Contract
EXHIBIT
10.2
THIS
SECURITY, AND ANY SECURITIES TO BE ISSUED BY THE CORPORATION IN CONVERSION OF
THIS SECURITY, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
(a
corporation incorporated under the laws of the State of Colorado)
SECURED
CONVERTIBLE DEBENTURE
Date
of
Issue: March
25, 2009
Interest
Rate: 15.0%
per annum
$250,000___
(the “Principal
Amount”)
Mexoro Minerals Ltd. (the
“Corporation”) for value
received hereby promises to each holder identified on
the signature pages hereto (the “Holder”) the
outstanding Principal Amount on the Maturity Date as hereinafter defined. The
Holder is entitled, subject to such earlier conversion as may be required
hereunder, to convert the Principal Amount into Conversion Units upon surrender
of this Convertible Debenture at an office of the Corporation. The Corporation
shall pay interest on the Principal Amount outstanding from time to time from
the date of this Convertible Debenture or from the last interest payment date to
which interest has been paid on the Convertible Debenture, whichever is later,
at the rate of fifteen per cent (15%) per annum. Such interest shall be
calculated and payable in accordance with Article 2 hereof and interest on
overdue interest shall be calculated, and shall be due and payable, in lawful
money of the United States of America, in the same manner and at the same time
and place as aforesaid.
Payment
and performance of the Principal Amount, together with interest thereon and any
other indebtedness, liabilities, covenants and obligations of the Corporation to
the Holder arising in respect of this Convertible Debenture shall constitute
Obligations for the
purpose of and as defined in the Mexoro General Security Agreement and Sunburst
General Security Agreement (collectively, the “Security Agreements”) and are
secured by the Security Agreements and the security interests granted by the
Corporation and Sunburst to the Holder pursuant to the Security
Agreements.
ARTICLE
1
INTERPRETATION
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1.1
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Definitions
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In this
Convertible Debenture, unless there is something in the subject matter or
context inconsistent therewith:
“business day” means a day
which is not a Saturday, Sunday or civic or statutory holiday in New
York;
“Capital Reorganization” has
the meaning attributed thereto in Section 3.3;
“Cieneguita
Dividend”
means a 15% per annum dividend to be distributed quarterly in cash by the
Corporation on the Common Shares. The Corporation and MRT shall
guarantee that this dividend shall be no less than USD250,000.00 per
year.
“Common Shares” means shares of
common stock in the capital of the Corporation as such shares exist at the close
of business on the date of execution and delivery of this Convertible
Debenture;
“Corporation’s Auditors” or
“Auditors of the
Corporation” means an independent firm of chartered accountants duly
appointed as auditors of the Corporation;
“Conversion Date” has the
meaning attributed thereto in subsection 3.2(3);
“Conversion Price” means the
price per Conversion Unit at which this Convertible Debenture is convertible,
being $0.20 per Conversion Unit;
“Conversion Privilege” means
the right to convert this Convertible Debenture into a Conversion Unit as
provided in Article 3;
“Conversion Share” means Common
Shares to be issued as part of the Conversion Units in connection with the
conversion of all or part of this Convertible Debenture;
“Conversion Unit” means one
Conversion Share and one half of a Conversion Warrant, to be issued at the
Conversion Price in connection with the conversion of all or part of this
Convertible Debenture;
“Conversion Warrant” means
share purchase warrants of the Corporation to be issued as
part of the Conversion Units in connection with the conversion of this
Convertible Debenture, and exercisable to purchase a Warrant Share at $0.30 per
Warrant Share, expiring on February 28, 2012;
“Convertible Debenture” means
this 15% secured convertible debenture of the Corporation and any debenture
issued in replacement, substitution or exchange, in whole or in part, of this
15% secured convertible debenture;
“Dividend Paid in the Ordinary
Course” means any dividend paid by the Corporation on the Common Shares
(whether in cash, securities, property or other assets), provided that the
directors of the Corporation do not by resolution determine that such dividend
is extraordinary or otherwise out of the ordinary course having regard to the
Corporation’s dividend policy at such time, the value of such dividend, the
financial position of the Corporation, economic conditions, business practices
and such other factors as the directors of the Corporation may in their
discretion consider relevant;
“Equity Securities” means any
Common Stock or Common Stock Equivalents;
“Event of Default” has the
meaning attributed thereto in Section 4.3;
“Financing” means MRT’s
investment in the Corporation for the acquisition of real property known as
Cieneguiata.
“Holder” means the original
Holder or other permitted Holder of this Convertible Debenture;
“Interest Rate” means 15% per
annum;
“Issue Date” means the date of
issue of this Convertible Debenture;
“Maturity Date” means one (1)
year from the Issue Date or such earlier date on which the conversion of this
Convertible Debenture shall become due and payable pursuant to the terms
provided herein in accordance with the terms of this Convertible
Debenture;
“Mexoro General Security
Agreement” means the general security agreement dated as of the date here
of the Corporation granting the Holder a security interest in all the present
and after acquired property of the Corporation;
“MRT” means a company that
intends to invest in the Corporation for the purposes of the Corporation’s
acquisition of real property known as Cieneguita.
“Person” means any individual,
corporation or company, partnership, joint venture, syndicate, sole
proprietorship, trust, trustee, executor, administrator or other legal
representative or an unincorporated organization, government or governmental
authority or entity and pronouns have a similarly extended meaning;
“Registration” means a
registration effected by preparing and filing a Registration Statement and the
declaration or ordering of the effectiveness of that Registration Statement; and
the terms “Register” and “Registered” have meanings concomitant with the
foregoing; “Registrable
Securities”
means (i) the Conversion Shares and (ii) the Warrant Shares;
“Registration Statement” means
a registration statement prepared on Forms S-1, S-2 or S-3 under the Securities
Act, or on any comparable form in connection with registration in a jurisdiction
other than the United States;
“Reserved Property” means 10%
of the real property known as Cieneguita located in Chihuahua, Mexico, which may
be acquired by the Corporation and which shall provide the Corporation with
funds to satisfy the Cieneguita Dividend.
“Securities Act” means the
United States Securities Act of 1933, as amended;
“Securities Purchase
Agreement” means the
securities purchase agreement entered into between the Corporation and the
Holder on the date hereof that governs the sale of this
Convertible Debenture.
“Sunburst” means Sunburst de
Mexico S.A. de C.V., the wholly-owned subsidiary of the
Corporation;
“Sunburst General Security
Agreement” means the general security agreement dated as of the date here
of Sunburst, granting the Holder a security interest in all the present and
after acquired property of Sunburst;
“Warrant Certificate” means the
form of certificate representing the Conversion Warrants in the form attached as
Schedule B hereto; and
“Variable Rate Transaction”
shall mean a transaction in which the Company issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for the shares of Common Stock at any time
after the initial issuance of such debt or equity securities.
“Warrant Share” means a Common
Share issued upon the exercise of a Conversion Warrant.
Words
importing the singular number include the plural and vice versa and words
importing gender include the neuter, feminine and masculine
genders.
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1.2
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Headings
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The
division of this Convertible Debenture into Articles, Sections, subsections and
clauses, and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation hereof.
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1.3
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Applicable
Law
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This
Convertible Debenture shall be governed by and construed in accordance with the
laws of the State of New York and the laws of the United States applicable
therein. The parties hereto submit to the exclusive jurisdiction of the courts
in the State of New York. The parties agree that any litigation between the
parties which arises pursuant to or in connection with this Convertible
Debenture, or any of its provisions, shall be referred to the courts in the
State of New York and shall not be referred to the courts in any other
jurisdiction.
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1.4
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Business
Day
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In the
event that any day on or before which any action is required to be taken
hereunder is not a business day, then such action shall be required to be taken
on or before the requisite time on the next succeeding day that is a business
day.
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1.5
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Monetary
Reference
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Any
reference in this Convertible Debenture to “Dollars”, “dollars” or “$” shall be
deemed to be a reference to lawful money of the United States of
America.
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1.6
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Invalidity
of Provisions
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Each of
the provisions contained in this Convertible Debenture is distinct and severable
and a declaration of invalidity or unenforceability of any such provision by a
court of competent jurisdiction shall not affect the validity or enforceability
of any other provision hereof or thereof.
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1.7
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Schedules
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The
following schedules are attached to and form part of this Convertible
Debenture:
Schedule
Schedule
A - Notice
of Election to Convert
Schedule
B - Form
of Conversion Warrant
ARTICLE
2
INTEREST
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2.1
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Interest
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Interest
shall accrue from the date hereof or from the last interest payment date to
which interest on the Convertible Debenture shall have been paid, on the
outstanding Principal Amount of this Convertible Debenture at the Interest Rate
payable quarterly in arrears on the last day of each three month period
commencing May 30, 2009, both before and after demand, default, maturity and
judgment and interest on overdue interest at the rate and in the manner
aforesaid. Interest shall continue to accrue and become payable on the Principal
Amount unless the Principal Amount is fully converted prior to the Maturity Date
in accordance with Articles 3 or 4 herein.
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2.2
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Payment
of Interest
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Subject
to the terms of the Securities Purchase Agreement dated same, as interest
becomes due on this Convertible Debenture, the Corporation shall pay, at its
election, either in certified funds for such interest payable, less any
applicable withholding tax, or in Common Shares calculated at a twenty percent
(20%) discount to the twenty (20) day moving average of the Common Shares as
quoted on the Over the Counter Bulletin Board Market (“OTCBB”) or other such
stock exchange as the case may be to the then registered Holder of this
Convertible Debenture and addressed to such Xxxxxx at his last address appearing
on the register. The forwarding of such payment cash or Common Shares shall
satisfy and discharge the liability for interest on this Convertible Debenture
to the extent of the sum represented thereby unless such cheque be not paid at
par on presentation at any of the places of payment above
mentioned.
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2.3
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Cancellation
of Matured Convertible Debenture
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Upon
conversion of the outstanding Principal Amount of, and payment of any accrued
but unpaid interest on the Convertible Debenture, this Convertible Debenture
shall be cancelled and destroyed by the Corporation and no Convertible Debenture
shall be issued in substitution therefor
.
1
ARTICLE
3
CONVERSION
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3.1
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Conversion
Privilege and Conversion Price
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Subject
to and upon compliance with the provisions of this Article 3, the Holder shall
have the right, at such Holder’s option, at any time up to the Maturity Date or
until anytime thereafter that the Principal Amount or a portion thereof remains
outstanding, to the extent applicable, to convert the whole or from time to time
part of the Principal Amount outstanding under this Convertible Debenture into
Conversion Units at the Conversion Price. The number of Conversion Units shall
be determined by dividing the Principal Amount of the Convertible Debenture by
the Conversion Price.
When the
holder has the right to convert this Convertible Debenture into Conversion Units
at the Conversion Price, the Holder may instead choose to accept either of the
following:
(1) Cash & Warrants:
Full payment, including accrued interest plus sufficient warrants equal to 20%
of the value of this Convertible Debenture with a strike price at 20% discount
to the 20 day moving average of the Common Shares as quoted on the Over the
Counter Bulletin Board or other such exchange as the case may be
(“OTCBB”). This offer may only be accepted by the Holder when a
Financing occurs and when the Company
provides a written offer to the Holder; or
(2) Real Property
Interest: A percentage ownership interest in the Reserved Property equal
to the Principal Amount divided by the sum of all Principal Amounts raised in
connection with the Securities Purchase Agreement.
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3.2
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Manner
of Exercise of Right to Convert
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(1) In order
to exercise the Conversion Privilege, the Holder shall at any anytime, surrender
such Convertible Debenture to the Corporation at an office of the Corporation
accompanied by a notice in the form substantially similar to the “Notice of
Election to Convert” attached to this Convertible Debenture, duly signed by the
Holder or the Holder’s executors, administrators or other legal representatives
or the Holder’s attorney duly appointed by an instrument in writing in form and
execution satisfactory to the Corporation stating:
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(a)
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that
the Holder elects to convert the then outstanding Principal Amount under
the Convertible Debenture or a specified portion
thereof;
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(b)
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the
names (with addresses) in which the Conversion Shares and Conversion
Warrants issuable upon such conversion are to be registered;
and
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(c)
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the
address or addresses to which the certificates representing the Conversion
Shares and Conversion Warrants issuable upon conversion and the cheque for
any amount payable under Section 3.6 are to be
delivered.
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(2) Upon
receipt by the Corporation of the “Notice of Election to Convert” in accordance
with Section 3.2(1) above, the Holder or his permitted nominee shall be entitled
to be entered in the books of the Corporation as at the Conversion Date, as
defined below (or such later date as is specified in subsection 3.2(3)) as the
Holder of the number of Conversion Shares and Conversion Warrants into which
this Convertible Debenture is convertible, in accordance with the provisions of
this Article 3 upon receipt of such notice, the Corporation shall deliver to the
Holder electing to convert or, subject as aforesaid, its nominee or assignee a
certificate or certificates representing the number of Conversion Shares and
Conversion Warrants into which all or any portion of the Principal Amount hereof
has been converted and, if applicable, a cheque for any amount payable under
Section 3.6 to the address indicated in the “Notice of Election to Convert”, and
if applicable, a new Convertible Debenture representing such Principal Amount
that has not been converted.
(3) For the
purposes of this Article 3, this Convertible Debenture shall be deemed to be
surrendered for conversion on the date (the “Conversion Date”) on which it
is so surrendered in accordance with the provisions of this Article 3 and, if
surrendered by mail or other means of delivery, on the date on which it is
received by the Corporation, provided that if this Convertible Debenture is
surrendered for conversion on a day on which the register of Common Shares is
closed, the Person entitled to receive Conversion Shares shall become the Holder
of record of such Conversion Shares as at the date on which such register is
next reopened and provided that if a Convertible Debenture is surrendered for
conversion on any interest payment date such Convertible Debenture shall be
deemed to be surrendered for conversion on such interest payment
date.
(4) If this
Convertible Debenture is surrendered for conversion in accordance with this
Section 3.2, the Holder shall be entitled to receive accrued and unpaid interest
in respect of the Principal Amount converted only for the period up to the
Conversion Date, such interest to be paid at the time of delivery of the
Conversion Shares and Conversion Warrants issuable upon such conversion in
accordance with Section 2.2.
(5) The
Conversion Shares and Conversion Warrants shall be issued without any type of
restrictive legend except as required by US securities laws and any laws
pertaining to the country of residence of the Convertible Debenture
holder.
(6) Payments
due under this Convertible Debenture shall be made at the time of exercise and
shall be in cash or in shares of Common Stock. In the event payment
is made in shares of Common Stock, such shares shall be valued at their fair
market value on the date of exercise.
(7) Notwithstanding
anything to the contrary set forth in this Convertible Debenture, at no time may
a Holder of this Convertible Debenture convert this Convertible Debenture to
acquire the Conversion Shares or exercise Conversion Warrants to the extent that
after giving effect to such conversion or exercise, the Holder (together with
the Holder’s affiliates) would beneficially own (as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the
rules thereunder) in excess of 9.99% of the number of shares of Common Stock
outstanding immediately after giving effect to such exercise; provided, however,
that upon a Holder of this Convertible Debenture providing the Corporation with
a Waiver Notice with 65 days notice that such Holder would like to waive this
Section with regard to any or all Conversion Shares or Conversion Warrants
issuable upon conversion of this Convertible Debenture or through the exercise
of the Conversion Warrants, this Section shall be of no force or effect with
regard to all or a portion of the Warrant referenced in the Waiver
Notice.
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3.3
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Capital
Reorganization
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If and
whenever at any time after the date hereof, and prior to the Conversion Date,
there is a subdivision or consolidation of the Common Shares, or an issuance of
Common Shares or securities convertible into Common Shares to all or
substantially all of the holders of Common Shares by way of a stock dividend or
other distribution (other than the issue of securities to the Holder or the
issue of Common Shares or other securities to holders of Common Shares as a
Dividend Paid in the Ordinary Course), or a reclassification of the Common
Shares at any time outstanding or other change of the Common Shares into other
shares or into other securities, whether of the Corporation or of another body
corporate, or other capital reorganization, or a consolidation, amalgamation or
merger of the Corporation with or into any other corporate or other entity
(other than a consolidation, amalgamation or merger which does not result in any
reclassification of the outstanding Common Shares or a change of the Common
Shares into other shares), or a transfer of the undertaking or assets of the
Corporation as an entirety or substantially as an entirety to another
corporation or other entity in which the Holders of Common Shares are entitled
to receive shares, other securities or other property (any of such events being
called a “Capital
Reorganization”), the Holder who exercises the right to convert this
Convertible Debenture pursuant to this Convertible Debenture after the effective
date of such Capital Reorganization will be entitled to receive, and will accept
for the same aggregate consideration in lieu of the number of Conversion Shares
and Conversion Warrants to which the Holder was previously entitled upon such
conversion into a Conversion Unit, the aggregate number of Conversion Shares and
Conversion Warrants, other securities or other property which the Holder would
have been entitled to receive as a result of such Capital Reorganization if, on
the effective date thereof, the Holder had been the Holder of the number of
Conversion Shares and Conversion Warrants into which such a Conversion Unit were
convertible immediately prior to such Capital Reorganization. The Corporation
will take all steps necessary to ensure that, on a Capital Reorganization, the
Holder will, if it exercises its conversion rights hereto, receive the aggregate
number of shares, other securities or other property to which it is entitled as
a result of the Capital Reorganization. Appropriate adjustments will be made as
a result of any such Capital Reorganization in the application of the provisions
set forth in this Article 3 with respect to the rights and interests thereafter
of the Holder under this Convertible Debenture to the end that the provisions
set forth in this Article 3 will thereafter correspondingly be made applicable
as nearly as may reasonably be in relation to any shares, other securities or
other property thereafter deliverable upon the conversion of this Convertible
Debenture.
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3.4
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Notice
as to Adjustment
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The
Corporation shall from time to time, immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in Section 3.3,
deliver a notice in writing (an “Adjustment Notice”) to the
Holder specifying the nature of the event requiring the same and the amount of
the adjustment or readjustment necessitated thereby and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Such notice and the amount of the adjustment specified
therein shall, subject to the provisions of subsection 3.5, be conclusive and
binding on all parties in interest.
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3.5
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Rules
Regarding Calculation of Adjustment of Conversion
Terms
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If within
five days of receipt of an Adjustment Notice a Holder notifies the Corporation
in writing that it disputes the content of the Adjustment Notice, or if at any
time a dispute is made by a shareholder or other creditor of the Corporation
with respect to adjustments provided for in Section 3.3, such dispute will be
resolved by a written determination by the accounting firm of Davidson &
Partners in Vancouver B.C.
However,
if they are unable or unwilling to act, by such other firm of independent
chartered accountants as may be selected by the directors of the Corporation,
and any such determination will be binding upon the Corporation, the Holder and
(to the extent permitted by the articles and by-laws of the Corporation and
applicable law) the shareholders of the Corporation; such auditors or
accountants will be given access to all necessary records of the Corporation. If
any such determination is made, the Corporation will deliver a certificate of
the Corporation to the Holder describing such determination.
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3.6
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No
Requirement to Issue Fractional Conversion
Units
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The
Corporation shall not be required to issue fractional Conversion Units upon the
conversion of all or any part of this Convertible Debenture pursuant to this
Article 3. The number of whole Conversion Units issuable upon conversion of this
Convertible Debenture shall be computed on the basis of the aggregate Principal
Amount of the Convertible Debenture so converted. If any fractional interest in
a Conversion Unit would, except for the provisions of this Section, be
deliverable upon the conversion of any Principal Amount of the Convertible
Debenture, the Corporation may, at its sole option, in lieu of delivering any
certificate representing such fractional interest, satisfy such fractional
interest by paying to the Holder an amount in lawful money of the United States
of America equal (to the nearest amount) to the corresponding fraction of the
value of a Conversion Unit on the Conversion Date, determined by the directors
of the Corporation acting in good faith which determination shall be conclusive,
provided that the Corporation shall not be required to make any payment,
calculated as aforesaid, that is less than $10.00.
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3.7
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Corporation
to Reserve Shares
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The
Corporation shall at all times while any Principal Amount of the Convertible
Debenture remains outstanding reserve and keep available out of its authorized
but unissued Common Shares solely for the purpose of issue upon conversion of
this Convertible Debenture, as provided in this Article 3, and issue upon
exercise of the Conversion Warrants, and conditionally allot to the Holder who
may exercise its conversion rights hereunder and its exercise rights in
connection with the Conversion Warrants, such number of Conversion Shares as
shall then be issuable upon the conversion of this Convertible Debenture and
such number of Warrant Shares as shall be issuable upon exercise of the
Conversion Warrants. All Conversion Shares which shall be so issuable shall be
duly and validly issued as fully paid and non-assessable Common Shares. All
Warrant Shares issued upon the exercise of the Conversion Warrants in accordance
with the terms and conditions of the Warrant Certificate, including payment of
the exercise price thereof, shall be duly and validly issued as fully paid and
non-assessable Common Shares.
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3.8
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Hold
Period Legends
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The legend set forth below shall be
included on (i) all certificates for Conversion Shares issued to U.S. Persons as
such term is defined in Rule 902 of Regulation S (“U.S. Persons”) under the
United States Securities Act of 1933, as amended, (ii) any Conversion Warrants
issued upon conversion of this Convertible Debenture, and (iii) any securities
issued upon exercise of Conversion Warrants if held by a U.S. Person at the time
of exercise:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”). THE HOLDER
HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S (“REGULATION S”) UNDER THE U.S.
SECURITIES ACT, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A
UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, (D)
UNDER AN EFFECTIVE REGISTRATION STATEMENT, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT,
PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2), OR (E) ABOVE, A LEGAL
OPINION ISSUED BY THE ATTORNEY FOR THE HOLDER BE PROVIDED TO THE
CORPORATION.
ARTICLE
4
DEFAULT
AND ENFORCEMENT
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4.1
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Covenants
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Except as
otherwise provided in this Convertible Debenture, the Corporation hereby
covenants and agrees that so long as any amounts remain unpaid pursuant to this
Convertible Debenture it will strictly observe and perform the following
covenants:
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(a)
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The
Corporation shall take all necessary action to adjust the Conversion Price
as provided under Section 3.3 hereof, if applicable;
and
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(b)
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The
Corporation and Sunburst will not dispose of any assets out of the
ordinary course of business without the prior written consent of the
Holder, such consent not to be unreasonably
withheld.
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4.2
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Acceleration
on Event of Default
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If an
Event of Default shall occur and be continuing, the unpaid balance of the
Principal Amount, and all accrued interest and all other amounts payable under
this Convertible Debenture may be declared by the Holder on written notice to
the Corporation to be, and upon such notice shall become, immediately due and
payable. Upon the payment in full of the aftorementioned amounts, the Holder
shall promptly surrender this Convertible Debenture to or as directed by the
Corporation.
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4.3
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Events
of Default
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Any of
the following conditions or events which shall occur shall constitute events of
default (“Events of
Default”) under this Convertible Debenture:
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(a)
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if
the Corporation shall default in the payment of any of the Principal
Amount at the Maturity Date;
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(b)
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if
the Corporation shall default in the payment of any interest on this
Convertible Debenture, or other amounts payable hereunder, when the same
becomes due and payable, whether at the Maturity Date or otherwise and
such default shall continue for a period of ten (10) business days after a
notice in writing of such default has been given by the Holder to the
Corporation;
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(c)
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if
the Corporation or Sunburst shall default in the performance of or
compliance with any term or condition or covenant contained in this
Convertible Debenture or the General Security Agreements, provided that
such default is of a nature that may be cured, and such default shall not
have been remedied within a period of ten (10) business days after such
default;
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(d)
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notwithstanding
the $476,000 promissory note issued by the Corporation heretofore and held
by certain Swiss investors due on March 31, 2008 under which the
Corporation is currently in default, if the Corporation or Sunburst
commits any of the events of default under any operating and/or senior
debt credit facilities or arrangements with any other lender and such
default shall not have been remedied within a period of ten (10) business
days after such default;
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(e)
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if
the Corporation or Sunburst shall (i) file, or consent by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or otherwise take advantage of any bankruptcy or insolvency
law of any jurisdiction, (ii) make an assignment, an arrangement or a
compromise for the benefit of its creditors, (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers of itself or of any substantial part of its property, (iv)
cease to carry on business, or (v) take corporate action for the purpose
of any of the foregoing;
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(f)
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if
any representation, warranty or certification made in connection with the
execution and delivery of this Convertible Debenture or the General
Security Agreements shall prove to be at any time materially incorrect at
the time it was made and such default shall not have been remedied within
a period of ten (10) business days after Xxxxxx has noticed the
Corporation of such default;
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(g)
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if
a court or governmental authority of competent jurisdiction shall enter a
final order appointing, with or without the consent of the Corporation or
Sunburst, as the case may be, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of either of their property, or if a final order for
relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Corporation or Sunburst, or if any
petition for any such relief shall be filed against the Corporation or
Sunburst and such petition shall not be dismissed within thirty (30) days;
and
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(h)
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the
Corporation fails to: (i) include the Conversion Shares issuable upon
conversion of this Convertible Debenture, Warrant Shares issuable upon
exercise of the Conversion Warrants and any other securities due to the
Holder pursuant to this Convertible Debenture in any Registration
Statement for which Holder is entitled to piggy back registration rights
pursuant to Section 5.1 herein; (ii) make its best efforts to obtain
effectiveness with the Securities and Exchange Commission of the
Registration Statement for which Holder is entitled to piggy back
registration rights pursuant to Section 5.1 herein; or (iii) maintain the
effectiveness of such Registration Statement (or sales cannot otherwise be
made thereunder effective, whether by reason of the Corporation’s failure
to amend or supplement the prospectus included therein) for more than
twenty (20) consecutive days or thirty (30) days in any twelve month
period after the Registration Statement becomes effective or after
becoming effective the Registration Statement is not kept effective for
the term of the Conversion
Warrants.
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4.4
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Representations
and Warranties
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The
Corporation hereby represents and warrants to the Holder that:
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(a)
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no
authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the
execution, delivery and performance of this Convertible Debenture or the
General Security Agreements by the Corporation and Sunburst or for the
grant by the Corporation and Sunburst of the security interests granted
pursuant to the General Security Agreements except for authorization,
approval or such filings as have been obtained, made and are in full force
and effect; and in particular, but without limiting the foregoing, the
Corporation has obtained all approvals and authorizations from the OTCBB
and the shareholders and directors of the Corporation as are necessary to
complete all the transactions contemplated in and provided for in this
Convertible Debenture;
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(b)
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the
Corporation and Sunburst are in compliance with the requirements of all
applicable laws, rules, regulations and orders of every governmental
authority, the non-compliance with which would materially adversely affect
the value or worth of the Corporation’s and Sunburst’s property as
collateral security for this Convertible Debenture and the General
Security Agreements and upon completion of all the transactions
contemplated in and provided for in this Convertible Debenture the
Corporation and Sunburst will remain in compliance with the requirements
of all applicable laws, rules, regulations and orders of every
governmental authority; and
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(c)
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this
Convertible Debenture and the General Security Agreements have been
properly authorized, duly executed and delivered by the Corporation and
Sunburst and constitute legal, valid and binding obligations of the
Corporation and Sunburst enforceable in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
moratorium, and other laws affecting creditors’ rights generally and
except that orders for specific performance, injunctions and other
equitable remedies are discretionary remedies which may be granted only in
the discretion of the court.
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4.5
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Indemnity
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The
Corporation covenants and agrees to indemnify and hold harmless the Holder from
and against any and all damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfillment of any covenant on the
part of the Corporation or Sunburst under this Convertible Debenture or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by the Corporation or Sunburst to the Holder under
this Convertible Debenture or the General Security Agreements and any and all
actions, suits, proceedings, demands, assessments, judgments, costs and legal
and other expenses incident to any of the foregoing.
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4.6
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Survival
of Representations, Warranties, Indemnity and
Covenants
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Notwithstanding
the completion of the transactions herein contemplated, the representations and
warranties, covenants and indemnities contained in this Convertible Debenture
shall not merge in, be prejudiced by or be superseded in any way by the
execution and completion of this Convertible Debenture and shall survive the
same for a period of two years from the date of execution of this Convertible
Debenture.
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4.7
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Remedies
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In case
of a default hereunder by the Corporation or Sunburst, the Holder may enforce
the rights of the Holder by any remedy or proceeding authorized or permitted by
applicable law (subject in all cases to any mandatory provision of applicable
law). No remedy herein contained conferred upon the Holder shall be intended to
be exclusive and such Holder shall be entitled to seek other remedies available
under applicable laws.
2
ARTICLE
5
REGISTRATION
RIGHTS
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5.1
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Piggy
Back Registration Rights
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If the
Corporation proposes to Register any Equity Securities for its own account or
for the account of any Person that is not a Holder, then in connection with the
public offering of such securities, the Corporation shall promptly give each
Holder written notice of such Registration and, upon the written request of any
Holder given within twenty (20) days after delivery of such notice, the
Corporation shall use its best efforts to include in such Registration any
Registrable Securities thereby requested by such Holder. If a Holder
decides not to include all or any of its Registrable Securities in such
Registration by the Corporation, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent Registration
Statement or Registration Statements as may be filed by the Corporation with
respect to offerings of its securities, all upon the terms and conditions set
forth herein.
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5.2
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No
Variable Rate Transaction
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For a
period of 12 months following the Effective Date, the Corporation shall be
prohibited from effecting or entering into an agreement to effect any subsequent
financing involving a Variable Rate Transaction.
ARTICLE
6
REDEMPTION
6.1 Redemption
On the
terms and subject to the conditions set forth in this Agreement, the Corporation
shall redeem this Convertible Debenture from the Holder (the “ Redemption ”) for the
aggregate Redemption Consideration (as such term is defined in Section 6.2
below) on the Redemption Date (as such term is defined in Section 6.3). The
Corporation shall give the Holder written notice of the Redemption Date not less
than three days prior to such date.
6.2 Deliveries
On the
Redemption Date, (a) the Holder shall deliver to the Corporation or its
designee its original executed Convertible Debenture, each of which shall be
duly executed in blank for transfer, and (b) the Corporation shall pay to
the Holder an aggregate amount in cash equal to $0.01 per Conversion Warrant,
plus all accrued but unpaid interest on the Convertible Debenture through the
date immediately preceding the Redemption Date (the “ Redemption
Consideration ”), by wire transfer of immediately available funds to
the account designated by the Holder prior to the Redemption Date.
6.3 Redemption Date
The Corporation shall have the right to
redeem this Convertible Debenture in the event that the Corporation’s Common
Shares close with a bid price, on average, over $1.00 per share for a
consecutive 20 day trading period.
6.4 Effect of
Redemption
Upon
consummation of the Redemption, this Convertible Debenture shall be cancelled by
the Corporation on its books and the Holder shall have no further rights,
powers, entitlements or claims of any kind under this Convertible Debenture or
the Security Agreements, all of which shall be fully and effectively terminated,
cancelled, released, acquitted, and forever discharged without any further
action on the part of the Holder. For the avoidance of doubt, the payment of the
Redemption Consideration shall discharge in full the Corporation’s obligation to
repay any principal outstanding under this Convertible Debenture immediately
prior to the Redemption.
ARTICLE
7
MISCELLANEOUS
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7.1
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Notice
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Any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be given by facsimile or other means of electronic
communication or by delivery as hereafter provided. Any such notice other
communication, if sent by facsimile or other means of electronic communication,
shall be deemed to have been received on the business day following the sending,
or, if delivered by hand, shall be deemed to have been received at the time it
is delivered to the applicable address noted below either to the individual
designated below or to an individual at such address having apparent authority
to accept deliveries on behalf of the addressee. Notice of change of address
shall also be governed by this Section. Notices and other communications shall
be addressed as follows:
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(a)
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if
to the Corporation:
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C.
General Xxxxxx, #706
Col. San
Xxxxxx
Chihuahua,
Mexico
Attention: Xxxxxxxxx Xxxxxx
Facsimile: x00
(000) 000 0000 xxx 000
With a
copy to:
Xxxxxxx
X. Xxxxxxxxxx, Esq.
Xxxxxxx
Xxxxxx Xxxxxx-Xxxx Xxxxxxxxxx LLP
000
Xxxxxxx Xxxxxx, 00xx
Floor
New York,
NY 10022
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(b)
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if
to the Holder:
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To the
Holder whose name and address appears on the front page of this Convertible
Debenture.
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7.2
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Replacement
of Certificates
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(1) In case
this Convertible Debenture shall become mutilated or be lost, destroyed or
stolen, the Corporation shall issue, and thereupon deliver, a new Convertible
Debenture of like tenor as the one mutilated, lost, destroyed or stolen in
exchange for and upon surrender and cancellation of such mutilated Certificate
or in lieu of and in substitution for such lost, destroyed or stolen Convertible
Debenture.
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7.3
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Amendment,
Waiver
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No
amendment or waiver of this Convertible Debenture will be binding unless such
amendment or waiver is agreed to in writing by the Corporation and the Holder.
No waiver of any provision of this Convertible Debenture will constitute a
waiver of any other provision nor will any waiver of any provision of this
Convertible Debenture constitute a continuing waiver unless otherwise expressly
provided.
[SIGNATURE
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IN WITNESS WHEREOF MEXORO MINERALS
LTD. has caused this Convertible Debenture to be signed by its authorized
signatory as of the 25th day of March, 2009.
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By:__/s/ Xxxxxxxxx
Xxxxxx________________
Name:
Xxxxxxxxx Xxxxxx
Title:
President
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SCHEDULE
A
NOTICE
OF ELECTION TO CONVERT
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TO:
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|||
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Principal
Amount to be converted
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$
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||
The
undersigned, the registered Holder of that certain 15% Convertible Debenture,
dated _________, 2009, in the original principal amount of $_________, hereby
irrevocably elects to convert the above noted Principal Amount of such
Convertible Debenture into (Check one):
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□
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Cash &
Warrants: Pursuant to an offer from the Corporation and Financing,
to receive full payment, including accrued interest plus sufficient
warrants equal to 20% of the value of the debenture with a strike price at
20% discount to the 20 day moving average of the Common Shares as quoted
on the Over the Counter Bulletin Board or other such exchange as the case
may be (“OTCBB”); or
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□
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Conversion Shares
& Warrants: Conversion Units at the Conversion Price. The
number of Conversion Units shall be determined by dividing the Principal
Amount of the Convertible Debenture by the Conversion Price;
or
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□
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Real Property
Interest: A percentage ownership interest in the Reserved Property
equal to the Principal Amount divided by the sum of all Principal Amounts
raised in connection with the Securities Purchase
Agreement.
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In
accordance with the provisions of the within mentioned Convertible Debenture, I
hereby deliver this Convertible Debenture to the Corporation for such
purpose.
For
conversions into Cash & Warrants or Conversion Shares &
Warrants:
I hereby
direct that the certificates for the Conversion Shares and Conversion Warrants
be registered and delivered as follows:
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Name
in Full
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Address
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Address
for Delivery
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Number
of Conversion Shares and Conversion Warrants
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(Please
print full name in which share and warrant certificates are to be
issued.)
The
registered Holder hereof may exercise the Holder’s right to subscribe for
Conversion Units of MEXORO
MINERALS LTD. by completing this Notice of Election to Convert it to the
Corporation at its office.
For
conversions into real property:
I hereby
direct that my Principal Xxxxxx be converted into a percent interest of the
Cieneguita property. Please register this interest as
follows:
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Name
in Full
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Address
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Address
for Delivery
|
If
applicable, please deliver a new Convertible Debenture in respect of the balance
of the principal amount of the attached Convertible Debenture Certificate that
has not been converted, redeemed or repaid, to the undersigned.
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Dated:
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(Signature
of Holder)
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(Print
Name of Holder)
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SCHEDULE
B
FORM OF
TRANSFER
SCHEDULE
A
TO: MEXORO MINERALS
LTD.
SUBSCRIPTION
FORM
The
undersigned hereby subscribes for _______________ shares of common stock
(“Common Shares”) in the capital of Mexoro Minerals Ltd. (the “Corporation”) (or
such other number of common shares or other securities to which such
subscription entitles the undersigned in lieu thereof or in addition thereto
pursuant to the provisions of the warrant certificate (the “Warrant
Certificate”) dated the day of , 20
issued by the Corporation) at the purchase price of U.S. $0.30 per Common Share
(or at such other purchase price as may be in effect under the provisions of the
Warrant Certificate) and on and subject to the other terms and conditions
specified in the Warrant Certificate and hereunder and encloses herewith a
certified cheque, bank draft or money order in lawful money of the United States
of America payable to the Corporation or has transmitted same day funds in
lawful money of United States of America by wire to such account as the
Corporation directed the undersigned in payment of the subscription
price.
The
undersigned is an “accredited investor” Is defined in Regulation D promulgated
under the United States Securities Act of 1933, as amended (the “Securities
Act”) or is a not U.S. Person or a person within the United States and that the
Common Shares are not being subscribed for on behalf of a U.S. Person (as such
term is defined for the purposes of the Securities Act.
The
undersigned hereby directs that the Common Shares subscribed for be registered
and delivered as follows:
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Name in Full
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Address
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Number of Common Shares
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DATED
this ________ day
of ,
20_____.
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By:
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SCHEDULE
B
FORM OF
TRANSFER
FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
______________________________________________________________________________(include
name and address of the transferee) Warrants exercisable for shares in the
common stock (“Common Shares”) in the capital stock of Mexoro Minerals Ltd. (the
“Corporation”) registered in the name of the undersigned on the register of the
Corporation maintained therefor, and hereby irrevocably appoints
_____________________________________________ the attorney of the undersigned to
transfer the said securities on the books maintained by the Corporation with
full power of substitution.
DATED
this _________ day of _______________, 20________ .
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Signature
of Transferor
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Address
of Transferor
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SCHEDULE
C
NOTICE
OF EXERCISE
(If
Registration Statement Not Effective)
TO:
MEXORO MINERALS LTD.
The
undersigned holder of the within Warrant Certificate, hereby exercises certain
Warrants (the “Exercised Warrants”) evidenced thereby and hereby subscribes for
a number of Common Shares of Mexoro Minerals Ltd. (the “Corporation”) equal to
such number of Common Shares or number or amount of other securities or
property, or combination thereof, to which such exercise entitles him under the
provisions of the Warrant at an aggregate price equal to the product of the
Exercise Price and the number of Exercised Warrants, and on the terms specified
in such Warrant Certificate, and in payment therefor, delivers herewith a bank
draft, certified cheque or money order payable to Mexoro Minerals Ltd.
Capitalized terms not defined herein shall have the definitions set forth in the
Warrant Certificate.
The
undersigned represents that it (A) has had access to such current public
information concerning the Corporation as it considered necessary in connection
with its investment decision and (B) understands that the securities issuable
upon exercise hereof have not been registered under the United States Securities Act of
1933, as amended (the “1933 Act”).
The
undersigned represents and warrants that it: [CHECK ONE ONLY]
____ A.
is not a U.S. Purchaser and it (1) is not in the United States; (2) is not a
U.S. Person and is not exercising the Warrants for, or on behalf or benefit of,
a U.S. Person or person in the United States; (3) did not execute or deliver the
Subscription Form in the United States; (4) agrees not to engage in hedging
transactions with regard to the Common Shares prior to the expiration of the
one-year distribution compliance period set forth in Rule 903(b)(3) of
Regulation S; (5) acknowledges that the Common Shares issuable upon exercise of
the Warrants are “restricted securities” as defined in Rule 144 of the 1933 Act
and upon the issuance thereof, and until such time as the same is no longer
required under the applicable requirements of the 1933 Act or applicable U.S.
state laws and regulations, the certificates representing the Common Shares will
bear a restrictive legend; and (6) acknowledges that the Corporation shall
refuse to register any transfer of the Common Shares not made in accordance with
the provisions of Regulation S, pursuant to registration under the 1933 Act, or
pursuant to an available exemption from registration under the 1933 Act; and (B)
it holder has not engaged in any “directed selling efforts” (as defined in
Regulation S) in the United States.
____B.
the undersigned is delivering a written opinion of United States counsel or a
written confirmation from the Corporation to the effect that the Common Shares
to be delivered upon exercise hereof have been registered under the 1933 Act or
are exempt from registration thereunder.
The
undersigned holder understands that the certificate representing the
Corporation’s Common Shares is issued upon exercise of this Warrant will bear a
legend restricting the transfer without registration under the 1933 Act and
applicable state securities laws substantially the form set forth in Section
1(3) of the Warrant Certificate.
Name:
Please
print or type name and address (including postal code)
Address:
Number of
Warrants being Exercised:
DATED
this______ day of_______ ,_________
Signature
guaranteed by:
Name of
registered holder (please print)
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Signature
of or on behalf of registered
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holder
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Office,
Title or other Authorization (if holder not an
individual)
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