DEBT CONVERSION AGREEMENT
Exhibit
4.6
THIS
DEBT
CONVERSION AGREEMENT ("AGREEMENT"), dated as March 24, 2006,
among
Execute Sports, Inc., a Nevada corporation (the "Company"), and Myr and Coral
Guy (the "Holders").
WHEREAS,
on February 28, 2005, the Company issued a Promissory Note due February 28,
2006, as amended from time to time, to the Holder in an aggregate principal
amount of One Hundred Thousand ($100,000.00) dollars (the "Note");
WHEREAS,
the principal outstanding on the Note as of March 24, 2006 is Sixty Thousand,
Nine Hundred and Five and 46/100 ($60,905.46) dollars;
WHEREAS,
the annual interest on the Note is Two Percent per annum and as of March 24,
2006, the interest due on the Note is Two Thousand, Eight Hundred, and Nine
and
38/100 ($2,089.38) dollars.
WHEREAS,
the Company has requested that the Holders convert their Notes into 251,979
shares of the Company’s common stock, par value $.001 per share ("Common
Stock"), as set forth herein;
NOW
THEREFORE, in consideration of the premises and the mutual covenants and
agreements of the parties hereinafter set forth, the parties hereto hereby
agree
as follows:
1.
DEBT
CONVERSION.
(a)
Holder hereby agrees, subject to the conditions set forth herein, to convert
the
principal and accrued interest on its Notes into shares of the Company's Common
Stock
("Conversion
Shares") at a conversion price of $0.25 per share, respectively ("Debt
Conversion"). The entire amount of the Conversion Shares shall be allocated
in a
manner as mutually agreed to by the parties and the Debt Conversion shall be
classified as mutually agreed to by the parties.
(b)
The
Company shall take such actions as may be necessary to effectuate the Debt
Conversion, including, but not limited to, providing notices to, and responding
to queries from, all applicable regulatory authorities and stock exchanges
and
obtaining all necessary third party consents.
(f)
Subject to the terms and conditions of this Agreement, the consummation of
the
transactions contemplated by this Agreement shall take place at a closing
("Closing") to be held at 10:00 a.m., local time, on the fourth business day
after the date on which the last of the conditions set forth in Section 4 (c)
and (d) below is fulfilled, at the offices of Execute Sports, Inc., 0000 Xxxxxx
xxx Xxx, Xxxxx 000, Xxx Xxxxxxxx, XX 00000, or at such other time, date or
place
as the parties may agree upon in writing. At the Closing, the Holder shall
deliver its Note for cancellation and the Company shall deliver to the Holder
certificates representing the Conversion Shares to which such Holder is entitled
as a result of such Debt Conversion. From and after the Closing, the Notes
shall
represent solely the right to receive Conversion Shares. If a Holder has lost
its Note and is unable to deliver its Notes at the Closing, it shall submit
an
affidavit of loss and indemnity agreement so that the Notes may be replaced
and
deemed cancelled in accordance with the terms hereof. In the event that as
a
result of the Debt Conversion, fractions of shares would be required to be
issued, such fractional shares shall be rounded up or down to the nearest whole
share. The Company shall pay any documentary, stamp or similar issue or transfer
tax due on such Debt Conversion, except that the Holder shall pay any such
tax
due because the Conversion Shares are issued in a name other than the
Holder's.
2.
REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company hereby
represents
and warrants to the Holder as follows:
(a)
As of
the date hereof, the Company has 75,000,000 shares of Common Stock authorized,
of which 21,831,886 shares of Common Stock are issued and outstanding, and
no
shares of preferred stock authorized. As of the date hereof, the Company has
reserved for issuance 1,430,000 shares of Common Stock upon exercise of all
outstanding options and warrants. All of the issued and outstanding shares
of
the Company's Common Stock are, and all shares reserved for issuance will be,
upon issuance in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized, validly issued,
fully paid and nonassessable. The Conversion Shares to be issued and delivered
to the Holders upon conversion of the Notes have been duly authorized and when
issued upon such conversion, will be validly issued, fully-paid and
non-assessable. The issuance of the Conversion Shares will be "restricted
securities" as defined under Rule 144 promulgated under the Securities
Act.
(b)
The
Company has full legal power to execute and deliver this Agreement and to
perform its obligations hereunder. All acts required to be taken by the Company
to enter into this Agreement and to carry out the transactions contemplated
hereby have been properly taken, and this Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its terms
and does not conflict with, result in a breach or violation of or constitute
(or
with notice of lapse of time or both constitute) a default under any instrument,
contract or other agreement to which the Company or its subsidiaries is a
party.
(c)
The
affirmative vote of at least a majority of the Board of Directors of the Company
with respect to the matters referred to in Section 1 hereof is the only vote
of
the holders of any class or series of the capital stock of the Company required
to approve the transactions contemplated hereby.
(d)
None
of the Company's Articles of Incorporation, as amended, or Bylaws, or the laws
of Nevada or California contains any applicable anti-takeover provision or
statute which would restrict the Company's ability to enter into this Agreement
or consummate the transactions contemplated by this Agreement or which would
limit any of the Holders' rights following consummation of the transactions
contemplated by this Agreement.
(e)
No
broker, finder or investment banker is entitled to any brokerage, finder's
or
other fee or commission in connection with the transactions contemplated by
this
Agreement based upon arrangements made by or on behalf of the Company other
than
the fees of any investment banking firm that has been engaged by the Company
to
render the Fairness Opinion (defined below), the fees of which will be paid
by
the Company.
(f)
The
Company has delivered or made available to the Holder prior to the execution
of
this Agreement true and complete copies of all periodic reports, registration
statements and proxy statements filed by it with the Commission since July
16,
2005. Each of such filings with the Commission (collectively, the "SEC
Filings"), as of its filing date, complied in all material respects with the
requirements of the rules and regulations promulgated by the Commission with
respect thereto and did not contain any untrue statement of a material fact
or
omit a material fact necessary in order to make the statements contained therein
not misleading in light of the circumstances in which such statements were
made.
3.
REPRESENTATIONS AND WARRANTIES OF THE HOLDERS. Ty Guy represents and warrants
to
the Company as follows:
(a)
The
Holder has full legal power to execute and deliver this Agreement and to perform
its obligations hereunder. All acts required to be taken by such Holder to
enter
into this Agreement and to carry out the transactions contemplated hereby have
been properly taken; and this Agreement constitutes a legal, valid and binding
obligation of such Holder enforceable in accordance with its terms.
(b)
The
Holder has reviewed the filings of the Company referred to in Section 2(f)
above.
(c)
The
Holder has been given an opportunity to ask questions and receive answers from
the officers and directors of the Company and to obtain additional information
from the Company.
(d)
The
Holder has such knowledge and experience in financial and business matters
as to
be capable of evaluating the merits and risks of an investment in the Company's
securities and has obtained, in its judgment, sufficient information about
the
Company to evaluate the merits and risks of an investment in the
Company.
(e)
The
Holder is relying solely on the representations and warranties contained in
Section 2 hereof and in certificates delivered hereunder in making their
decision to enter into this Agreement and consummate the transactions
contemplated hereby and no oral representations or warranties of any kind have
been made by the Company or its officers, directors, employees or agents to
such
Holders.
4.
CONDITIONS.
(a)
The
obligations of the Company to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment of the following
conditions:
(i)
The
representations and warranties of each of the Holders set forth in Section
3
hereof shall be true and correct on and as of the Closing date and a certificate
certifying such shall be delivered.
(ii)
All
proceedings, corporate or otherwise, to be taken by the Holders in connection
with the consummation of the transactions contemplated by this Agreement shall
have been duly and validly taken and all necessary consents, approvals or
authorizations of any governmental or regulatory authority or other third party
required to be obtained by the Company or the Holders shall have been obtained
in form and substance reasonably satisfactory to the Company.
(iii)
The
Holder shall have delivered to the Company for cancellation its Notes or an
affidavit of loss and indemnity.
(b)
The
obligations of the Holder to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment of the following
conditions:
(i)
The
representations and warranties of the Company set forth in Section 2 hereof
shall be true and correct on and as of the Closing date and a certificate
certifying such shall be delivered.
(ii)
All
proceedings, corporate or otherwise, to be taken by the Company in connection
with the consummation of the transactions contemplated by this Agreement shall
have been duly and validly taken and all necessary consents, approvals or
authorizations of any governmental or regulatory authority or other third party
required to be obtained by the Company or the Holders shall have been obtained
in form and substance reasonably satisfactory to the Holders.
(iii)
The
Company shall have caused the Conversion Shares to be approved for listing
on
the Over the Counter Bulletin Board or any national securities exchange on
which
the Common Stock is then listed.
(iv)
The
Holder shall have received a legal opinion of Xxxxxxx X. Xxxxxxxx, counsel
to
the Company, addressed to the Holder dated as of the Closing date covering
such
matters as is customary of transactions of this nature and in form and substance
reasonably satisfactory to the Holder.
(vi)
The
Holder shall have delivered to the Company for cancellation their Notes or
an
affidavit of loss and indemnity
5.
REGISTRATION.
(a)The
Company shall file, and use reasonable best efforts to cause to be declared
effective by the Commission as promptly as practicable but in no event later
than nine months following the Closing Date, a registration statement (the
"Required Registration Statement") to register Fifty Percent of the Conversion
Shares, or 125,989 or the 251,979 shares received by the Holder upon the Debt
Conversion for resale pursuant to the Securities Act.
(b)
The
Company shall bear all fees and expenses attendant to registering the Conversion
Shares, but the Holders shall pay any and all sales commissions and the expenses
of any legal counsel selected by them to represent them in connection with
the
sale of the Conversion Shares. The Company shall use its best efforts to cause
any registration statement filed pursuant to this section to remain effective
until all the Conversion Shares registered thereunder are sold or until the
delivery to the Holder of an opinion of counsel to the Company to the effect
set
forth in Section 5(h).
(c)
The
Company will indemnify the Holder against all claims, losses, damages and
liabilities (or actions or proceedings, commenced or threatened, in respect
thereof), joint or several, arising out of or based on any untrue statement
(or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any registration, qualification
or compliance pursuant to this Section 5 or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the
Company of the Securities Act or any rule or regulation thereunder applicable
to
the Company in connection with any such registration, qualification or
compliance, and will reimburse the Holder for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action or proceeding; provided that the
Company will not be liable to a Holder in any such case to the extent that
any
such claim, loss, damage, liability or expense arises out of or is based on
any
untrue statement or omission based upon written information furnished to the
Company by or on behalf of such Holder specifically stating that it is intended
for inclusion in any registration statement under which Conversion Shares are
registered. Such indemnity shall remain in full force and effect regardless
of
any investigation made by or on behalf of a Holder or any such director, officer
or controlling person, and shall survive the transfer of such securities by
any
Holder.
(d)
The
Company shall comply with all of the reporting requirements of the Exchange
Act
and with all other public information reporting requirements of the Commission,
which are conditions to the availability of Rule 144 for the sale of the Common
Stock. The Company shall cooperate with the Holder in supplying such information
as may be necessary for such Holder to
complete
and file any information reporting forms presently or hereafter required by
the
Commission as a condition to the availability of Rule 144.
(e)
The
Company represents and warrants to the holders of Conversion Shares that the
granting of the registration rights to the Holders hereby does not and will
not
violate any agreement between the Company and any other security holders with
respect to registration rights granted by the Company.
(f)
The
rights granted under this Section 5 shall terminate upon delivery to the Holders
of an opinion of counsel to the Company reasonably satisfactory to the Holder
to
the effect that such rights are no longer necessary for the public sale of
the
Conversion Shares without restriction as to the number of securities that may
be
sold at any one time or the manner of sale.
(i)
The
rights granted under this Section 5 shall not be transferable.
6.
MISCELLANEOUS.
(a)
Section headings used in this Agreement are for convenience of reference only
and shall not affect the construction of this Agreement.
(b)
This
Agreement may be executed in any number of counterparts and by the different
parties on separate counterparts and each such counterpart shall be deemed
to be
an original, but all such counterparts shall together constitute but one and
the
same agreement.
(c)
This
Agreement shall be a contract made under and governed by the laws of the State
of California.
(d)
All
obligations of the Company and rights of the Holder expressed herein shall
be in
addition to and not in limitation of those provided by applicable
law.
(e)
This
Agreement shall be binding upon the Company, the Holder and its respective
successors and assigns, and shall inure to the benefit of the Company, the
Holders and their respective successors and permitted assigns.
(f)
The
terms and provisions of this Agreement are intended solely for the benefit
of
each party hereto and their respective successors or permitted assigns, and
it
is not the intention of the parties to confer third-party beneficiary rights
upon any other person or entity.
(g)
All
amendments or modifications of this Agreement and all consents, waivers and
notices delivered hereunder or in connection herewith shall be in
writing.
(h)
This
Agreement constitutes the entire agreement among the parties with respect to
the
subject matter hereof and supersedes all prior agreements and undertakings,
both
written and oral, among the parties with respect thereto.
(i)
Whether or not the Closing occurs, the Company shall pay all costs and expenses,
including reasonable attorneys' fees, incurred by it or the Holders with respect
to the negotiation, execution, delivery and performance of this Agreement,
including any expenses of enforcing this provision. This provision shall survive
termination of the Agreement.
7.
WAIVER
OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDERS
HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
8.
SPECIFIC PERFORMANCE. THE PARTIES HERETO ACKNOWLEDGE AND
AGREE
THAT ANY REMEDY AT LAW FOR ANY BREACH OF THE PROVISIONS OF THIS AGREEMENT WOULD
BE INADEQUATE, AND EACH PARTY HERETO HEREBY CONSENTS TO THE GRANTING BY ANY
COURT OF AN INJUNCTION OR OTHER EQUITABLE RELIEF, WITHOUT THE NECESSITY OF
ACTUAL MONETARY LOSS BEING PROVED, IN ORDER THAT THE BREACH OR THREATENED BREACH
OF SUCH PROVISIONS MAY BE EFFECTIVELY RESTRAINED.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their duly authorized representatives as of the date first above
written.
EXECUTE
SPORTS, INC.
Xxxx
X.
Xxxxxxx
President
and Secretary
HOLDERS
Myr
Guy
Coral
Guy
