EXHIBIT 4.2
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
7 % CONVERTIBLE DEBENTURE
COMPANY: The World Golf League, Inc.
COMPANY ADDRESS: 000 Xxxx Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxxx, XX 00000
CLOSING DATE: June 4, 2004
MATURITY DATE: June 3, 2006
PRINCIPAL AMOUNT: $250,000
FIRST PAYMENT DUE DATE: August 15, 2004
The World Golf League, Inc., a Delaware corporation, and any successor or
resulting corporation by way of merger, consolidation, sale or exchange of all
or substantially all of the assets or otherwise (the "COMPANY"), for value
received, hereby promises to pay to the Holder (as such term is hereinafter
defined), or such other Person (as such term is hereinafter defined) upon order
of the Holder, on the Maturity Date, the Principal Amount (as such term is
hereinafter defined), as such sum may be adjusted pursuant to Article 3, and to
pay interest thereon from the Closing Date, monthly in arrears, on the 15th day
of each month (each an "INTEREST PAYMENT DUE DATE" and collectively, the
"INTEREST PAYMENT DUE DATES"), commencing on the First Payment Due Date, at the
rate of seven percent (7 %) per annum (the "DEBENTURE INTEREST RATE"), until the
Principal Amount of this Debenture has been paid in full. All interest payable
on the Principal Amount of this Debenture shall be calculated on the basis of a
360-day year for the actual number of days elapsed. Payment of interest on this
Debenture shall be in cash or, at the option of the Holder, in shares of Common
Stock of the Company valued at the then applicable Conversion Price (as defined
herein). This Debenture may not be prepaid without the written consent of the
Holder.
DEFINITIONS
Definitions. The terms defined in this Article whenever used in this
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Debenture have the following respective meanings:
"AFFILIATE" has the meaning ascribed to such term in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended.
"BANKRUPTCY CODE" means the United States Bankruptcy Code of 1986, as
amended (11 U.S.C. Sec.Sec. 101 et. seq.).
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"BUSINESS DAY" means a day other than Saturday, Sunday or any day on which
banks located in the State of California are authorized or obligated to close.
"CAPITAL SHARES" means the Common Stock and any other shares of any other
class or series of capital stock, whether now or hereafter authorized and
however designated, which have the right to participate in the distribution of
earnings and assets (upon dissolution, liquidation or winding-up) of the
Company.
"COMMON SHARES" or "COMMON STOCK" means shares of the Company's Common
Stock.
"COMMON STOCK ISSUED AT CONVERSION", when used with reference to the
securities deliverable upon conversion of this Debenture, means all Common
Shares now or hereafter Outstanding and securities of any other class or series
into which this Debenture hereafter shall have been changed or substituted,
whether now or hereafter created and however designated.
"CONVERSION" or "CONVERSION" means the repayment by the Company of the
Principal Amount of this Debenture (and, to the extent the Holder elects as
permitted by Section 3.1, accrued and unpaid interest thereon) by the delivery
of Common Stock on the terms provided in Section 3.2, and "CONVERT,"
"CONVERTED," "CONVERTIBLE" and like words shall have a corresponding meaning.
"CONVERSION DATE" means any day on which all or any portion of the
Principal Amount of this Debenture is converted in accordance with the
provisions hereof.
"CONVERSION NOTICE" means a written notice of conversion substantially in
the form annexed hereto as Exhibit A.
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"CONVERSION PRICE" on any date of determination means the applicable price
for the conversion of this Debenture into Common Shares on such day as set forth
in Section 3.1(a).
"CURRENT MARKET PRICE" on any date of determination means the closing price
of a Common Share on such day as reported on the NASDAQ OTCBB Exchange;
provided that, if such security is not listed or admitted to trading on the
NASDAQ OTCBB, as reported on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of such security
on the over-the-counter market on the day in question as reported by Bloomberg
LP or a similar generally accepted reporting service, as the case may be.
"DEADLINE" means the date that is the 90th day from the Closing Date.
"DEBENTURE" or "DEBENTURES" means this Convertible Debenture of the Company
or such other convertible debenture(s) exchanged therefor as provided in Section
2.1.
"DISCOUNT MULTIPLIER" has the meaning set forth in Section 3.1(a).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.1.
"HOLDER" means Golden Gate Investors, Inc., any successor thereto, or any
Person to whom this Debenture is subsequently transferred in accordance with the
provisions hereof.
"INTEREST PAYMENT DUE DATE" has the meaning set forth in the opening
paragraph of this Debenture.
"MARKET DISRUPTION EVENT" means any event that results in a material
suspension or limitation of trading of the Common Shares.
"MARKET PRICE" per Common Share means the lowest price of the Common Shares
during any Trading Day as reported on the NASDAQ OTCBB; provided that, if such
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security is not listed or admitted to trading on the NASDAQ OTCBB, as reported
on the principal national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or listed
or admitted to trading on any national securities exchange or quotation system,
the lowest price of the Common Shares during any Trading Day on the
over-the-counter market as reported by Bloomberg LP or a similar generally
accepted reporting service, as the case may be.
"MAXIMUM RATE" has the meaning set forth in Section 6.4.
"OUTSTANDING" when used with reference to Common Shares or Capital Shares
(collectively, "SHARES") means, on any date of determination, all issued and
outstanding Shares, and includes all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that any such Shares directly or indirectly owned or
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held by or for the account of the Company or any Subsidiary of the Company shall
not be deemed "OUTSTANDING" for purposes hereof.
"PERSON" means an individual, a corporation, a partnership, an association,
a limited liability company, an unincorporated business organization, a trust or
other entity or organization, and any government or political subdivision or any
agency or instrumentality thereof.
"PRINCIPAL AMOUNT" means, for any date of calculation, the principal sum
set forth in the first paragraph of this Debenture (but only such principal
amount as to which the Holder has (a) actually advanced pursuant to the
Securities Purchase Agreement, and (b) not theretofore furnished a Conversion
Notice in compliance with Section 3.2).
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement of even date herewith by and between the Company and Holder, as the
same may be amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as in effect at the time.
"SECURITIES PURCHASE AGREEMENT" means that certain Securities Purchase
Agreement of even date herewith by and among the Company and Holder, as the same
may be amended from time to time.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
"TRADING DAY" means any day on which (i) purchases and sales of securities
on the principal national security exchange or quotation system on which the
Common Shares are traded are reported thereon, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, as
reported by Bloomberg LP or a similar generally accepted reporting service, as
the case may be, (ii) at least one bid for the trading of Common Shares is
reported and (iii) no Market Disruption Event occurs.
All references to "cash" or "$" herein means currency of the United States
of America.
EXCHANGES, TRANSFER AND REPAYMENT
Registration of Transfer of Debentures. This Debenture, when presented
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for registration of transfer, shall (if so required by the Company) be duly
endorsed, or be accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company duly executed, by the Holder duly
authorized in writing.
Loss, Theft, Destruction of Debenture. Upon receipt of evidence
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satisfactory to the Company of the loss, theft, destruction or mutilation of
this Debenture and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security reasonably satisfactory to the Company, or, in
the case of any such mutilation, upon surrender and cancellation of this
Debenture, the Company shall make, issue and deliver, in lieu of such lost,
stolen, destroyed or mutilated Debenture, a new Debenture of like tenor and
unpaid Principal Amount dated as of the date hereof (which shall accrue interest
from the most recent Interest Payment Due Date on which an interest payment was
made in full). This Debenture shall be held and owned upon the express
condition that the provisions of this Section 2.2 are exclusive with respect to
the replacement of a mutilated, destroyed, lost or stolen Debenture and shall
preclude any and all other rights and remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without the surrender
thereof.
Who Deemed Absolute Owner. The Company may deem the Person in whose name
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this Debenture shall be registered upon the registry books of the Company to be,
and may treat it as, the absolute owner of this Debenture (whether or not this
Debenture shall be overdue) for the purpose of receiving payment of or on
account of the Principal Amount of this Debenture, for the conversion of this
Debenture and for all other purposes, and the Company shall not be affected by
any notice to the contrary. All such payments and such conversions shall be
valid and effectual to satisfy and discharge the liability upon this Debenture
to the extent of the sum or sums so paid or the conversion or conversions so
made.
Repayment at Maturity. At the Maturity Date, the Company shall repay the
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outstanding Principal Amount of this Debenture in whole in cash, together with
all accrued and unpaid interest thereon, in cash, to the Maturity Date.
CONVERSION OF DEBENTURE
Conversion; Conversion Price; Valuation Event.
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(a) At the option of the Holder, this Debenture may be converted, either in
whole or in part, up to the full Principal Amount hereof (in increments of
$1,000 in Principal Amount) into Common Shares (calculated as to each such
conversion to the nearest 1/100th of a share), at any time and from time to time
on any Business Day, subject to compliance with Section 3.2. The number of
Common Shares into which this Debenture may be converted is equal to the dollar
amount of the Debenture being converted multiplied by eleven, minus the product
of the Conversion Price multiplied by ten times the dollar amount of the
Debenture being converted, and the entire foregoing result shall be divided by
the Conversion Price. In addition, the Company shall pay to the Holder on the
Conversion Date, in cash, any accrued and unpaid interest on the Debenture being
converted not included at the option of the Holder in clause (i) of the
immediately preceding sentence. The "CONVERSION PRICE" shall be equal to the
lesser of (i) $0.25, or (ii) eighty percent (80%) of the average of the 5 lowest
Volume Weighted Average Prices during the twenty (20) Trading Days prior to
Holder's election to convert (a "DISCOUNT MULTIPLIER"); provided, that in the
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event the Registration Statement has not been declared effective by the SEC by
the Deadline or, if the Registration Statement has theretofore been declared
effective but is not thereafter effective, then the applicable Discount
Multiplier shall decrease by three percentage points (3%) for each month or
partial month occurring after the Deadline that the Registration Statement is
not effective.
Beginning in the first full calendar month after the Registration Statement is
declared effective, Holder shall convert at least 5%, but no more than 15% (such
15% maximum amount to be cumulative from the Deadline), of the face value of the
Debenture per calendar month into Common Shares of the Company, provided that
the Common Shares are available, registered and freely tradable. If Holder
converts more than 5% of the face value of the Debenture in any calendar month,
the excess over 5% shall be credited against the next month's minimum conversion
amount. The 15% monthly maximum amount shall not be applicable if the Current
Market Price of the Common Stock at anytime during the applicable month is
higher than the Current Market Price of the Common Stock on the Closing Date. In
the event Holder does not convert at least 5% of the Debenture in any particular
calendar month, Holder shall not be entitled to collect interest on the
Debenture for that month if the Company gives Holder written notice, at least 5
business days prior to the end of the month, of Xxxxxx's failure to convert the
minimum required amount for that month.
If the Holder elects to convert a portion of the Debenture and, on the day that
the election is made, the Volume Weighted Average Price is below $0.012, the
Company shall have the right to prepay that portion of the Debenture that Holder
elected to convert, plus any accrued and unpaid interest, at 150% of such
amount. In the event that the Company elects to prepay that portion of the
Debenture, Holder shall have the right to withdraw its Conversion Notice. If, at
anytime during the month, the Volume Weighted Average Price is below $0.012,
Holder shall not be obligated to convert any portion of the Debenture during
that month.
(b) Notwithstanding the provisions of Section 3.1(a), in the event the
Company's Registration Statement has not been declared effective by the Deadline
or, if the Registration Statement has theretofore been declared effective but is
not thereafter effective, the following will also apply in addition to any
damages incurred by the Holder as a result thereof:
(i) The Holder may demand repayment of one hundred and fifty percent
(150%) of the Principal Amount of the Debenture, together with all accrued
and unpaid interest thereon, in cash, at any time prior to the Company's
Registration Statement being declared effective by the SEC or during the
period that the Company's Registration Statement is not effective, such
repayment to be made within three (3) business days of such demand. In the
event that the Debenture is so accelerated, in addition to the repayment of
one hundred and fifty percent (150%) of the Principal Amount together with
accrued interest as aforesaid, the Company shall immediately issue and pay,
as the case may be, to the Holder 50,000 Shares of Common Stock and $15,000
for each sixty (60) day period, or portion thereof, during which the
Principal Amount, including interest thereon, remains unpaid, with the
payment amount to increase to $20,000 for each sixty (60) day period, or
portion thereof, after the first sixty (60) day period;
(ii) If the Holder does not elect to accelerate the Debenture, the
Company shall immediately issue or pay, as the case may be, to Holder
50,000 Shares of Common Stock and $15,000 for each sixty (60) day period,
or portion thereof, that the Registration Statement is not effective, with
the payment amount to increase to $20,000 for each sixty (60) day period,
or portion thereof, after the first sixty (60) day period.
(iii) If the SEC indicates that the Company's Registration Statement
will be declared effective upon request by the Company, and the Company
does not, within 3 business days of the SEC indication, request that the
Registration Statement become effective, the amounts set forth in
subsections (ii) and (iii) above shall double.
Exercise of Conversion Privilege. (a) Conversion of this Debenture
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may be exercised on any Business Day by the Holder by telecopying an executed
and completed Conversion Notice to the Company. Each date on which a Conversion
Notice is telecopied to the Company in accordance with the provisions of this
Section 3.2 shall constitute a Conversion Date. The Company shall convert this
Debenture and issue the Common Stock Issued at Conversion in the manner provided
below in this Section 3.2, and all voting and other rights associated with the
beneficial ownership of the Common Stock Issued at Conversion shall vest with
the Holder, effective as of the Conversion Date at the time specified in the
Conversion Notice. The Conversion Notice also shall state the name or names
(with addresses) of the persons who are to become the holders of the Common
Stock Issued at Conversion in connection with such conversion. As promptly as
practicable after the receipt of the Conversion Notice as aforesaid, but in any
event not more than three (3) Business Days after the Company's receipt of such
Conversion Notice, the Company shall (i) issue the Common Stock Issued at
Conversion in accordance with the provisions of this Article 3 and (ii) cause to
be mailed for delivery by overnight courier, or if a Registration Statement
covering the Common Stock has been declared effective by the SEC cause to be
electronically transferred, to Holder (x) a certificate or certificate(s)
representing the number of Common Shares to which the Holder is entitled by
virtue of such conversion, (y) cash, as provided in Section 3.3, in respect of
any fraction of a Common Share deliverable upon such conversion and (z) cash or
shares of Common Stock, as applicable, representing the amount of accrued and
unpaid interest on this Debenture as of the Conversion Date. Such conversion
shall be deemed to have been effected at the time at which the Conversion Notice
indicates, and at such time the rights of the Holder of this Debenture, as such
(except if and to the extent that any Principal Amount thereof remains
unconverted), shall cease and the Person and Persons in whose name or names the
Common Stock Issued at Conversion shall be issuable shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby,
and all voting and other rights associated with the beneficial ownership of such
Common Shares shall at such time vest with such Person or Persons. The
Conversion Notice shall constitute a contract between the Holder and the
Company, whereby the Holder shall be deemed to subscribe for the number of
Common Shares which it will be entitled to receive upon such conversion and, in
payment and satisfaction of such subscription (and for any cash adjustment to
which it is entitled pursuant to Section 3.4), to surrender this Debenture and
to release the Company from all liability thereon (except if and to the extent
that any Principal Amount thereof remains unconverted). No cash payment
aggregating less than $1.00 shall be required to be given unless specifically
requested by the Holder.
If, at any time after the date of this Debenture, (i) the Company
challenges, disputes or denies the right of the Holder hereof to effect the
conversion of this Debenture into Common Shares or otherwise dishonors or
rejects any Conversion Notice delivered in accordance with this Section 3.2 or
(ii) any third party who is not and has never been an Affiliate of the Holder
commences any lawsuit or legal proceeding or otherwise asserts any claim before
any court or public or governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of the Holder hereof to effect
the conversion of this Debenture into Common Shares, then the Holder shall have
the right, by written notice to the Company, to require the Company to promptly
redeem this Debenture for cash at one hundred and fifty (150%) of the Principal
Amount thereof, together with all accrued and unpaid interest thereon to the
date of redemption. Under any of the circumstances set forth above, the Company
shall be responsible for the payment of all costs and expenses of the Holder,
including reasonable legal fees and expenses, as and when incurred in defending
itself in any such action or pursuing its rights hereunder (in addition to any
other rights of the Holder).
The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under the Bankruptcy Code. In the
event the Company is a debtor under the Bankruptcy Code, the Company hereby
waives to the fullest extent permitted any rights to relief it may have under 11
U.S.C. Sec. 362 in respect of the Holder's conversion privilege. The Company
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. Sec. 362 in respect of the conversion of this Debenture. The
Company agrees, without cost or expense to the Holder, to take or consent to any
and all action necessary to effectuate relief under 11 U.S.C. Sec. 362.
Fractional Shares. No fractional Common Shares or scrip representing
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fractional Common Shares shall be delivered upon conversion of this Debenture.
Instead of any fractional Common Shares which otherwise would be delivered upon
conversion of this Debenture, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction multiplied by the
Current Market Price on the Conversion Date. No cash payment of less than $1.00
shall be required to be given unless specifically requested by the Holder.
Adjustments. The Conversion Price and the number of shares deliverable
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upon conversion of this Debenture are subject to adjustment from time to time as
follows:
Reclassification, Etc. In case the Company shall reorganize its
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capital, reclassify its capital stock, consolidate or merge with or into another
Person (where the Company is not the survivor or where there is a change in or
distribution with respect to the Common Stock of the Company), sell, convey,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another Person, or effectuate a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company is disposed of (each, a "FUNDAMENTAL CORPORATE CHANGE") and, pursuant to
the terms of such Fundamental Corporate Change, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("OTHER PROPERTY") are to be received by
or distributed to the holders of Common Stock of the Company, then the Holder of
this Debenture shall have the right thereafter, at its sole option, to (x)
require the Company to prepay this Debenture for cash at one hundred and fifty
percent (150%) of the Principal Amount thereof, together with all accrued and
unpaid interest thereon to the date of prepayment, (y) receive the number of
shares of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property as is receivable
upon or as a result of such Fundamental Corporate Change by a holder of the
number of shares of Common Stock into which the outstanding portion of this
Debenture may be converted at the Conversion Price applicable immediately prior
to such Fundamental Corporate Change or (z) require the Company, or such
successor, resulting or purchasing corporation, as the case may be, to, without
benefit of any additional consideration therefor, execute and deliver to the
Holder a debenture with substantial identical rights, privileges, powers,
restrictions and other terms as this Debenture in an amount equal to the amount
outstanding under this Debenture immediately prior to such Fundamental Corporate
Change. For purposes hereof, "COMMON STOCK OF THE SUCCESSOR OR ACQUIRING
CORPORATION" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to prepayment and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions shall similarly apply to successive Fundamental Corporate
Changes.
Certain Conversion Limits.
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Notwithstanding anything herein to the contrary, if and to the extent that,
on any date, the holding by the Holder of this Debenture would result in the
Holder's being deemed the beneficial owner of more than 4.99% of the then
Outstanding shares of Common Stock, then the Holder shall not have the right,
and the Company shall not have the obligation, to convert any portion of this
Debenture as shall cause such Holder to be deemed the beneficial owner of more
than 4.99% of the then Outstanding shares of Common Stock. If any court of
competent jurisdiction shall determine that the foregoing limitation is
ineffective to prevent a Holder from being deemed the beneficial owner of more
than 4.99% of the then Outstanding shares of Common Stock, then the Company
shall prepay such portion of this Debenture as shall cause such Holder not to be
deemed the beneficial owner of more than 4.99% of the then Outstanding shares of
Common Stock. Upon such determination by a court of competent jurisdiction, the
Holder shall have no interest in or rights under such portion of the Debenture.
Any and all interest paid on or prior to the date of such determination shall be
deemed interest paid on the remaining portion of this Debenture held by the
Holder. Such prepayment shall be for cash at a prepayment price of one hundred
and fifty percent (150%) of the Principal Amount thereof, together with all
accrued and unpaid interest thereon to the date of prepayment.
Surrender of Debentures. Upon any redemption of this Debenture
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pursuant to Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to Section 2.4,
the Holder shall either deliver this Debenture by hand to the Company at its
principal executive offices or surrender the same to the Company at such address
by nationally recognized overnight courier. Payment of the redemption price or
the amount due on maturity specified in Section 2.4, shall be made by the
Company to the Holder against receipt of this Debenture (as provided in this
Section 3.5) by wire transfer of immediately available funds to such account(s)
as the Holder shall specify by written notice to the Company. If payment of
such redemption price is not made in full by the redemption date, or the amount
due on maturity is not paid in full by the Maturity Date, the Holder shall again
have the right to convert this Debenture as provided in Article 3 hereof or to
declare an Event of Default.
STATUS; RESTRICTIONS ON TRANSFER
Status of Debenture. This Debenture constitutes a legal, valid and
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binding obligation of the Company, enforceable in accordance with its terms
subject, as to enforceability, to general principles of equity and to principles
of bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights and remedies generally.
Restrictions on Transfer. This Debenture, and any Common Shares
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deliverable upon the conversion hereof, have not been registered under the
Securities Act. The Holder by accepting this Debenture agrees that this
Debenture and the shares of Common Stock to be acquired as interest on and upon
conversion of this Debenture may not be assigned or otherwise transferred unless
and until (i) the Company has received the opinion of counsel for the Holder
that this Debenture or such shares may be sold pursuant to an exemption from
registration under the Securities Act or (ii) a registration statement relating
to this Debenture or such shares has been filed by the Company and declared
effective by the SEC.
Each certificate for shares of Common Stock deliverable hereunder shall
bear a legend as follows unless and until such securities have been sold
pursuant to an effective registration statement under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). The securities may not be offered for sale, sold or
otherwise transferred except (i) pursuant to an effective registration
statement under the Securities Act or (ii) pursuant to an exemption
from registration under the Securities Act in respect of which the
issuer of this certificate has received an opinion of counsel
satisfactory to the issuer of this certificate to such effect. Copies
of the agreement covering both the purchase of the securities and
restrictions on their transfer may be obtained at no cost by written
request made by the holder of record of this certificate to the
Secretary of the issuer of this certificate at the principal executive
offices of the issuer of this certificate."
COVENANTS
Conversion. The Company shall cause the transfer agent, not later
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than three (3) Business Days after the Company's receipt of a Conversion Notice,
to issue and deliver to the Holder the requisite shares of Common Stock Issued
at Conversion. Such delivery shall be by electronic transfer if a Registration
Statement covering the Common Stock has been declared effective by the SEC.
Notice of Default. If any one or more events occur which constitute or
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which, with notice, lapse of time, or both, would constitute an Event of
Default, the Company shall forthwith give notice to the Holder, specifying the
nature and status of the Event of Default or such other event(s), as the case
may be.
Payment of Obligations. So long as this Debenture shall be outstanding,
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the Company shall pay, extend, or discharge at or before maturity, all its
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings.
Compliance with Laws. So long as this Debenture shall be outstanding, the
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Company shall comply with all applicable laws, ordinances, rules, regulations
and requirements of governmental authorities, except for such noncompliance
which would not have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of operations of the
Company and the Subsidiaries.
Inspection of Property, Books and Records. So long as this Debenture shall
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be outstanding, the Company shall keep proper books of record and account in
which full, true and correct entries shall be made of all material dealings and
transactions in relation to its business and activities and shall permit
representatives of the Holder at the Holder's expense to visit and inspect any
of its respective properties, to examine and make abstracts from any of its
respective books and records, not reasonably deemed confidential by the Company,
and to discuss its respective affairs, finances and accounts with its respective
officers and independent public accountants, all at such reasonable times and as
often as may reasonably be desired.
SECTION 5.6 Right of First Refusal on Other Financing. In the event
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that the Company obtains any other financing (either debt, equity, or a
combination thereof) which is to close during the term of this Debenture, Holder
shall be entitled to a right of first refusal to enable it to, at Holder's
option, either: (i) match the terms of the other financing, or (ii) add
additional principal to this Debenture, in the amount of such other financing,
on the same terms and conditions as this Debenture. The Company shall deliver to
Holder, at least 10 days prior to the proposed closing date of such transaction,
written notice describing the proposed transaction, including the terms and
conditions thereof, and providing Holder an option during the 10 day period
following delivery of such notice to either provide the financing being offered
in such transaction on the same terms as contemplated by such transaction, or to
add additional principal to this Debenture, in the amount of such other
financing, on the same terms and conditions as this Debenture.
EVENTS OF DEFAULT; REMEDIES
Events of Default. "EVENT OF DEFAULT" wherever used herein means any
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one of the following events:
the Company shall default in the payment of principal of or interest on
this Debenture as and when the same shall be due and payable and, in the case of
an interest payment default, such default shall continue for five (5) Business
Days after the date such interest payment was due, or the Company shall fail to
perform or observe any other covenant, agreement, term, provision, undertaking
or commitment under this Debenture, the Conversion Warrants (as defined in the
Securities Purchase Agreement), the Securities Purchase Agreement or the
Registration Rights Agreement and such default shall continue for a period of
ten (10) Business Days after the delivery to the Company of written notice that
the Company is in default hereunder or thereunder;
any of the representations or warranties made by the Company herein, in the
Securities Purchase Agreement, the Registration Rights Agreement or in any
certificate or financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the execution and
delivery of this Debenture, the Warrants, the Securities Purchase Agreement or
the Registration Rights Agreement shall be false or misleading in a material
respect on the Closing Date;
under the laws of any jurisdiction not otherwise covered by clauses (iv)
and (v) below, the Company or any Subsidiary (A) becomes insolvent or generally
not able to pay its debts as they become due, (B) admits in writing its
inability to pay its debts generally or makes a general assignment for the
benefit of creditors, (C) 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 person for it or for any substantial part of its
properties and assets, and in the case of any such official proceeding
instituted against it (but not instituted by it), either the proceeding remains
undismissed or unstayed for a period of sixty (60) calendar 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 (D) takes any corporate action to authorize any of the above actions;
the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under the Bankruptcy
Code or any other applicable Federal or state law, or appointing a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Company or of any substantial part of its property, or ordering the winding-up
or liquidation of its affairs, and any such decree or order continues and is
unstayed and in effect for a period of sixty (60) calendar days;
the institution by the Company or any Subsidiary of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
Bankruptcy Code or any other applicable federal or state law, or the consent by
it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as and when they become due, or the
taking of corporate action by the Company in furtherance of any such action;
a final judgment or final judgments for the payment of money shall have
been entered by any court or courts of competent jurisdiction against the
Company and remains undischarged for a period (during which execution shall be
effectively stayed) of thirty (30) days, provided that the aggregate amount of
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all such judgments at any time outstanding (to the extent not paid or to be
paid, as evidenced by a written communication to that effect from the applicable
insurer, by insurance) exceeds One Hundred Thousand Dollars ($100,000);
it becomes unlawful for the Company to perform or comply with its
obligations under this Debenture, the Conversion Warrant, the Securities
Purchase Agreement or the Registration Rights Agreement in any respect;
the Common Shares shall be delisted from the NASDAQ OTCBB (the "TRADING
MARKET" or, to the extent the Company becomes eligible to list its Common Stock
on any other national security exchange or quotation system, upon official
notice of listing on any such exchange or system, as the case may be, it shall
be the "TRADING MARKET") or suspended from trading on the Trading Market, and
shall not be reinstated, relisted or such suspension lifted, as the case may be,
within five (5) days or;
the Company shall default (giving effect to any applicable grace period) in
the payment of principal or interest as and when the same shall become due and
payable, under any indebtedness, individually or in the aggregate, of more than
One Hundred Thousand Dollars ($100,000);
Acceleration of Maturity; Rescission and Annulment. If an Event of
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Default occurs and is continuing, then and in every such case the Holder may, by
a notice in writing to the Company, rescind any outstanding Conversion Notice
and declare that all amounts owing or otherwise outstanding under this Debenture
are immediately due and payable and upon any such declaration this Debenture
shall become immediately due and payable in cash at a price of one hundred and
fifty percent (150%) of the Principal Amount thereof, together with all accrued
and unpaid interest thereon to the date of payment; provided, however, in the
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case of any Event of Default described in clauses (iii), (iv), (v) or (vii) of
Section 6.1, such amount automatically shall become immediately due and payable
without the necessity of any notice or declaration as aforesaid.
Late Payment Penalty. If any portion of the principal of or interest on
----------------------
this Debenture shall not be paid within ten (10) days of when it is due, the
Discount Multiplier under this Debenture, and under all warrants granted by the
Company to the Holder, shall decrease by one percentage point (1%) for all
conversions of this Debenture and warrant exercises thereafter.
Maximum Interest Rate. Notwithstanding anything herein to the contrary,
----------------------
if at any time the applicable interest rate as provided for herein shall exceed
the maximum lawful rate which may be contracted for, charged, taken or received
by the Holder in accordance with any applicable law (the "MAXIMUM RATE"), the
rate of interest applicable to this Debenture shall be limited to the Maximum
Rate. To the greatest extent permitted under applicable law, the Company hereby
waives and agrees not to allege or claim that any provisions of this Note could
give rise to or result in any actual or potential violation of any applicable
usury laws.
Remedies Not Waived. No course of dealing between the Company and the
---------------------
Holder or any delay in exercising any rights hereunder shall operate as a waiver
by the Holder.
SECTION 6.6 Remedies. The Company acknowledges that a breach by it
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of its obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Debenture will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this
Debenture, that the Holder shall be entitled to all other available remedies at
law or in equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any breach of this
Debenture and to enforce specifically the terms and provisions thereof, without
the necessity of showing economic loss and without any bond or other security
being required.
SECTION 6.7 Payment of Certain Amounts. Whenever pursuant to
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this Debenture the Company is required to pay an amount in excess of the
Principal Amount plus accrued and unpaid interest, the Company and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Debenture may be difficult to determine and the amount to be so paid by the
Company represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this
Debenture and to earn a return from the sale of shares of Common Stock acquired
upon conversion of this Debenture at a price in excess of that price paid for
such shares pursuant to this Debenture. The Company and the Holder hereby agree
that such amount of stipulated damages is not disproportionate to the possible
loss to the Holder from the receipt of a cash payment without the opportunity to
convert this Debenture into shares of Common Stock.
MISCELLANEOUS
Notice of Certain Events. In the case of the occurrence of any event
-------------------------
described in Section 3.4 of this Debenture, the Company shall cause to be mailed
to the Holder of this Debenture at its last address as it appears in the
Company's security registry, at least twenty (20) days prior to the applicable
record, effective or expiration date hereinafter specified (or, if such twenty
(20) days' notice is not possible, at the earliest possible date prior to any
such record, effective or expiration date), a notice thereof, including, if
applicable, a statement of (y) the date on which a record is to be taken for the
purpose of such dividend, distribution, issuance or granting of rights, options
or warrants, or if a record is not to be taken, the date as of which the holders
of record of Common Stock to be entitled to such dividend, distribution,
issuance or granting of rights, options or warrants are to be determined or (z)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.
Register. The Company shall keep at its principal office a register in
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which the Company shall provide for the registration of this Debenture. Upon
any transfer of this Debenture in accordance with Articles 2 and 4 hereof, the
Company shall register such transfer on the Debenture register.
Withholding. To the extent required by applicable law, the Company may
-----------
withhold amounts for or on account of any taxes imposed or levied by or on
behalf of any taxing authority in the United States having jurisdiction over the
Company from any payments made pursuant to this Debenture.
Transmittal of Notices. Except as may be otherwise provided herein, any
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notice or other communication or delivery required or permitted hereunder shall
be in writing and shall be delivered personally, or sent by telecopier machine
or by a nationally recognized overnight courier service, and shall be deemed
given when so delivered personally, or by telecopier machine or overnight
courier service as follows:
(1) if to the Company, to:
The World Golf League, Inc.
000 Xxxx Xxxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) if to the Holder, to:
Golden Gate Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 7.4.
Attorneys' Fees. Should any party hereto employ an attorney for the
-----------------
purpose of enforcing or construing this Debenture, or any judgment based on this
Debenture, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all reasonable attorneys' fees and all reasonable costs, including but not
limited to service of process, filing fees, court and court reporter costs,
investigative costs, expert witness fees, and the cost of any bonds, whether
taxable or not, and that such reimbursement shall be included in any judgment or
final order issued in that proceeding. The "prevailing party" means the party
determined by the court to most nearly prevail and not necessarily the one in
whose favor a judgment is rendered.
Governing Law. This Debenture shall be governed by, and construed in
--------------
accordance with, the laws of the State of California (without giving effect to
conflicts of laws principles). With respect to any suit, action or proceedings
relating to this Debenture, the Company irrevocably submits to the exclusive
jurisdiction of the courts of the State of California sitting in San Diego and
the United States District Court located in the City of San Diego and hereby
waives, to the fullest extent permitted by applicable law, any claim that any
such suit, action or proceeding has been brought in an inconvenient forum.
Subject to applicable law, the Company agrees that final judgment against it in
any legal action or proceeding arising out of or relating to this Debenture
shall be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified copy of which
judgment shall be conclusive evidence thereof and the amount of its
indebtedness, or by such other means provided by law.
SECTION 7.7 Waiver of Jury Trial. To the fullest extent permitted by
----------------------
law, each of the parties hereto hereby knowingly, voluntarily and intentionally
waives its respective rights to a jury trial of any claim or cause of action
based upon or arising out of this Debenture or any other document or any
dealings between them relating to the subject matter of this Debenture and other
documents. Each party hereto (i) certifies that neither of their respective
representatives, agents or attorneys has represented, expressly or otherwise,
that such party would not, in the event of litigation, seek to enforce the
foregoing waivers and (ii) acknowledges that it has been induced to enter into
this Debenture by, among other things, the mutual waivers and certifications
herein.
SECTION 7.8 Headings. The headings of the Articles and Sections of
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this Debenture are inserted for convenience only and do not constitute a part of
this Debenture.
SECTION 7.9 Payment Dates. Whenever any payment hereunder shall be due on a
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day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
SECTION 7.10 Binding Effect. Each Holder by accepting this Xxxxxxxxx agrees
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to be bound by and comply with the terms and provisions of this Debenture.
SECTION 7.11 No Stockholder Rights. Except as otherwise provided herein,
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this Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including, without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
SECTION 7.12 Facsimile Execution. Facsimile execution shall be
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deemed originals.
IN WITNESS WHEREOF, the Company has caused this Debenture to be signed by
its duly authorized officer on the date of this Debenture.
The World Golf League, Inc.
By: /s/ XXXXXXX X. XXXXXXX
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Title: President and CEO
