Date of Issuance: March 19, 2009 8% CONVERTIBLE DEBENTURE DUE MARCH 19, 2011; MARCH 25, 2011
Exhibit
4.1
NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Date of
Issuance: March 19, 2009
$185,000
8%
CONVERTIBLE DEBENTURE
DUE MARCH
19, 2011; MARCH 25, 2011
THIS
DEBENTURE is one of two duly authorized and issued 8% Convertible Debentures of
Skins, Inc., a Nevada corporation, having a principal place of business at
0 Xxxxxx
Xxxxxx, Xxxxx 00X, Xxxxxxx Xxx Xxxxxx 00000 (the "Company"),
designated as its 8% Convertible Debenture, due March 19, 2011 and March 25,
2011 respectively (the "Debentures").
FOR VALUE
RECEIVED, the Company promises to pay to XXX Management Corp. or its registered
assigns (the "Holder"), the principal sum of Seventy Six Thousand Dollars
($76,000) on March 19, 2011 and One Hundred and Nine Thousand Dollars ($109,000)
on March 25, 2011 or such earlier date as the Debentures are required or
permitted to be repaid as provided hereunder (the "Maturity Date"), and to pay
interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of 8% per annum,
payable on the Maturity Date, unless the Debenture is converted to
shares of common stock in accordance with the terms and conditions
herein.
THE
COMPANY MAY PREPAY ANY PORTION OF THE PRINCIPAL AMOUNT AT 125% OF
SUCH AMOUNT ALONG WITH ANY ACCRUED INTEREST OF THIS DEBENTURE AT ANY TIME UPON
SEVEN DAYS WRITTEN NOTICE TO THE HOLDER
This
Debenture is subject to the following additional provisions:
Section
1. This Debenture is exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holder
surrendering the same. No service charge will be made for such registration of
transfer or exchange.
Section
2. This Debenture may be transferred or exchanged only in compliance with
applicable federal and state securities laws and regulations. Prior to due
presentment to the Company 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 Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section
3. Events of Default.
a) "Event
of Default", wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
i) any
default in the payment of the principal of, interest (including Late Fees) on,
or liquidated damages in respect to this Debenture, free of any claim of
subordination, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which
default is not cured, if possible to cure, within 3 days of notice of
such default sent by the Holder;
ii) the
Company or any of its subsidiaries shall commence, or there shall be commenced
against the Company or any such subsidiary a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy, insolvency or
other proceeding which remains undismissed for a period of 60 days; or the
Company or any subsidiary thereof is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or
the Company
or any subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary thereof shall call a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts; or
the Company or any subsidiary thereof shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or any
subsidiary thereof for the purpose of effecting any of the
foregoing;
b) If any
Event of Default occurs and is continuing, the full principal amount of this
Debenture, together with interest and other amounts owing in respect thereof, to
the date of acceleration shall become at the Holder's election, immediately due
and payable in cash.. The Holder need not provide and the Company hereby waives
any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Xxxxxx at any
time prior to payment hereunder and the Holder shall have all rights as a
Debenture holder until such time, if any, as the full payment under this Section
shall have been received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
Section
4. Conversion.
a) i)
Xxxxxx's Conversion Right. At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture, including interest and
principal, shall be convertible into shares of Common Stock at a price of sixty
percent (60%) of the lowest closing bid price, determined on the then current
trading market for the Company’s common stock, for 10 trading days prior to
conversion. (the “Set Price”) at the option of the Holder, in whole at any time
and from time to time. The Holder shall effect conversions by
delivering to the Company the form of Notice of Conversion attached hereto as
Annex A (a "Notice of Conversion"), specifying the date on which such conversion
is to be effected (a "Conversion Date"). If no Conversion Date is specified in a
Notice of Conversion, the Conversion Date shall be the date that such Notice of
Conversion is provided hereunder. To effect conversions hereunder, the Holder
shall not be required to physically surrender Debentures to the Company. The
Company shall deliver any objection to any Notice of Conversion within 2
Business Days of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder and any assignee, by acceptance of
this Debenture, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less than the amount
stated on the face hereof.
ii) If
the Company, at any time while this Debenture is outstanding: (A) shall pay a
stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Debenture, including as interest thereon), (B)
subdivide outstanding shares of Common Stock into a larger number of shares, (C)
combine (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issue by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then the
Set Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
iii) Whenever
the Set Price is adjusted pursuant to any of Section 4, the Company shall
promptly mail to each Holder a notice setting forth the Set Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
iv) If
(A) the Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Company
shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of
the Company shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the
Company, of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then, in each case, the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of the Debentures, and
shall cause to be mailed to the Holders at their last addresses as they
shall appear upon the stock books of the Company, at least 20
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. Holders are entitled to convert
Debentures during the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
v) If, at
any time while this Debenture is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a "Fundamental Transaction"), then upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for
each Underlying Share that would have been issuable upon such conversion absent
such Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of one share of Common Stock (the
"Alternate Consideration"). For purposes of any such conversion, the
determination of the Set Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Set Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor to the
Company or surviving entity in such Fundamental Transaction shall issue to the
Holder a new debenture consistent with the foregoing provisions
and evidencing the Holder's right to convert such
debenture into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this
paragraph (c) and insuring that this Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a Change of Control Transaction, then at the request of the Holder
delivered before the 90th day
after such Fundamental Transaction, the Company (or any such successor or
surviving entity) will purchase the Debenture from the Holder for a purchase
price, payable in cash within five Trading Days after such request (or,
if later, on the effective date of the Fundamental Transaction),
equal to the 100% of the remaining unconverted principal amount of this
Debenture on the date of such request, plus all accrued and unpaid interest
thereon, plus all other accrued and unpaid amounts due hereunder.
(d) The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of the Debenture
(e) Any
and all notices or other communications or deliveries to be provided by the
Holders hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this Section. Any
and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service addressed to each
Holder at the facsimile telephone number or address of such
Xxxxxx appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) the second Business Day following the
date of mailing, if sent by nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice
is required to be given.
Section
5. Definitions. For the purposes hereof, in addition to the terms defined
elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein
have the meanings given to such terms in the Purchase Agreement, and (b) the
following terms shall have the following meanings:
"Business
Day" means any day except Saturday, Sunday and any day which shall be a federal
legal holiday in the United States or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Common
Stock" means the common stock, $.001 par value per share, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Person"
means a corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
"Securities
Act" means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
"Set
Price" shall have the meaning set forth in Section 4.
Section
6. Except as expressly provided herein, no provision of this Debenture shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any)
on, this Debenture at the time, place, and rate, and in the coin or currency,
herein prescribed. This Debenture is a direct debt obligation of the Company.
This Debenture ranks pari passu with all other Debentures now or hereafter
issued under the terms set forth herein. As long as this Debenture is
outstanding, the Company shall not and shall cause it subsidiaries not to,
without the consent of the Holder, (a) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (b) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than a de minimis number of shares of its Common Stock or other equity
securities other than as to the Underlying Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents; or (c) enter into any agreement with respect to any of
the foregoing.
Section
7. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company
shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed Debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
Section
8. So long as any portion of this Debenture is outstanding, the Company will not
and will not permit any of its subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom that is senior in any
respect to the Company's obligations under the Debentures without the prior
consent of the Holder, which consent shall not be unreasonably
withheld.
Section
9. All questions concerning the construction, validity, enforcement and
interpretation of this Debenture shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the "New York
Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
Service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the
investigation, preparation and prosecution of such action or
proceeding.
Section
10. Any waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section
11. For six months from the date of this Debenture, the Holders
shall be entitled to “piggyback” registration rights on registrations initiated
by the Company on forms which permit the general sale of securities to the
public, subject to customary cut-backs if deemed necessary or advisable by the
underwriters for any such registration; except for any draw down or “Pipe”
transactions.
Section
12. If any provision of this Debenture is invalid, illegal or unenforceable, the
balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of interest. The
Company covenants (to the extent that it may lawfully do so) that it shall not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section
13. Whenever any payment or other obligation hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day.
*********************
IN
WITNESS WHEREOF, the Company has caused this Convertible Debenture to be
duly executed by a duly authorized officer as of the date first above
indicated.
| Skins, Inc. | |||
|
|
By:
|
||
| Name | |||
| Title | |||
ANNEX
A
NOTICE OF
CONVERSION
The
undersigned hereby elects to convert principal under the 8% Convertible
Debenture of Skins, Inc. (the "Company"), due on March 5, 2010, into
____________ shares of common stock, $.001 par value per share (the "Common
Stock"), of the Company according to the conditions hereof, 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 taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
By the
delivery of this Notice of Conversion the undersigned represents and warrants to
the Company that its ownership of the Company's Common Stock does not exceed the
amounts determined in accordance with Section 13(d) of the Exchange Act,
specified under Section 4 of this Debenture.
Conversion
calculations:
Date to
Effect Conversion: ____________________________________
60% of
the lowest closing bid price for 10 trading days prior to
conversion.
_________________________________________________________
Principal
Amount of Debentures to be Converted:
_________________________________________________________
Interest
Amount of Debentures to be Converted
_________________________________________________________
Number of
shares of Common Stock to
be
issued:
_________________________________________________________
Signature:
_________________________________________________
Name:
____________________________________________________
Address:__________________________________________________
NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Date of
Issuance: March 25, 2009
$185,000
8%
CONVERTIBLE DEBENTURE
DUE MARCH
25, 2011
THIS
DEBENTURE is one of two duly authorized and issued 8% Convertible Debentures of
Skins, Inc., a Nevada corporation, having a principal place of business at
0 Xxxxxx
Xxxxxx, Xxxxx 00X, Xxxxxxx Xxx Xxxxxx 00000 (the "Company"),
designated as its 8% Convertible Debenture, due March 25, 2011 (the
"Debenture").
FOR VALUE
RECEIVED, the Company promises to pay to XXX Management Corp. or its registered
assigns (the "Holder"), the principal sum of One Hundred and Eighty Five
Thousand Dollars ($185,000) on March 25, 2011 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"Maturity Date"), and to pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 8% per
annum, payable on the Maturity Date, unless the Debenture is
converted to shares of common stock in accordance with the terms and conditions
herein.
THE
COMPANY MAY PREPAY ANY PORTION OF THE PRINCIPAL AMOUNT AT 125% OF
SUCH AMOUNT ALONG WITH ANY ACCRUED INTEREST OF THIS DEBENTURE AT ANY TIME UPON
SEVEN DAYS WRITTEN NOTICE TO THE HOLDER
This
Debenture is subject to the following additional provisions:
Section
1. This Debenture is exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holder
surrendering the same. No service charge will be made for such registration of
transfer or exchange.
Section
2. This Debenture may be transferred or exchanged only in compliance with
applicable federal and state securities laws and regulations. Prior to due
presentment to the Company 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 Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section
3. Events of Default.
a) "Event
of Default", wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
i) any
default in the payment of the principal of, interest (including Late Fees) on,
or liquidated damages in respect to this Debenture, free of any claim of
subordination, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which
default is not cured, if possible to cure, within 3 days of notice of
such default sent by the Holder;
ii) the
Company or any of its subsidiaries shall commence, or there shall be commenced
against the Company or any such subsidiary a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy, insolvency or
other proceeding which remains undismissed for a period of 60 days; or the
Company or any subsidiary thereof is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the Company or
any subsidiary thereof makes a general assignment for the benefit of creditors;
or the Company shall fail to pay, or shall state that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or the Company
or any subsidiary thereof shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or the
Company or any subsidiary thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any subsidiary thereof
for the purpose of effecting any of the foregoing; or
(iii)
the Company shall fail to timely file all reports required to be filed by it
with the SEC pursuant to Section 13 or 15(d) of the Securities and Exchange Act
of 1934, as amended (the “Exchange Act”), or otherwise required by the Exchange
Act.
b) If any
Event of Default occurs and is continuing, the full principal amount of this
Debenture, together with interest and other amounts owing in respect thereof, to
the date of acceleration shall become at the Holder's election, immediately due
and payable in cash.. The Holder need not provide and the Company hereby waives
any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Xxxxxx at any
time prior to payment hereunder and the Holder shall have all rights as a
Debenture holder until such time, if any, as the full payment under this Section
shall have been received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
Section
4. Conversion.
a) i)
Xxxxxx's Conversion Right. At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture, including interest and
principal, shall be convertible into shares of Common Stock at a price of sixty
percent (60%) of the lowest closing bid price, determined on the then current
trading market for the Company’s common stock, for 10 trading days prior to
conversion. (the “Set Price”) at the option of the Holder, in whole at any time
and from time to time. In lieu of conversion, the Holder may exchange
this Debenture (including all principal and all accrued interest) for assuming
convertible non-trade debt of the Company in the amount of Two Hundred and
Seventy-Five Thousand Dollars ($275,000). The Holder shall effect conversions by
delivering to the Company the form of Notice of Conversion attached hereto as
Annex A (a "Notice of Conversion"), specifying the date on which such conversion
is to be effected (a "Conversion Date"). If no Conversion Date is specified in a
Notice of Conversion, the Conversion Date shall be the date that such Notice of
Conversion is provided hereunder. To effect conversions hereunder, the Holder
shall not be required to physically surrender Debentures to the Company. The
Company shall deliver any objection to any Notice of Conversion within 2
Business Days of receipt of such notice. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error. The Holder and any assignee, by acceptance of
this Debenture, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less than the amount
stated on the face hereof.
ii) If
the Company, at any time while this Debenture is outstanding: (A) shall pay a
stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Debenture, including as interest thereon), (B)
subdivide outstanding shares of Common Stock into a larger number of shares, (C)
combine (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issue by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then the
Set Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
iii) Whenever
the Set Price is adjusted pursuant to any of Section 4, the Company shall
promptly mail to each Holder a notice setting forth the Set Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
iv) If
(A) the Company shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Company
shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of
the Company shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the
Company, of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then, in each case, the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of the Debentures, and
shall cause to be mailed to the Holders at their last addresses as they
shall appear upon the stock books of the Company, at least 20
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. Holders are entitled to convert
Debentures during the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
v) If, at
any time while this Debenture is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a "Fundamental Transaction"), then upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for
each Underlying Share that would have been issuable upon such conversion absent
such Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of one share of Common Stock (the
"Alternate Consideration"). For purposes of any such conversion, the
determination of the Set Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Set Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any
different components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor to the
Company or surviving entity in such Fundamental Transaction shall issue to the
Holder a new debenture consistent with the foregoing provisions
and evidencing the Holder's right to convert such
debenture into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this
paragraph (c) and insuring that this Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a Change of Control Transaction, then at the request of the Holder
delivered before the 90th day
after such Fundamental Transaction, the Company (or any such successor or
surviving entity) will purchase the Debenture from the Holder for a purchase
price, payable in cash within five Trading Days after such request (or,
if later, on the effective date of the Fundamental Transaction),
equal to the 100% of the remaining unconverted principal amount of this
Debenture on the date of such request, plus all accrued and unpaid interest
thereon, plus all other accrued and unpaid amounts due hereunder.
(d) The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of the Debenture
(e) Any
and all notices or other communications or deliveries to be provided by the
Holders hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this Section. Any
and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service addressed to each
Holder at the facsimile telephone number or address of such
Xxxxxx appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:30 p.m. (New
York City time), (ii) the date after the date of transmission,
if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) the second Business Day following the
date of mailing, if sent by nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice
is required to be given.
Section
5. Definitions. For the purposes hereof, in addition to the terms defined
elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein
have the meanings given to such terms in the Purchase Agreement, and (b) the
following terms shall have the following meanings:
"Business
Day" means any day except Saturday, Sunday and any day which shall be a federal
legal holiday in the United States or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Common
Stock" means the common stock, $.001 par value per share, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Person"
means a corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
"Securities
Act" means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
"Set
Price" shall have the meaning set forth in Section 4.
Section
6. Except as expressly provided herein, no provision of this Debenture shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any)
on, this Debenture at the time, place, and rate, and in the coin or currency,
herein prescribed. This Debenture is a direct debt obligation of the Company.
This Debenture ranks pari passu with all other Debentures now or hereafter
issued under the terms set forth herein. As long as this Debenture is
outstanding, the Company shall not and shall cause it subsidiaries not to,
without the consent of the Holder, (a) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder; (b) repay, repurchase or offer to repay, repurchase or otherwise acquire
more than a de minimis number of shares of its Common Stock or other equity
securities other than as to the Underlying Shares to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents; or (c) enter into any agreement with respect to any of
the foregoing.
Section
7. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company
shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed Debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
Section
8. So long as any portion of this Debenture is outstanding, the Company will not
and will not permit any of its subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom that is senior in any
respect to the Company's obligations under the Debentures without the prior
consent of the Holder, which consent shall not be unreasonably
withheld.
Section
9. All questions concerning the construction, validity, enforcement and
interpretation of this Debenture shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the "New York
Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
Service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses
incurred
with the
investigation, preparation and prosecution of such action or
proceeding.
Section
10. Any waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section
11. For six months from the date of this Debenture, the Holders shall
be entitled to “piggyback” registration rights on registrations initiated by the
Company on forms which permit the general sale of securities to the public,
subject to customary cut-backs if deemed necessary or advisable by the
underwriters for any such registration; except for any draw down or “Pipe”
transactions.
Section
12. If any provision of this Debenture is invalid, illegal or unenforceable, the
balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates applicable laws
governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate of interest. The
Company covenants (to the extent that it may lawfully do so) that it shall not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
Section
13. Whenever any payment or other obligation hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day.
*********************
IN
WITNESS WHEREOF, the Company has caused this Convertible Debenture to be
duly executed by a duly authorized officer as of the date first above
indicated.
| Skins, Inc. | |||
|
|
By:
|
||
| Name | |||
| Title | |||
ANNEX
A
NOTICE OF
CONVERSION
The
undersigned hereby elects to convert principal under the 8% Convertible
Debenture of Skins, Inc. (the "Company"), due on March 25, 2011, into
____________ shares of common stock, $.001 par value per share (the "Common
Stock"), of the Company according to the conditions hereof, 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 taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
By the
delivery of this Notice of Conversion the undersigned represents and warrants to
the Company that its ownership of the Company's Common Stock does not exceed the
amounts determined in accordance with Section 13(d) of the Exchange Act,
specified under Section 4 of this Debenture.
Conversion
calculations:
Date to
Effect Conversion: ____________________________________
60% of
the lowest closing bid price for 10 trading days prior to
conversion.
_________________________________________________________
Assumption
of debt: ________________________________________
Principal
Amount of Debentures to be Converted:
_________________________________________________________
Interest
Amount of Debentures to be Converted
_________________________________________________________
Number of
shares of Common Stock to
be
issued:
_________________________________________________________
Signature:
_________________________________________________
Name:
____________________________________________________
Address:__________________________________________________
