stolen, destroyed or mutilated Warrant shall thereupon become void.
5. Rights
of the Holder.
Except
as set forth in this Section 5, the Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant
and
are not enforceable against the Company except to the extent set forth herein.
Notwithstanding the provisions of this Warrant, the Agreement or of the other
Transaction Agreements, if the Company shall declare a dividend upon the Common
Stock (whether payable out of earnings or earned surplus or otherwise), then
the
Company shall pay to the Holder an amount equal to the dividend payment which
would have been paid to the Holder had all of the Holder’s unexercised Warrants
outstanding on the record date for determining the amount of dividend payments
to be paid to security holders of the Company been exercised as of the close
of
business on the Trading Day immediately before such record date.
6. Protection
Against Dilution and Other Adjustments.
6.1 Adjustment
Mechanism.
If an
adjustment of the Exercise Price is required pursuant to this Section 6 (other
than pursuant to Section 6.4), the Holder shall be entitled to purchase such
number of shares of Common Stock as will cause (i) (x) the total number of
shares of Common Stock Holder is entitled to purchase pursuant to this Warrant
following such adjustment, multiplied by (y) the adjusted Exercise Price per
share, to equal the result of (ii) (x) the dollar amount of the total number
of
shares of Common Stock Holder is entitled to purchase before adjustment,
multiplied by (y) the total Exercise Price before adjustment.
6.2 Capital
Adjustments.
In case
of any stock split or reverse stock split, stock dividend, reclassification
of
the Common Stock, recapitalization, merger or consolidation (where the Company
is not the surviving entity), the provisions of this Section 6 shall be applied
as if such capital adjustment event had occurred immediately prior to the date
of this Warrant and the original Exercise Price had been fairly allocated to
the
stock resulting from such capital adjustment; and in other respects the
provisions of this Section shall be applied in a fair, equitable and reasonable
manner so as to give effect, as nearly as may be, to the purposes hereof. A
rights offering to stockholders shall be deemed a stock dividend to the extent
of the bargain purchase element of the rights. The Company will not effect
any
consolidation or merger, unless prior to the consummation thereof, the successor
or acquiring entity (if other than the Company) and, if an entity different
from
the successor or acquiring entity, the entity whose capital stock or assets
the
holders of the Common Stock of the Company are entitled to receive as a result
of such consolidation or merger assumes by written instrument the obligations
under this Warrant (including under this Section 6) and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled
to
acquire.
6.3 Adjustment
for Spin Off.
If, for
any reason, prior to the exercise of this Warrant in full, the Company spins
off
or otherwise divests itself of a part of its business or operations or disposes
all or of a part of its assets in a transaction (the “Spin Off”) in which the
Company does not receive compensation for such business, operations or assets,
but causes securities of another entity (the “Spin Off Securities”) to be issued
to security holders of the Company, then the Company shall cause (i) to be
reserved Spin Off Securities equal to the number thereof which would have been
issued to the Holder had all of the Holder’s unexercised Warrants outstanding on
the record date (the “Record Date”) for determining the amount and number of
Spin Off Securities to be issued to security holders of the Company (the
“Outstanding Warrants”) been exercised as of the close of business on the
Trading Day immediately before the Record Date (the “Reserved Spin Off Shares”),
and (ii) to be issued to the Holder on the exercise of all or any of the
Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to
(x)
the Reserved Spin Off Shares, multiplied by (y) a fraction, of which (I) the
numerator is the amount of the Outstanding Warrants then being exercised, and
(II) the denominator is the amount of the Outstanding Warrants.
7. Transfer
to Comply with the Securities Act; Registration Rights.
This
Warrant has not been registered under the Securities Act of 1933, as amended,
(the “Act”) and has been issued to the Holder for investment and not with a view
to the distribution of either the Warrant or the Warrant Shares. Neither this
Warrant nor any of the Warrant Shares or any other security issued or issuable
upon exercise of this Warrant may be sold, transferred, pledged or hypothecated
in the absence of an effective registration statement under the Act relating
to
such security or an opinion of counsel satisfactory to the Company that
registration is not required under the Act. Each certificate for the Warrant,
the Warrant Shares and any other security issued or issuable upon exercise
of
this Warrant shall contain a legend on the face thereof, in form and substance
satisfactory to counsel for the Company, setting forth the restrictions on
transfer contained in this Section.
8. Notices.
Any
notice required or permitted hereunder shall be given in manner provided herein:
If
to
Company at: 1284 Puerta del Sol
Xxxxx
000
Xxx
Xxxxxxxx, XX 00000
Ph:
000-000-0000
If
to
Holder at: __________________
__________________
__________________
__________________
9. Supplements
and Amendments; Whole Agreement.
This
Warrant may be amended or supplemented only by an instrument in writing signed
by the parties hereto. This Warrant contains the full understanding of the
parties hereto with respect to the subject matter hereof and thereof and there
are no representations, warranties, agreements or understandings other than
expressly contained herein and therein.
10. Governing
Law.
This
Warrant shall be deemed to be a contract made under the laws of the State of
California for contracts to be wholly performed in such state and without giving
effect to the principles thereof regarding the conflict of laws. Each of the
parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the County of San Diego or the state courts of the State
of California sitting in the County of San Diego in connection with any dispute
arising under this Warrant and hereby waives, to the maximum extent permitted
by
law, any objection, including any objection based on
forum non conveniens,
to the
bringing of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Holder for any reasonable legal
fees and disbursements incurred by the Buyer in enforcement of or protection
of
any of its rights under any of the Transaction Agreements.
11. JURY
TRIAL WAIVER.
The
Company and the Holder hereby waive a trial by jury in any action, proceeding
or
counterclaim brought by either of the Parties hereto against the other in
respect of any matter arising out or in connection with this
Warrant.
12. Counterparts.
This
Warrant may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
13. Descriptive
Headings.
Descriptive headings of the several Sections of this Warrant are inserted for
convenience only and shall not control or affect the meaning or construction
of
any of the provisions hereof.
IN
WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
day of
,
2006.
EXECUTE
SPORTS, INC.
By:
________________________________
___________________________________
(Print
Name)
___________________________________
(Title)
NOTICE
OF
EXERCISE OF WARRANT
TO: EXECUTE
SPORTS, INC.
VIA
FAX: (000) 000-0000
0000
Xxxxxx xxx Xxx
Xxxxx
000
Xxx
Xxxxxxxx, XX 00000
AND
TO:
XXXX
X.XXXXXXX
VIA
FAX (000) 000-0000
0000
Xxxxxxx Xxxxx
Xxx
Xxxxx, XX 00000
Attn:
President & Secretary
The
undersigned hereby irrevocably elects to exercise the right, represented by
the
Common Stock Purchase Warrant, dated as of _____________________, 2006 , to
purchase ___________ shares of the Common Stock, par value $0.001 per share
(“Common Stock”), of EXECUTE
SPORTS, INC.
and
tenders herewith payment in accordance with Section 2 of said Common Stock
Purchase Warrant, as follows:
(
) CASH: $
=
(Exercise Price x Exercise Shares)
Payment
is being made by:
(
)
enclosed check
(
)
wire
transfer
(
)
other
It
is the
intention of the Holder to comply with the provisions of Section 2.2 of the
Warrant regarding certain limits on the Holder's right to exercise thereunder.
Based on the analysis on the attached Worksheet Schedule, the Holder believes
this exercise complies with the provisions of said Section 2.2. Nonetheless,
to
the extent that, pursuant to the exercise effected hereby, the Holder would
have
more shares than permitted under said Section, this notice should be amended
and
revised, ab initio, to refer to the exercise which would result in the issuance
of shares consistent with such provision. Any exercise above such amount is
hereby deemed void and revoked.
As
contemplated by the Warrant, this Notice of Conversion is being sent by
facsimile to the telecopier number and officer indicated above.
If
this
Notice of Exercise represents the full exercise of the outstanding balance
of
the Warrant, the Holder either (1) has previously surrendered the Warrant to
the
Company or (2) will surrender (or cause to be surrendered) the Warrant to the
Company at the address indicated above by express courier within five (5)
Trading Days after delivery or facsimile transmission of this Notice of
Exercise.
The
certificates representing the Warrant Shares should be transmitted by the
Company to the Holder
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via
express courier, or
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by
electronic transfer
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after
receipt of this Notice of Exercise (by facsimile transmission or otherwise)
to:
_____________________________________
_____________________________________
_____________________________________
Dated:
______________________
____________________________
[Name
of
Holder]
By:
_________________________
