Exhibit 10.16
US$100,000
CONVERTIBLE DEBENTURE - SERIES A
by and between
B. TWELVE, INC., as the Corporation and
CREDIFINANCE GESTION S.A., as the Holder
May 1, 2002
ARTICLE 1
PRINCIPAL SUM
SECTION 1.1. PRINCIPAL SUM.
For value received, B. Twelve, Inc. (the "Corporation"), a Florida corporation
having its head office at Gardens Corporate Center, 0000 XXX Xxxxxxxxx, Xxxxx
000, Xxxx Xxxxx Xxxxxxx, Xxxxxxx, 00000, shall pay to the order of Credifinance
Gestion S.A., a Switzerland corporation having its head office at 00 Xxx
Xxxxxx-Xxxxx, Xxxxxx, Xxxxxxxxxxx XX0000, or its assigns (the "Holder") the
principal sum of ONE HUNDRED THOUSAND DOLLARS (US$100,000) in lawful money of
the United States of America (the "Principal Sum") upon presentation and
surrender of this Debenture at an office designated by the Holder at Maturity or
upon an Event of Default (as defined below) or otherwise in accordance with the
terms of this Debenture.
SECTION 1.2. INTEREST.
The Principal Sum outstanding from time to time shall bear interest both before
and after Maturity, default and judgment from and including May 1, 2002 (the
"Commencement Date") to the date of repayment in full at 5% per annum calculated
and payable annually, not in advance, commencing on the Commencement Date.
Interest on overdue interest shall be calculated at the same rate and payable on
demand. Accrued and unpaid interest will be calculated on an actual number of
days to 365-day year basis. Interest is payable either in cash or an equivalent
value of common shares of the Company based on the Conversion Price defined
herein. Unless the Debenture is converted, redeemed or retracted before
Maturity, the interest payment dates will be May 1, 2003 and April 30, 2004.
SECTION 1.3. ISSUANCE OF PRICE PROTECTION AGREEMENT.
As further consideration for the advance of the Principal Sum, the Corporation
agrees to provide the Holder with anti-dilution protection as described in the
Price Protection Agreement even dated and is hereby incorporated herein by
reference thereto as if fully set forth herein.
ARTICLE 2
SECURITY
SECTION 2.1 SECURITY.
The Corporation acknowledges that it has granted security in connection with and
which shall secure such Obligations pursuant to the security agreement of even
date executed by the Corporation in favor of the Holder (the "Security
Agreement"), and the Corporation promises to pay, on demand, any and all
out-of-pocket expenses (including counsel fees and disbursements) incurred by or
on behalf of the Holder in enforcing any of its rights pursuant to this
Debenture or the Security Agreement.
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ARTICLE 3
INTERPRETATION
SECTION 3.1. DEFINITIONS.
As used in this Debenture, the following terms have the following meanings:
"affiliates" means, with respect to a specified Person, any Person directly or
indirectly controlling, controlled by, or under common control with the
specified Person, including without limitation their stockholders and any
Affiliates thereof. A Person shall be deemed to control a corporation or other
entity if the Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and business of the corporation or other
entity, whether through the ownership of voting securities, by contract, or
otherwise.
"Business Day" means any day of the year, other than Saturday, Sunday or other
day on which banks are required or authorized to close in Xxxxxxx, Xxxxxxx.
"Common Shares" means the shares of $0.0001 par value of the Corporation
designated as common shares in its certificate of incorporation dated March 5,
1999, as amended by certificates and articles of amendment, as such shares exist
at the commencement of business on this date.
"Conversion Period" means the period during which the Holder may exercise its
option to convert this Debenture into Common Shares, beginning on the date of
this Debenture and terminating on the Maturity of this Debenture or, if such day
is not a Business Day, on the immediately preceding Business Day.
"Conversion Price" means the price per share at which this Debenture may be
converted into Common Shares during the Conversion Period, which is US$1.00 per
Common Share.
"Event of Default" has the meaning specified in Section 7.1.
"GAAP" means, at any time, accounting principles generally accepted in the
United States of America applied in a consistent manner.
"Governmental Authority" means and includes any federal, state, District of
Columbia, county, municipal, or other government and any department, commission,
board, bureau, agency or instrumentality thereof, whether domestic or foreign.
"Instrument" means this Debenture, the Security Agreement or any other agreement
or instrument (whether now existing, presently arising or created in future)
delivered by the Corporation to the Holder.
"Lien" means any mortgage, charge, pledge, hypothecation, security interest,
assignment, encumbrance, lien (statutory or otherwise), charge, title retention
agreement or arrangement, restrictive covenant or other encumbrance of any
nature or any other arrangement or condition that in substance secures payment
or performance of an obligation.
"Maturity" means the date the Holder may demand repayment of the Principal Sum
and all accrued or unpaid interest. The Debenture must be paid in full either on
the earlier of: (a) April 30, 2004; or (b) the closing date of any offering of
debt or equity securities, convertible or otherwise, of the Corporation or any
of its affiliates (as defined herein) or successors, and including without
limitation offerings or issuances of shares, warrants, rights, debentures, notes
or other commercial paper, net of all reasonable expenses or fees associated
with such offerings or issuances whereby the net proceeds raised by the Company
after the date of this Debenture aggregate over US$1,000,000.00.
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"Obligations" means all monies now or at any time previously and from time to
time hereafter owing or payable by the Corporation to the Holder or any
affiliates of the Holder and all obligations (whether now existing or hereafter
incurred) of the Corporation in favour of the Holder or any affiliates of the
Holder, and whether direct or indirect, absolute or contingent, matured or not,
whether arising from agreement or dealings between the Holder and the
Corporation or from any agreement or dealings with any other Person by which the
Holder may be or become in any manner whatsoever creditor or other obligee of
the Corporation or however otherwise arising and whether the Corporation is
bound alone or with another or others and whether as principal or surety,
including monies payable or obligations arising in connection with this
Debenture.
"Patents" means all of the Corporation's current patents, assigned patents,
after-acquired patents, patent applications, whether filed or registered in the
United States, Canada or internationally, including without limitation all
continuations, continuations in part, divisionals, reissues, re-examinations and
convention priority and any patents issuing therefrom, including without
limitation such patents issued or pending as described in Schedule A to the
Security Agreement.
"Permitted Indebtedness" means:
(1) indebtedness under this Debenture;
(2) unsecured indebtedness owed to creditors incurred in the
ordinary course of business;
(3) indebtedness owed to the Holder or any of its affiliates;
(4) unsecured indebtedness, indebtedness secured by security
ranking subordinate to security in favour of the Holder and
leases provided that the aggregate of such annual indebtedness
newly arising in the year and current year payments under
leases will not exceed $100,000 in the aggregate, such
$100,000 annual limit to be increased annually upon receipt of
the financial statements of the Corporation of each year by an
amount equal to 20% of the net income after tax of the
Corporation for the immediately preceding fiscal year; or
(5) any additional unsecured indebtedness provided that to the
extent that such indebtedness is in excess of that provided
for in subparagraphs (2) or (4), the amount of such excess is
paid to reduce accrued and unpaid interest under this
Debenture and, if any excess remains, the Principal Sum.
"Permitted Liens" means, in respect of any Person, liens in favour of the Holder
or any of its affiliates created by the Security Documents.
"Person" means an individual, partnership, corporation, trust, joint venture,
joint stock company, limited liability company, association, unincorporated
organization, Governmental Authority, or any other entity.
"Premises" means any premises owned or occupied by the Corporation from time to
time.
"Securities Laws" means the Securities Act of 1933 and the securities laws of
any state in the United States of America and the rules, regulations and
policies of any U.S. securities regulatory authority administering such
securities laws, as the same shall be in effect from time to time.
"Security Documents" means, collectively, this Debenture and all other
agreements and other instruments delivered to the Holder by the Corporation or
any of its affiliates (whether now existing or presently arising) for the
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purpose of establishing, perfecting, preserving or protecting any security held
by the Holder in respect of any Obligations, including without limitation the
Security Agreement (as defined in Section 2.1, above).
"Shareholders Agreement" means that certain Amended and Restated Unanimous
Shareholders' Agreement dated January 15, 2001 by and among the Corporation and
its shareholders, as amended from time to time.
"Voting Control" means the direct or indirect ownership or control of a
sufficient number of outstanding shares of a corporation to elect a majority of
its directors or, in the case of a non-corporate entity, means the direct or
indirect ownership or control of a sufficient number, amount or type of
securities or other ownership interests to elect or appoint persons performing
similar functions or to perform similar functions.
SECTION 3.2. GENDER AND NUMBER.
Any reference in this Debenture to gender includes all genders and words
importing the singular number only include the plural and vice versa.
SECTION 3.3. HEADINGS, ETC.
The provision of a Table of Contents, the division of this Debenture into
Articles and Sections and the insertion of headings are for convenient reference
only and are not to affect the interpretation of this Debenture.
SECTION 3.4. CURRENCY.
All references in this Debenture to dollars, unless otherwise specifically
indicated, are expressed in United States of America currency (the "Agreed
Currency").
SECTION 3.5 CERTAIN PHRASES, ETC.
In this Debenture (i) (y) the words "including" and "includes" mean "including
(or includes) without limitation" and (z) the phrase "the aggregate of", "the
total of", "the sum of", or a phrase of similar meaning means "the aggregate (or
total or sum), without duplication, of", and (ii) in the computation of periods
of time from a specified date to a later specified date, unless otherwise
expressly stated, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding".
SECTION 3.6 ACCOUNTING TERMS.
All accounting terms not specifically defined in this Debenture shall be
interpreted in accordance with GAAP.
SECTION 3.7 INCORPORATION OF SCHEDULES.
The schedules attached to this Debenture shall, for all purposes of this
Debenture, form an integral part of it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES.
The Corporation represents and warrant to the Holder as follows:
(1) Incorporation and Qualification. The Corporation is duly
incorporated, organized and validly existing under the laws of
its jurisdiction of incorporation and is qualified, licensed
or registered to carry on business under the laws applicable
to it in all jurisdictions in which such qualification,
licensing or registration is necessary or where failure to be
so qualified would have a material adverse effect on its
operations, business, properties or financial condition.
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(2) Corporate Power. The Corporation has all requisite corporate
power and authority to (i) own, lease and operate its
properties and assets and to carry on its business as now
being conducted by it, and (ii) enter into and perform its
obligations under this Debenture and the Security Documents.
(3) Conflict with Other Instruments. The execution and delivery by
the Corporation and the performance by the Corporation of its
obligations under, and compliance with the terms, conditions
and provisions of, this Debenture, including the execution and
delivery of or the continued compliance with any currently
existing Security Documents, will not (i) conflict with or
result in a breach of any of the terms or conditions of (t)
its constating documents or by-laws, (u) any applicable law,
rule or regulation, (v) any contractual restriction binding on
or affecting it or its properties, or (w) any judgment,
injunction, determination or award which is binding on it, or
(ii) result in, require or permit (x) the imposition of any
encumbrance in, on or with respect to any of its assets or
property (except in favour of the Holder), (y) the
acceleration of the maturity of any debt binding on or
affecting the Corporation, or (z) any third party to terminate
or acquire rights under any material agreement.
(4) Corporate Action, Governmental Approvals, etc. The execution
and delivery of this Debenture and continued compliance with
any Security Documents by the Corporation and the performance
by the Corporation of its obligations under this Debenture and
the Security Documents have been duly authorized by all
necessary corporate action. No authorization, consent,
approval, registration, qualification, designation,
declaration or filing with any Person, is or was necessary in
connection with the execution, delivery and performance of
obligations under this Debenture and the Security Documents
except as are in full force and effect, unamended, at the date
of this Debenture.
(5) Execution and Binding Obligation. This Debenture has been duly
executed and delivered by the Corporation and constitutes a
legal, valid and binding obligation of the Corporation,
enforceable against each of them in accordance with its terms,
subject only to any limitation under applicable laws relating
to (i) bankruptcy, insolvency, arrangement or creditors'
rights generally, and (ii) the discretion that a court may
exercise in the granting of equitable remedies.
(6) Authorizations, etc. The Corporation possesses all
authorizations, permits, consents, registrations and approvals
necessary to properly conduct its businesses and all such
authorizations, permits, consents, registrations and approvals
are in good standing and in full force and effect.
(7) No Default. The Corporation is not in violation of its
constating documents, its by-laws or any shareholders'
agreement applicable to it.
(8) Books and Records. All books and records of the Corporation
have been fully, properly and accurately kept and completed
and there are no material inaccuracies or discrepancies of any
kind contained or reflected therein. The Corporation's books
and records and other data and information are available to
the Corporation in the ordinary course of their business.
(9) Tax Liability. The Corporation has filed all tax and
information returns which are required to be filed and has
paid all taxes, interest and penalties, if any, which have
become due pursuant to such returns or pursuant to any
assessment received by it other than those in respect of which
liability based on such returns is being contesting in good
faith and by appropriate proceedings where adequate reserves
have been established in accordance with GAAP. Adequate
provision for payment has been made for taxes not yet due.
There are no tax disputes existing or pending involving the
Corporation which could reasonably be expected to have a
material adverse effect.
(10) Disclosure. There is no fact known to the Corporation which
could reasonably be expected to have a material adverse effect
on its business, operations, properties or financial condition
and which has not been fully disclosed to the Holder. No event
has occurred which could be reasonably anticipated to have a
material adverse effect since the date of this Debenture.
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SECTION 4.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties in this Debenture and in any certificates or
documents delivered to the Holder shall not merge in or be prejudiced by and
shall survive any advance and shall continue in full force and effect so long as
any amounts are owing by the Corporation to the Holder.
ARTICLE 5
COVENANTS
SECTION 5.1. AFFIRMATIVE COVENANTS.
So long as the Debenture remains outstanding, the Corporation and each of its
affiliates shall:
(1) Pay Certain Debts. Subject to the next sentence, punctually
pay and discharge every obligation the failure to pay or
discharge of which might result in any Lien or right of
distress, forfeiture, termination or sale or any other remedy
being enforced against the Patents and provide to the Holder,
when required, evidence of such payment and discharge. The
Corporation may, on giving the Holder such security (if any)
as the Holder may require, refrain from paying or discharging
any obligation, the liability for which is being contested in
good faith.
(2) Corporate Existence. Preserve and maintain its corporate
existence and all its rights, licences, powers, privileges,
franchises and goodwill.
(3) Comply with Agreement. Observe and perform all of its
obligations under the material agreements to which it is a
party or upon or under which any of the Patents is held.
(4) Carry on Business. Carry on and conduct its business in a
proper and efficient manner so as to preserve and protect the
Patents and income therefrom, including collecting all
accounts receivable in the ordinary course of business.
(5) Keeping of Books. Keep proper books of record and account, in
which full and correct entries of all transactions in relation
to its business are made.
(6) Compliance with Laws. Comply with the requirements of all
applicable laws, judgments, orders, decisions and awards.
(7) Change in Jurisdiction, etc. At least thirty (30) days prior
to any of the following changes becoming effective, notify the
Holder in writing of (i) any proposed change in the location
of: (w) any place of business of the Corporation, (x) the
chief executive office or head office of the Corporation, (y)
any account debtors of the Corporation, and (z) any place
where tangible property of the Corporation is stored, and (ii)
any proposed change in the name of the Corporation.
(8) Pay Taxes. Pay or cause to be paid, when due: (i) all taxes,
assessments and governmental charges or levies imposed upon it
or upon its income, sales, capital or profit or any other
property belonging to it, and (ii) all claims which, if
unpaid, might by law become a Lien upon the assets, except any
such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings and in
respect of which the Corporation have established adequate
reserves in accordance with generally accepted accounting
principles.
(9) Notification of Default. Advise the Holder immediately upon
becoming aware of any Event of Default (as defined herein) and
deliver to the Holder upon request a certificate in form and
substance satisfactory to the Holder signed by a senior
officer certifying that no Event of Default has occurred or,
if such is not the case, specifying all Events of Default and
their nature and status.
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(10) Auditors. Retain auditors satisfactory to the Holder at all
times.
(11) Registration of Security. Have made and maintained in good
standing all necessary registrations and filings in all
applicable jurisdictions in connection with the security
granted by the Corporation or any affiliates to the Holder
pursuant to the Security Documents.
(12) Protect Security. Promptly cure or cause to be cured any
defects in the execution and delivery of this Debenture or any
defects in the validity or enforceability of this Debenture
and at its expense, execute and deliver or cause to be
executed and delivered, all such agreements, instruments and
other documents (including the filing of any financing
statements or financing change statements) as the Holder may
consider necessary or desirable to protect or otherwise
perfect any security interest created by the Security
Documents.
(13) Inspection by the Holder. Allow the Holder and its authorized
representatives at any reasonable time to enter the Premises
in order to examine and review the Patents and the books and
records of the Corporation and make extracts therefrom, and
permit the Holder or such representatives prompt access to
such other persons as the Holder may deem necessary or
desirable for the purposes of reviewing or verifying any
matters relating to any of the Patents or the books and
records of the Corporation.
(14) Financial Reporting. Deliver to the Holder:
i. as soon as practicable and in any event within one
hundred forty (140) days after the end of each
financial year of the Corporation, a copy of audited
consolidated financial statements including the
balance sheet and statements of income, retained
earnings and changes in financial position, together
with all supporting schedules. The financial
statements shall be signed by an authorized officer
on behalf of the Corporation and shall be accompanied
by a detailed report of the auditors of the
Corporation (which report shall not be qualified).
The Corporation shall deliver to the Holder with the
financial statements a certificate signed by its
chief financial officer or another senior officer
satisfactory to the Holder, in any case without
personal liability to such officer, stating that (i)
the financial statements have been prepared in
accordance with generally accepted accounting
principles and present fairly the financial position
of the Corporation at the date thereof, and (ii) the
Corporation is not in breach of any of its covenants
or representations and warranties, contained in this
Debenture or the Security Documents;
ii. as soon as practicable and in any event within sixty
(60) days after the end of each quarter, a copy of
quarterly consolidated financial statements including
the balance sheet and statements of income, retained
earnings and changes in financial position, together
with all supporting schedules. The financial
statements shall be signed by an authorized officer
on behalf of the Corporation. The Corporation shall
deliver to the Holder with the financial statements a
certificate signed by its chief financial officer or
another senior officer satisfactory to the Holder, in
any case without personal liability to such officer,
stating that (i) the financial statements have been
prepared in accordance with generally accepted
accounting principles and present fairly the
financial position of the Corporation at the date
thereof, and (ii) the Corporation is not in breach of
any of its covenants or representations and
warranties, contained in this Debenture or the
Security Documents; and
iii. as soon as practicable and in any event within ten
(10) days of the end of each financial quarter, a
certificate signed by the President, Vice President
or Chief Executive Officer of the Corporation stating
that (i) vacation pay, wages, source deductions and
taxes required to be remitted by the Corporation or
its affiliates have been so remitted and are in good
standing since the date of the last certificate, and
(ii) the property of the Corporation and its
affiliates and the operations of the Corporations and
its affiliates' business are in compliance in all
material respects with all environmental laws or
describing in reasonable detail any such
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non-compliance. The Corporation shall provide to the
Holder and its representatives, agents and designees
any other information concerning its or its
affiliates' financial position and business
operations which the Holder or such representative,
agent or designee may from time to time request.
(15) Notice of Litigation and Damage. Promptly give written notice
together with a detailed explanation to the Holder of (i) all
claims or proceedings pending or threatened against the
Corporation which may give rise to uninsured liability in
excess of $25,000 or which may have a material adverse effect
on the business or operations of the Corporation, and (ii) all
damage to or loss or destruction of any property or assets
used by the Corporation in conducting its business or
operations which may give rise to an insurance claim in excess
of $25,000.
(16) Use of Proceeds. Use the proceeds advanced by the Holder in
connection with this Debenture only to pay down existing debt
with the Holder, a portion of the outstanding balances with
the Company's research partners, as well as, be used for
payment of expenditures relating to research and development,
patents, professional services and benefits, and the remainder
will be for general working capital purposes.
(17) Review of Patent Portfolio. Retained an independent law firm
satisfactory to the Corporation and the Holder to complete at
review of the Corporation's patent portfolio (see Schedule A
of the Security Agreement) within 30 days from the date of
this Debenture and to have a detailed report prepared by the
patent auditors completed and delivered to the Corporation
within 90 days from the date of this Debenture.
SECTION 5.2. NEGATIVE COVENANTS.
So long as any amount owing under this Debenture remains unpaid, each of the
Corporation and any of its affiliates shall not, without first obtaining the
consent of the Holder:
(1) Indebtedness. Incur any indebtedness other than Permitted
Indebtedness.
(2) INTENTIONALLY LEFT BLANK
(3) Encumbrances. Create, incur, grant, assume or suffer to exist
any mortgages, charges or security interests over the Patents
other than Permitted Liens.
(4) Disposal of Assets Generally. Remove, destroy, lease,
transfer, assign, licence, sub-licence, sell or otherwise
dispose of any of the property or assets of the Corporation,
including the Patents, except for (i) bona fide dispositions
in the ordinary course of business at fair market value, (ii)
property or assets which have no material economic value in
the business of the Corporation or are obsolete.
(5) Financial Year. Change its financial year end.
(6) Acquire or Change Business. Purchase, establish or acquire in
any manner any new business undertaking or make any change in
the nature of the Corporation's or an affiliate's business as
presently carried on.
(7) Mergers, etc. Enter into any reorganization, consolidation,
amalgamation, arrangement, winding-up, merger or other similar
transaction or permit the assignment or transfer of any of its
issued and outstanding shares or any right, option or
privilege convertible into shares in the capital of the
Corporation.
(8) Investments. Acquire or invest in any securities or make any
loans to or investments in any other person, other than in the
context of granting ordinary trade credit.
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(9) Transactions with Related Parties. Engage in any transactions
with Persons not dealing at arm's length with the Corporation
or any of its affiliates except with the Holder, or its
affiliates, or in the ordinary course of, and pursuant to the
reasonable requirements of, business and at prices and on
terms not less favourable to the Corporation than could be
obtained in a comparable arm's length transaction with another
Person.
(10) Distributions. Declare, make, pay or commit to any form of
distribution or reduction of the profits of the Corporation or
of its capital, including (i) any dividend (including stock
dividends) or other distribution on any present or future
shares, (ii) the purchase, redemption or retirement or
acquisition any of its shares, or any option, warrant or other
right to acquire any such shares, or apply or set apart any of
its assets therefor, (iii) bonuses to shareholders, (iv)
payment on account of loans made to shareholders of the
Corporation, or (v) payment of any bonuses or management fees.
(11) Share Capital. Create, allot or issue any shares in its
capital, or enter into any agreement, or grant any option,
right or privilege, whether pre-emptive, contractual or
otherwise for the purchase or other acquisition of shares or
securities convertible into shares of the Corporation, amend
its articles or by-laws, change its capital structure or enter
into any agreement or make any offer to do so.
(12) Subsidiaries. Incorporate or acquire any subsidiaries or
commence to carry on its business, otherwise than through the
Corporation.
(13) Compromise of Accounts. Compromise or adjust to compromise or
adjust any of its accounts receivable (or extend the time for
payment thereof) or grant any discounts, allowances or
credits, in each case other than in the normal course of
business.
(14) Invoices. Redate any invoice or sale or provision of service
or make sales or provide services on extended dating beyond
that customary in the business of the Corporation.
ARTICLE 6
CONVERSION OF DEBENTURE
SECTION 6.1. CONVERSION OF DEBENTURES INTO COMMON SHARES.
(1) Upon and subject to the provisions and conditions of this
Article 6, the Holder shall have the right, at its option,
during the Conversion Period to convert all or any part of the
Principal Sum outstanding into fully paid and non-assessable
Common Shares at the Conversion Price by submitting a
completed conversion form in the form attached hereto as
Schedule A.
(2) The Holder's right of conversion pursuant to this Article 6
shall extend only to the maximum number of whole Common Shares
into which the aggregate Principal Sum of the Debenture
surrendered for conversion at any one time by the Holder may
be converted in accordance with the provisions of Section
6.1(1). Fractional interests in Common Shares shall be
adjusted for in the manner provided below.
SECTION 6.2. MANNER OF EXERCISE OF RIGHT TO CONVERT TO COMMON SHARES.
The Holder may exercise its rights to convert by sending to the Corporation at
its principal address a notice exercising its right to convert in accordance
with the provisions of this Article. Upon receipt of the notice, the Holder
shall be entered in the books of the Corporation as at the date of conversion as
the Holder of the number of Common Shares into which the Debenture is
convertible and, as soon as practicable, the Corporation shall deliver to the
Holder a certificate or certificates for such Common Shares and, if applicable,
a cheque for any amount payable under Section 6.4.
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SECTION 6.3. ACCRUED INTEREST, ETC.
At the time of the conversion, the Holder shall be entitled to receive accrued
and unpaid interest on this Debenture up to but excluding the date of its
conversion. Common Shares issued upon such conversion shall rank only in respect
of dividends declared in favour of shareholders of record on and after the date
of conversion or such later date as the Holder becomes the Holder of record of
Common Shares pursuant to Section 6.2. As of and from the applicable date, the
Common Shares so issued shall, for all purposes, be and be deemed to be issued
and outstanding as fully paid and non-assessable Common Shares.
SECTION 6.4. NO REQUIREMENT TO ISSUE FRACTIONAL SHARES.
The Corporation shall not be required to issue fractional Common Shares upon the
conversion, If any fractional interest in a Common Share would, except for the
provisions of this Article 6, be deliverable upon the conversion of the
Debenture, the Corporation shall, in lieu of delivering any certificate of
fractional interest, satisfy the fractional interest by paying to the Holder an
amount of Agreed Currency equal (computed to the nearest whole cent, and
one-half of a cent being rounded up) to the Principal Sum of the Debenture
remaining outstanding after so much of the Principal Sum as may be converted
into a whole number of Common Shares has been so converted.
SECTION 6.6. CORPORATION TO RESERVE SHARES.
The Corporation shall at all times reserve and keep available out of its
authorized Common Shares and solely for the purpose of conversion as in this
Article 6 provided, and conditionally allot to the Holder, such number of Common
Shares as shall then be issuable upon the conversion. The Corporation covenants
with the Holder that all Common Shares which shall be so issuable shall be duly
and validly issued as fully-paid and non-assessable.
SECTION 6.7. REGISTRATION RIGHTS.
If the Holder has exercised its option to convert this Debenture into Common
Shares, the Holder shall be entitled to the registration rights with respect to
the Common Shares granted to all shareholders under the provisions of Article 11
of the Shareholders Agreement and such provisions are hereby incorporated herein
by reference thereto as if fully set forth herein. The Corporation and the
Holder agree that the provisions of Article 11 of the Shareholders Agreement
shall survive any termination of the Debenture without limit as to time.
SECTION 6.8 REDEMPTION AT THE COMPANY'S OPTION
The Company may not redeem the Debenture at any time before May 1, 2003. After
that date, the Company will have the option to redeem the Debenture, in whole or
in part from time to time, out of funds legally available for such payment, upon
not less than 10 nor more than 60 days' prior written notice by the Company to
the Holder, at a redemption price equal to par plus accrued and unpaid interest
to (but excluding) the date fixed for redemption. The Company may, at its
option, elect to pay the redemption price in cash (or, subject to the Holder's
approval, in common shares of the Company valued at the Conversion Price, or any
combination thereof).
SECTION 6.9 REDEMPTION AT THE HOLDER'S OPTION
The Holder is not able to elect to retract maturity term of the Debenture at any
time before May 1, 2003. After that date, at the option of the Holder, the
Company will be required to redeem the Debenture, in whole or in part from time
to time, out of funds legally available for such payment, at a redemption price
equal to par plus accrued and unpaid interest to (but excluding) the date fixed
for redemption. At the Holder's option upon not less than 10 nor more than 60
days' written notice to the Company, the Company must pay the redemption price
in cash to the Holder on a date fixed for redemption in such notice.
Any redemption notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Company prior to the close of business on the day
that is three business days prior to the redemption date.
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ARTICLE 7
EVENTS OF DEFAULT
SECTION 7.1. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an "Event of
Default" under this Debenture:
(1) if the Corporation fails to pay any principal, interest or
other amounts payable under this Debenture when such amounts
become due and payable;
(2) if any representation or warranty made or deemed to be made by
the Corporation in this Debenture or the Security Documents or
in any certificate, statement or report furnished in
connection therewith is found to be false or incorrect;
(3) the Corporation or its affiliates fail to perform, observe or
comply with any of the covenants contained in Section 5.1 and
such failure remains unremedied for ten (10) days following
notice of such failure by the Holder to the Corporation;
(4) the Corporation or its affiliates fail to perform, observe or
comply with any covenants contained in Section 5.2;
(5) if the Corporation or its affiliates fails to perform, observe
or comply with any other term, covenant or agreement contained
in this Debenture or the Security Documents and such failure
remains unremedied for thirty (30) days following notice of
such failure by the Holder to the Corporation;
(6) if the Corporation or any one of its affiliates fails to pay
the principal of, or premium or interest on, any of its debt
(other than this Debenture) which is outstanding in an
aggregate principal amount exceeding $50,000 when such amount
becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and
such failure continues after the applicable grace period, if
any, specified in the agreement or instrument relating to the
debt without waiver of failure by the holders of the debt; or
any other event occurs or condition exists and continues after
the applicable grace period, if any, specified in any
agreement relating to any such debt without waiver by the
holders of the debt, if its effect is to accelerate, or permit
the acceleration of the debt; or any such debt shall be
declared to be due and payable prior to its stated maturity
and the declaration has not been rescinded by the holders of
the debt;
(7) if any judgment or order for the payment of money in excess of
$50,000 is rendered against the Corporation or any of its
affiliates and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order, or
(ii) there shall be any period of ten consecutive days during
which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in
effect;
(8) if the Corporation or any of its affiliates (i) becomes
insolvent or generally not able to pay its debts as they
become due, (ii) admits in writing its inability to pay its
debts generally or makes a general assignment for the benefit
of creditors, (iii) institutes or has instituted against it
any proceeding seeking (x) to adjudicate it a bankrupt or
insolvent, (y) liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of
it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors including any
plan of compromise or arrangement or other corporate
proceeding involving or affecting its creditors, or (z) the
entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or for any
substantial part of its properties and assets, and in the case
of any such proceeding instituted against it (but not
instituted by it), either the proceeding remains undismissed
or unstayed for a period of thirty days, or any of the actions
sought in such proceeding (including the entry of an order for
relief against it or the appointment of a receiver, trustee,
custodian or other similar official for it or for any
substantial part of its properties and assets) occurs, or (iv)
takes any corporate action to authorize any of the above
actions;
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(9) if any financial statement provided by the Corporation to the
Holder is false or misleading in any material respect; or
(10) if there has occurred or been threatened, in the sole opinion
of the Holder, an event or development reasonably likely to
have a material adverse effect on the Corporation, its
business and operations or its prospects.
SECTION 7.2 CONSEQUENCES OF AN EVENT OF DEFAULT.
Upon the occurrence of any Event of Default, all Obligations and all monies
secured by the Security Documents or otherwise shall at the option of the Holder
become forthwith due and payable and all rights, powers or remedies conferred by
the Security Documents and law shall become immediately enforceable and any and
all additional and collateral securities for payment of this Debenture shall
become immediately enforceable.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 WAIVER.
(1) No amendment or waiver of any provision of this Debenture, nor
consent to any departure by the Corporation or any other
Person from such provisions, is effective unless in writing
and approved by the Holder. Any amendment, waiver or consent
is effective only in the specific instance and for the
specific purpose for which it was given.
(2) No failure on the part of the Holder to exercise, and no delay
in exercising, any right under this Debenture shall operate as
a waiver of such right; nor shall any single or partial
exercise of any right under this Debenture preclude any other
or further exercise of such right or the exercise of any other
right.
SECTION 8.2 OTHER SECURITY.
The rights of the Holder shall not be prejudiced nor shall the liabilities of
the Corporation or of any other person be reduced in any way by the taking of
any other security of any nature or kind whatsoever either before, at or after
the time of execution of this Debenture.
SECTION 8.3 POWER OF ATTORNEY.
The Corporation irrevocably appoints the Holder and its officers from time to
time or any of them to be the attorneys of the Corporation in the name of and on
behalf of the Corporation to execute, from and after the occurrence of an Event
of Default which is continuing, such deeds, transfers, conveyances, assignments,
assurances and things which the Corporation ought to execute and do under the
covenants and provisions herein contained and generally to use the name of the
Corporation in the exercise of all or any of the powers hereby conferred on the
Holder.
SECTION 8.4 HOLDER MAY REMEDY DEFAULT.
If the Corporation fails to do anything hereby required to be done by it, the
Holder may, but shall not be obliged to, do such thing and all sums thereby
expended by the Holder shall be payable forthwith by the Corporation, shall be
secured hereby and shall have the benefit of the lien hereby created, but no
such performance by the Holder shall be deemed to relieve the Corporation from
any default hereunder.
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SECTION 8.5 NOTICES, ETC.
Any notice, direction or other communication to be given under this Debenture
shall, except as otherwise permitted, be in writing and given by delivering it
or sending it by telecopy or other similar form of recorded communication
addressed:
(1) if to the Corporation, to it at, or care of:
B. Twelve, Inc.
C/O B. Twelve Limited
00X Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
Attention: Xxxx-Xxx Xxxxxx, Ph.D.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(2) if to the Holder, to it at, or care of:
Credifinance Gestion S.A.
C/O Credifinance Securities Ltd.
00X Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
Attention: Xxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Any such communication shall be deemed to have been validly and effectively
given if (i) personally delivered, on the date of such delivery if such date is
a Business Day and such delivery was made prior to 4:00 p.m. (Eastern Standard
Time (e.g. Toronto time)), otherwise on the next Business Day, (ii) transmitted
by facsimile or similar means of recorded communication on the Business Day
following the date of transmission. Any party may change its address for service
from time to time by notice given in accordance with the foregoing and any
subsequent notice shall be sent to the party at its changed address.
SECTION 8.6 SEVERABILITY.
If any provision of this Debenture is deemed by any court of competent
jurisdiction to be invalid or void, the remaining provisions shall remain in
full force and effect.
SECTION 8.7 INDEMNIFICATION.
The Corporation agrees to indemnify the Holder from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (except by
reason of the gross negligence or willful misconduct of the Holder or any of its
employees or a material breach by the Holder of any of its covenants contained
herein) which may be imposed on, incurred by, or asserted against the Holder and
arising by reason of any action (including any action referred to herein) or
inaction or omission to do any act legally required of the Corporation.
SECTION 8.8 SUCCESSORS AND ASSIGNS, ETC.
This Debenture may be assigned by the Holder in its sole discretion. This
Debenture and all its provisions shall enure to the benefit of the Holder, its
successors and assigns and shall be binding upon the Corporation, its successors
and assigns. The Holder is the person entitled to receive the money payable
hereunder and to give a discharge hereof. Presentment, notice of dishonour,
protest and notice of protest hereof are hereby waived.
SECTION 8.9 EXPENSES.
All legal and accounting expenses incurred by the Holder, the Corporation and
its shareholders and employees in connection with the transactions contemplated
in this Debenture shall be paid by the Corporation.
SECTION 8.10 GOVERNING LAW.
CHOICE OF LAW; CONSENT TO JURISDICTION. EXCEPT TO THE EXTENT THAT THE UNIFORM
COMMERICIAL CODE PROVIDES FOR THE APPLICATION OF THE LAW OF THE BORROWER'S STATE
OF ORGANIZATION, THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED
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IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY
OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT
OF THIS AGREEMENT OR THE NOTE IS COMMENCED BY LENDER IN THE STATE COURTS OF THE
STATE OF FLORIDA OR IN THE U.S. DISTRICT COURT FOR THE DISTRICT OF FLORIDA,
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH
ACTION AND TO THE LAYING OF VENUE IN THE STATE OF FLORIDA. ANY PROCESS IN ANY
SUCH ACTION SHALL BE DULY SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID,
TO BORROWER AT ITS ADDRESS DESCRIBED IN SECTION 8.5. OR IF SERVED BY ANY OTHER
MEANS PERMITTED BY APPLICABLE LAW.
TO THE EXTENT THAT THE CORPORATION HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE CORPORATION HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
DEBENTURE.
SECTION 8.11 COUNTERPARTS.
This Debenture may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF the parties have caused this Debenture to be executed by its
duly authorized officers on the date written above.
B. TWELVE, INC.
Per: __________________________________
Authorized Signing Officer
CREDIFINANCE GESTION S.A.
Per: __________________________________
Authorized Signing Officer
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SCHEDULE "A"
CONVERSION FORM
---------------
To: B. TWELVE, INC. (the "Corporation")
The undersigned holder of the debenture of the Corporation numbered Series A
(the "Debenture") hereby irrevocably elects to convert the outstanding Principal
Sum (as defined in the Debenture) (or $_________ thereof) into Common Shares of
the Corporation in accordance with the terms of the Debenture and directs that
the Common Shares issuable and deliverable upon the conversion be issued and
delivered to the person indicated below.
(If the Common Shares are to be issued in the name of a person other than the
holder, the signature must be guaranteed by a chartered bank, by a trust company
or by a member firm of a recognized stock exchange and all requisite transfer
taxes must be tendered by the undersigned).
CREDIFINANCE GESTION S.A.
Per: __________________________________
Authorized Signing Officer
Dated: __________________________________
CERTIFICATES TO BE ISSUED AND DELIVERED TO:
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Name
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Address
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City and Province/State
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Country
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Postal Code / ZIP Code
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