THIS CONVERTIBLE DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND IS A "RESTRICTED SECURITY" AS THAT TERM IS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT. NEITHER THIS CONVERTIBLE
DEBENTURE NOR ANY SECURITIES ISSUABLE UPON CONVERSION MAY BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE REASONABLE SATISFACTION OF GOLDEN EAGLE INTERNATIONAL, INC.
CONVERTIBLE DEBENTURE and CONVERTIBLE DEBENTURE AGREEMENT
This Convertible Debenture and Convertible Debenture Agreement are made by and
between GOLDEN EAGLE INTERNATIONAL, INC. (hereafter the "Borrower") and Xxxxx
Xxxxxxx, a resident of Florida, (the "Lender"), on October 18, 2002, effective
as of February 6, 2002 and is intended to supercede and replace all
outstanding agreements between the Borrower and the Lender, such agreements
(the "agreements") being for the following amounts:
------------------------------------------------------------------------------
Aggregate Amount
of Shares
Beneficially Owned
(Sole Voting and
Date Amount of Debenture ($) Source of Funds Dispositive Power)
--------- ----------------------- --------------- ------------------
02/06/02 $750,000 Personal Funds 25,000,000
01/22/02 $80,000 Personal Funds 2,666,666.7
01/07/02 $75,000 Personal Funds 2,500,000
12/06/01 $150,000 Personal Funds 5,000,000
11/20/01 $40,000 Personal Funds 1,333,333.3
11/06/01 $100,000 Personal Funds 3,333,333.3
10/12/01 $30,000 Personal Funds 1,000,000
10/03/01 $60,000 Personal Funds 2,000,000
09/19/01 $60,000 Personal Funds 2,000,000
08/03/01 $150,000 Personal Funds 5,000,000
07/16/01 $75,000 Personal Funds 2,500,000
07/05/01 $75,000 Personal Funds 2,500,000
06/14/01 $75,000 Personal Funds 2,500,000
04/19/01 $150,000 Personal Funds 5,000,000
04/04/01 $35,000 Personal Funds 1,166,666.7
03/01/01 $30,000 Personal Funds 1,000,000
02/15/01 $30,000 Personal Funds 1,000,000
12/08/00 $200,000 Personal Funds 6,666,666.7
11/29/00 $45,000 Personal Funds 1,500,000
09/05/00 $200,000 Personal Funds 6,666,666.7
08/23/00 $50,000 Personal Funds 1,666,666.7
07/13/00 $40,000 Personal Funds 1,333,333.3
07/12/00 $30,000 Personal Funds 1,000,000
02/10/00 $200,000 Personal Funds 6,666,666.7
01/27/00 $100,000 Personal Funds 3,333,333.3
---------- ------------------------ --------------- ------------------
Total $2,830,000 94,333,333.3
shares of common
stock
------------------------------------------------------------------------------
WHEREAS, the Borrower has borrowed $2,830,000 from the Lender in accordance
with the terms and conditions set forth in the earlier agreements and herein,
and
WHEREAS, the Lender has loaned $2,830,000 to the Borrower in accordance with
the terms and conditions set forth in the earlier agreements and herein.
WHEREAS, the amounts provided to the Borrower as described in the preceding
table have accrued unconverted interest from the date of advancement to
September 30, 2002, in the total amount of $232,830.09 which interest the
Borrower has not paid to the Lender.
THEREFORE, the Lender and the Borrower agree that this Convertible Debenture
replaces in their entirety and supercedes in all respects the earlier
agreements (none of which have any further force or effect) and further agree
that the terms and conditions applicable to this Convertible Debenture and the
funds that the Lender has advanced to the Borrower are as follows:
1. ACQUISITION OF CONVERTIBLE DEBENTURE. The Borrower hereby agrees to sell
and the Lender agrees to buy the Convertible Debenture of the Borrower
embodied in this Convertible Debenture Agreement. This Convertible Debenture
shall have the principal amount of $3,062,830.09 (including the total amount
advanced under the earlier agreements plus unpaid or unconverted interest
accrued through September 30, 2002)("Principal"). The Borrower acknowledges
that it has received full payment of or benefit from the Principal prior to
the date hereof. In addition, a resolution of the Board of Directors of the
Borrower authorizing the execution of this Convertible Debenture Agreement and
Convertible Debenture is marked as Exhibit "A," and by this reference is made
a part hereof.
2. CONVERTIBLE DEBENTURE TERM AND INTEREST RATE. The Principal and accrued
Interest ("Interest") shall be due and payable to the holder thereof on
January 2, 2004. The holder thereof may at its election extend the term of
the Convertible Debenture for successive one (1) year periods upon written
notice thereof to the Borrower.
Interest on the Convertible Debenture shall accrue from September 30,
2002 at the rate of ten percent (10%) per annum, calculated monthly, until
paid or converted. Interest and Principal shall be due and payable to the
Lender upon maturity or earlier redemption or conversion. However, in the
event of default, interest shall accrue at the rate of twelve percent (12%)
per annum, calculated monthly, from the date of default.
3. REDEMPTION. The Borrower may only elect to redeem the Convertible
Debenture by paying the Principal and accrued Interest of the Convertible
Debenture five (5) days prior to final maturity of the Convertible Debenture,
unless the Lender shall have already opted to convert. The foregoing
notwithstanding, the Lender may convert the Principal and accrued Interest
into any securities of the Borrower that are outstanding, or may be offered,
pursuant to Paragraph 5 below upon three (3) days written notice of conversion
("Notice of Conversion"), at any time, except that a conversion into the
common stock of the Borrower may not occur prior to December 31, 2002.
4. NEGOTIABILITY. The Convertible Debenture shall be saleable,
transferable, assignable or otherwise negotiable, by the holder thereof, upon
written notification to Borrower of the new holder and its address provided
that the assignor and the assignee comply with federal and all applicable
state securities laws in offering and in completing any such assignment. The
Borrower hereby makes an unconditional promise to repay the Principal and
accrued Interest of the Convertible Debenture on or before the date due to any
permitted transferee. Furthermore, it is agreed that all rights, benefits,
representations and warranties made by the Borrower shall survive any sale,
transfer, assignment, or other negotiation by Lender to a permitted
transferee. The Borrower acknowledges that repayment to a permitted transferee
is not subject to any claims or defenses the Borrower may have against the
Lender. The Borrower hereby makes an unconditional promise to repay the
Principal and accrued Interest hereunder on or before the date due to any such
transferee and acknowledges that repayment to a transferee is not subject to
any claims or defenses the Borrower may have against prior holders.
5. CONVERSION OF DEBT INTO BORROWER'S SECURITIES. The Holder (which includes
the Lender and any permitted transferee) may elect at any time to convert the
Principal and/or accrued Interest (to the day prior to the date Notice of
Conversion is given to the Borrower), in whole or in part, except that a
conversion into common stock of the Borrower may not occur prior to December
31, 2002 and further a conversion may not occur unless at the time of the
conversion there exists an exemption from registration for the conversion
under federal and applicable state securities laws. This conversion shall be
made into as many securities (the "Conversion Shares"), of whatever class of
stock or other securities of the Borrower outstanding, or which may be
offered, at the designation of the Holder, as equals the dollar amount to be
converted pursuant to the following:
If converted into the common stock of the Borrower, the conversion shall
be for the amount of stock as equals the dollar amount converted divided
by $.03.
As to any other class of stock, or other security outstanding or offered
by Borrower, then the conversion shall be made at the amount as equals
the dollar amount converted divided by the average closing bid price for
the class of stock or other security being purchased as reported by the
OTC Bulletin Board (or such other public market on which the securities
are traded) for the three (3) most recent days on which trading in the
security takes place prior to the date of the Lender's Notice of
Conversion to the Borrower. However, should the class of stock or
security not be traded and quoted on a public market, then the price
shall be the price per share or per security of the market value of such
securities as determined by an independent, financial appraiser which is
agreeable to both Borrower and Lender.
However, for any conversion with respect to accrued Interest accruing after
December 31, 2002, the conversion of such accrued Interest will be pursuant to
the following:
If converted into the common stock of the Borrower, or in the election of
the Holder any other class of stock, or other security outstanding or
offered by the Borrower, then the conversion shall be made at the amount
as equals the dollar amount converted divided by ninety percent (90%) of
the average closing bid price for the class of stock or other security
being purchased as reported by the OTC Bulletin Board (or such other
public market on which the securities are traded) for the three (3) most
recent days on which trading in the security takes place prior to the
date of the Lender's Notice of Conversion to the Borrower.
Should the class of stock or security not be traded and quoted on a
public market, then the price shall be ninety percent (90%) of the price
per share or per security of the market value of such securities as
determined by an independent, financial appraiser which is agreeable to
both Borrower and Lender.
6. DEFAULT. Each of the following events shall be and shall constitute an
event of default under this Agreement, and Borrower shall have a duty to
inform Lender of the occurrence of any such default within ten (10) calendar
days of such occurrence
(a) Any default by the Borrower in the punctual payment of the Principal
and accrued Interest of the outstanding Convertible Debenture when,
and as, the same shall become due and payable.
(b) Any default by the Borrower under, or breach by the Borrower in the
performance of, any covenant, agreement, warranty, representation or
condition contained in this Agreement or the Convertible Debenture;
(c) If the Borrower or its subsidiaries shall:
(i) apply for, or consent to, the appointment of a receiver,
trustee, or liquidator of the Borrower or its subsidiaries for
all or substantially all assets of the Borrower or its
subsidiaries;
(ii) file or be served with any petition for relief under the
Bankruptcy Code or any similar federal or state law or admit
in writing its inability to pay its debts as they become due;
or
(iii) make a general assignment to or for the benefit of creditors;
(d) If any pleading shall be filed in any court or other forum seeking
the adjudication of the Borrower or its subsidiaries as a bankrupt
or insolvent, the appointment of a receiver, trustee, or liquidator
of the Borrower or its subsidiaries or of all or substantially all
of their assets which pleading shall not be dismissed within ninety
(90) days; or a court shall have entered a decree or order for
relief in respect of the Borrower or its subsidiaries in an
involuntary case under applicable bankruptcy, insolvency, or other
similar law now or hereafter in effect, or ordering the winding-up
or liquidation of its affairs; or
(e) The filing of any tax lien respecting any of the assets of the
Borrower or its subsidiaries;
(f) A default under any bond, debenture, note or other evidence of
indebtedness by the Borrower, or any failure to pay off when due, or
extend without inducement to its guarantor, the specific
indebtedness to Frost Bank, or any subsidiary or under any mortgage,
indenture or instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness of such type by
the Borrower or any subsidiary with a principal amount then
outstanding in excess of $50,000; or
(g) A final judgment for the payment or money shall be entered against
the Borrower or any subsidiary in an aggregate amount in excess of
$50,000 by a court of competent jurisdiction, which judgment remains
undischarged for a period of 45 days after the right to appeal has
expired; or
(i) The foregoing notwithstanding, the Borrower shall have thirty (30)
days from the date of such default to cure said default, other than
a default under Section 6(a). Upon such cure the terms of the
Convertible Debenture shall continue in effect.
7. REMEDIES UPON DEFAULT. Upon the occurrence of any one or more of the
events of default described in Section 6 of this Agreement and subject solely
to the Borrower's actual cure of the default pursuant to Section 6(i), the
holder of the Convertible Debenture at its option, and in its sole discretion,
may declare the unpaid balance of the Principal and accrued Interest, together
with any further amount as shall be sufficient to cover costs and expenses of
collection, including attorney's fees, immediately due and payable as fully
and as completely as if said aggregate sum was originally agreed to be paid at
such time, all without notice or demand, which are hereby expressly waived by
the Borrower. In addition, thirty (30) days after the occurrence of any one
or more of such events of default, the holder may proceed to enforce payment
of the Principal and accrued Interest, together with any further amount as
shall be sufficient to cover costs and expenses of collection, including
attorney's fees, including conversion as set out in paragraph 5 above, default
Interest, as accelerated as above provided, and any and all other duties,
obligations and liabilities secured by this Agreement and the Convertible
Debenture.
8. LOCATION OF TRANSACTION. The offer and acceptance of the Convertible
Debenture, and any subsequent election to convert a Convertible Debenture into
common stock or other securities as provided by Section 5 above, shall be
deemed concluded at the office of the Borrower, 12401 South 000 Xxxx, Xxxx.
X0, Xxxxx X, Xxxx Xxxx Xxxx, Xxxx 00000.
9. EXEMPTION OF THIS DEBENTURE FROM REGISTRATION. The Borrower and the
Lender agree that the offer and acceptance of this Convertible Debenture is
exempt from the registration requirements of Section 5 of the Securities Act
of 1933, pursuant to an exemption specified in Sections 4(2) and 4(6) of the
Securities Act and rules thereunder. The securities being offered by the
Borrower to the Lender, in the event that the Lender exercises its conversion
rights to purchase Borrower's common stock or other securities pursuant to
this Agreement, have not been registered under the Securities Act of 1933 or
applicable State blue sky or securities laws and are offered under the
exemptions from registration discussed above. If Lender exercises its
conversion rights, the securities so purchased cannot be sold, transferred,
assigned or otherwise disposed of, except in compliance with this Convertible
Debenture Agreement and the applicable Federal and State securities laws and
regulations.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. The Borrower
represents, warrants and covenants to the Lender as follows:
(a) The Borrower shall maintain accurate records and books of account,
in accordance with generally accepted accounting principles,
consistently applied throughout the periods included therein, and
the Lender shall have the right to receive and review Borrower's SEC
filings and financial statements contained therein;
(b) The Borrower shall pay and discharge when due all taxes, levies and
other charges which are or, if they remain unpaid, may become a lien
against its or its subsidiaries' properties or assets;
(c) The Borrower shall maintain adequate insurance against loss or
damage to all of its or its subsidiaries' properties and assets and
will maintain insurance deemed by the Borrower to be adequate
against loss or damage to all of its or its subsidiaries' properties
and assets and liability for damage to the person or property of
others;
(d) The Borrower shall notify the Lender if, at any time, it changes the
address of the office where it keeps its books and records.
(e) The Borrower shall maintain its and its subsidiaries' corporate
existence and comply with all valid and applicable statutes, rules,
ordinances, regulations or orders, federal, state and local,
maintain its and its subsidiaries' franchises, and maintain its and
its subsidiaries' properties in good operating conditions;
(f) The Borrower shall at all times that the Convertible Debenture is
outstanding, maintain an adequate number of authorized but un-issued
shares of common stock necessary for the conversion of the Principal
and accrued Interest, such shares to be issued free and clear of
pre-emptive and similar rights, taxes, liens, charges and interests.
(g) The Borrower, concurrent with the issuance hereof, shall deliver a
certified copy of a resolution of its board of directors authorizing
the Borrower's transfer agent to issue the fully paid and
non-assessable Conversion Shares upon Notice of Conversion,
directing the transfer agent to issue the Conversion Shares upon
Notice of Conversion, and granting the transfer agent full
irrevocable authority to act upon the Notice of Conversion upon
receipt.
(h) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado and is
qualified or authorized to do business as a foreign corporation and
is in good standing in all jurisdictions in which qualification or
authorization may be required and has all requisite corporate power
and authority, licenses and permits to own or lease and operate its
properties and any of its business as presently being conducted and
to execute, deliver and perform this Agreement, the Convertible
Debenture, and consummate the transactions contemplated hereby.
(i) The Borrower is a Reporting Company whose common stock is registered
with the U.S. Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 as amended. The Borrower represents
and warrants that it will file all such reports as required and that
the information contained therein does not and will not contain any
misstatement of material information or any omission of information
necessary to make the information provided not misleading.
(j) All covenants and agreements in this Agreement and the Convertible
Debenture by the Borrower shall bind its successors and assigns,
whether so expressed or not. No payment, distribution or other
action may be taken by any subsidiary of the Borrower with respect
to this Agreement or the Convertible Debenture if the Borrower would
be prohibited from taking such action.
(k) Neither the Borrower nor any of its subsidiaries shall incur,
create, issue, assume, guarantee or otherwise become liable for any
indebtedness that is senior in any respect to the Convertible
Debenture without the prior written consent of the Lender.
11. REPRESENTATIONS AND WARRANTIES OF LENDER. The Lender represents and
warrants to the Borrower as follows:
(a) Lender is an accredited investor within the definition set out in
Section 2(a)(15) of the Securities Act, which definition has been
provided to Lender.
(b) The offer and acceptance of the Convertible Debenture, and any
Shares received upon conversion thereof, shall have taken place only
after a thorough review and execution by Lender of Borrower's
current Subscription Agreement that has been provided to Lender. In
addition, the Lender represents that he has consulted with his
legal, financial, and tax, advisors regarding the advisability of
this Agreement and the Convertible Debenture to the extent the
Lender has determined such consultation to be necessary or
appropriate in the circumstances.
(c) The Lender is aware that the Convertible Debenture, and Shares
received upon conversion thereof, have not been and might not be
registered with the U.S. Securities and Exchange Commission, and may
only be sold in accordance with applicable law and regulations.
The Lender is acquiring the Convertible Debenture and Shares
received upon conversion thereof for investment and not with a view
to the distribution thereof and has not entered into any agreement
or other arrangement or understanding with any party regarding the
resale of this Agreement, the Convertible Debenture, the Conversion
Shares, or any interest or partial interest therein.
(d) The Lender will not sell, sell short or cause any trading directly
or indirectly to take place in the market for any of the Borrower's
securities into which Principal or accrued Interest of the
Convertible Debenture may be converted that would in any way
negatively affect the trading price of such securities until after a
Notice of Conversion is given to the Borrower.
12. RIGHTS AND REMEDIES. Each right, power or remedy of the Lender or its
assignee upon the occurrence of any event of default as provided for herein,
or now or hereafter existing at law or in equity or by statute, shall be
cumulative and concurrent and shall be in addition to every other right, power
or remedy provided for herein or now or hereafter existing at law or in equity
or by statute, and the exercise or beginning of the exercise by the Lender or
its assignee of any one or more of such rights, powers or remedies shall not
preclude the simultaneous or later exercise of any or all such other rights,
powers or remedies. The Borrower covenants that it will not at any time
insist upon, or plead, or in any manner whatsoever claim or take benefit or
advantage of, any stay, usury or extension law wherever enacted or now or at
any time hereafter in force, which may effect the covenants or performance of
this agreement.
13. FAILURE TO ACT AND WAIVER. No failure or delay by the holder to insist
upon the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon an event of default hereunder shall constitute a
waiver of any such term or of any such breach, or preclude the holder from
exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable hereunder, the
holder shall not be deemed to waive the right either to require payment when
due of all other amounts payable hereunder, or to declare an event of default
hereunder for failure to effect such payment of any such other amount.
14. REGISTRATION RIGHTS. If the Borrower proposes to register under the
Securities Act shares of its Common Stock, the Borrower shall include in such
registration all Conversion Shares that the Lender desires to include therein.
In addition, within 90 days of the Borrower's receipt of a written request
from the Lender after the filing of the Form 10-KSB for the period ended
December 31, 2002, or as soon after that filing as practical, the Borrower
shall prepare and file a registration statement under the Securities Act for
the purpose of effecting a registration of the Conversion Shares. The Borrower
shall use its reasonable best efforts to effect such registration and to keep
the registration continuously effective. In either case, the Borrower shall
enter into such agreements as are customary and take such other actions as are
reasonably necessary in order to expedite or facilitate the disposition of the
Conversion Shares, including without limitation the listing of all Conversion
Shares on each securities exchange or other trading market on which securities
of the same class or series are then listed. The Borrower shall also file the
reports required to be filed by it under the Securities Exchange Act of 1934,
so as to enable the Lender to sell Conversion Shares pursuant to Rule 144.
All reasonable costs of such registration and listing of securities shall be
borne by Lender.
15. ACCEPTANCE OF INVESTMENT INTENT AND ESTOPPEL. In reliance upon the
representations and warranties of the Lender, the Borrower affirmatively
accepts and acknowledges: the Lender's investment intent; that the Lender is
not an "underwriter" as defined by Section 2(a)(11) of the Securities Act; and
that the Borrower shall be estopped from asserting as either a claim or
defense that the Lender is an underwriter as a result of the purchase of the
Convertible Debenture or conversion thereof.
16. BROKERAGE FEES AND OTHER EXPENSES. The Borrower and Lender agree that
there are no brokerage fees or commissions due related to the execution or
performance of the Convertible Debenture Agreement or the Convertible
Debenture. Each shall bear its own incidental expenses of the transaction
including any attorney's fees. In addition, the Borrower and Lender agree
that there is no finder fee or other payment due to any third party as result
of this transaction.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Representations and
Warranties set forth above shall survive the execution of this Agreement and
may be relied upon by either Party so long as the relying Party does not have
actual knowledge of the invalidity or inaccuracy of said Representations and
Warranties.
18. INDEMNIFICATION. Borrower agrees to indemnify and hold harmless Lender
for any liability arising to Lender after closing from Lender's reliance on
Borrower's Representations and Warranties. Lender also agrees to indemnify and
hold harmless Borrower for any liability arising to Borrower after closing
from Borrower's reliance on Lender's Representations and Warranties.
19. COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be executed in
counterpart signatures and the Parties agree that a facsimile signature
transmitted from a known telephone number of either Party shall be deemed to
be an original signature.
20. GOVERNING LAW. This Agreement and Debenture shall be construed and
enforced in accordance with the laws of the United States and the State of
Utah, without regard to conflicts of law. In the event that any dispute should
arise pertaining to this Agreement and Debenture, the parties agree that
jurisdiction shall vest only in the State or Federal Courts located in Salt
Lake City, Utah in order to resolve such dispute.
21. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given (a)
on date of delivery if delivered personally or (b) on the fifth day after
being sent by certified mail, return receipt requested, with postage prepaid,
or by courier service, return receipt requested, as follows:
Borrower: Xxxxxxxx X. Xxxxx, Corporate Secretary
GOLDEN EAGLE INTERNATIONAL, INC.
12401 South 000 Xxxx, Xxxx. X0, Xxxxx X
Xxxx Xxxx Xxxx, Xxxx 00000
Lender: Xxxxx Xxxxxxx
000 Xxxx Xxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000
22. ENTIRE AGREEMENT. This Agreement and the Convertible Debenture
constitute the entire agreement between the parties hereto and supersede all
prior agreements, understandings and arrangements, oral or written, between
the parties hereto with respect to the subject matter hereof and thereof.
This Agreement may not be amended or modified, except by a written agreement
signed by all parties hereto.
EXECUTED AND ACKNOWLEDGED on the date first set out above.
GOLDEN EAGLE INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxx /s/ Xxxxx Xxxxxxx
--------------------------- ----------------------------------
Xxxxx X. Xxxxxx, President Xxxxx Xxxxxxx
