CONVERTIBLE NOTE
EXHIBIT
13
THE
XXXXXXX XXXXXX COMPANY
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$250,000.00
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JANUARY
2,
2006
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THE
XXXXXXX XXXXXX COMPANY, (OTCBB:JKRI) a Florida corporation (the Company”), for
value received hereby promises to pay to the order of VANTAGE POINT CONSULTING
and or assignee (“Payee”), the Principal Amount of Two Hundred Fifty Thousand
and No/100 Dollars ($250,000.00), as per the Fee Agreement executed on November
12, 2005 and incorporated herein as Exhibit A, on or before the Due Date of
this
Note at the office of the Payee at 000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx
00000, with accrued interest payments & principal from the date of issuance
of this Note at the rate of eight percent (8.0%) per annum due and payable
on or
before January 1, 2007 (the “Due Date”).
For
the
purpose of calculating interest for any period for which interest shall be
payable, such interest shall be calculated on the basis of a 30 day month and
a
360 day year. Except as otherwise provided herein, all sums of past due
principal and interest shall bear interest at the maximum rate of interest
permitted by applicable law.
1. Covenants.
The Company covenants that so long as this Note shall be
outstanding:
(a) The
Company shall maintain an office at 000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx 00000, or at such other place as the Company may designate by written
notice given pursuant to the terms hereof, where notices, presentations and
demands to or upon the Company in respect of this Note may be made or
given.
(b) The
Company shall promptly cause to be paid and discharged all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or
any
subsidiary or upon the income and profits of, or upon any property belonging
to
the Company or any subsidiary before the same shall become in default, as well
as all lawful claims for labor, materials and supplies which, if unpaid, might
become a lien or charge upon such property or any part thereof; provided,
however, that the Company shall not be required to cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the amount
or validity thereof shall be contested in good faith by appropriate proceedings,
and the Company or such subsidiary, as the case may he, shall set aside on
its
books reserves with respect thereto which the Company and the independent public
accountants who are at the time employed to audit the books and accounts of
the
Company or such subsidiary consider adequate.
(c) The
Company shall at all times cause its physical property and the physical property
of its subsidiaries used or desirable in the conduct of the business of the
Company or its subsidiaries to be maintained, preserved, protected and kept
in
good repair, working order and condition, and from time to time cause to be
made
all needful and proper repairs, replacements, betterments and improvements
thereto, so that the business carried on in connection therewith may in the
opinion of the Company be properly and advantageously conducted at all times;
provided, however, that nothing in this Paragraph 1(c) shall require the Company
or any subsidiary to maintain, preserve, protect or keep in good repair, working
order or condition any physical property which, in the sole discretion of the
Company, is obsolete or surplus or unfit for use or may not be used
advantageously in the conduct of the business of the Company or such subsidiary,
as the case may be.
(d) The
Company shall at all times keep, and cause each subsidiary to keep, true and
complete books of record and accounts in accordance with generally accepted
accounting principles and practices and file timely all required reports with
the Securities and Exchange Commission.
(e) The
Company shall at all times cause to be done all things necessary to preserve
and
keep in full force and effect its corporate existence, rights, and franchises,
and the corporate existences, rights and franchises of each subsidiary, and
comply with and cause each subsidiary to comply with, all laws and governmental
requirements applicable to the Company or such subsidiary; provided, however,
that nothing in this Paragraph 1(e) shall (i) require the Company or any
subsidiary to maintain, preserve or renew any right or franchise which in the
opinion of the Board of Directors of the Company is not necessary or desirable
in the conduct of the business of the Company or of such subsidiary, as the
case
may be; or (ii) prevent the termination of the corporate existence of any
subsidiary if in the opinion of the Board of Directors of the Company such
termination is in the best interest of the Company and not disadvantageous
to
the Payee; or (iii) prevent any consolidation or merger involving the
Company or a subsidiary.
2. Piggy
Back Registration Rights. The Shares issued to the Payee shall be entitled
to
“Piggy Back Registration Rights” pursuant to a registration of the Company’s
securities made effective during the term of this Note. Upon effectiveness
of
said Registration Statement, Xxxxx’s Shares shall be immediately registered and
therefore eligible for trading under any and all restrictions that may
apply.
(a) The
Payee
is an “accredited investor” as defined under Rule 501 under the Securities
Act.
(b) The
Payee
acknowledges that the Shares have not been registered under the Securities
Act
or the securities laws of any state and are being offered pursuant to applicable
exemptions from such registration for nonpublic offerings as “restricted
securities” as defined by Rule 144 promulgated pursuant to the Securities Act.
The Shares may not be resold in the absence of an effective registration thereof
under the Securities Act and applicable state securities laws unless, in the
opinion of the Company’s counsel, an applicable exemption from registration is
available.
(c) The
Payee
is acquiring the Shares for its own account, for investment purposes only and
not with a view to, or for sale in connection with, a distribution, as that
term
is used in Section 2(11) of the Securities Act, in a manner which would require
registration under the Securities Act or any state securities laws.
(d) The
Payee
understands and acknowledges that the Shares will bear the following
legend:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED
FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION THEREOF UNDER THE
SECURITIES ACT OF 1933 AND/OR THE SECURITIES ACT OF ANY STATE HAVING
JURISDICTION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
(e) The
Payee
acknowledges that an investment in the Shares is not liquid and is transferable
only under limited conditions. The Payee acknowledges that such securities
must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. The Payee
is
aware of the provisions of Rule 144 promulgated under the Securities Act, which
permits limited resale of securities purchased in a private placement subject
to
the satisfaction of certain conditions and that such Rule is not now available
and, in the future, may not become available for resale of the
Shares.
Vantage
Point Convertible Note Initials _________ __________
(f) Payee
Sophistication and Ability to Bear Risk of Loss. The Payee acknowledges that
it
is able to protect its interests in connection with the acquisition of the
Shares and can bear the economic risk of investment in such securities without
producing a material adverse change in Payee’s financial condition. The Payee
otherwise has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of the investment in
the
Shares.
(g) Purchases
by Groups. The Payee represents, warrants, and covenants that it is not
acquiring the Shares as part of a group within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended.
3. Conversion
of Note.
(a) On
or
after the Due Date or upon an effective registration of the Company’s stock, the
Payee may convert all or part of the remaining principal balance, plus accrued
interest, of this Note into the common stock, par value $0.001 per share, of
the
Company (the “Common Stock”). In the event of a conversion, the number of shares
of the Common Stock to be issued shall be determined by dividing (i) the
unpaid principal balance of this Note, plus any accrued interest by
(ii) eighty percent (80%) of the average of the lowest three closing bid
prices in past 20 trading days immediately preceding any such conversion. All
such Common Stock conversions shall not exceed 4.99% of the then outstanding
Common Stocks of the Company. If this Note is surrendered for conversion, it
shall be duly endorsed, or be accompanied by a written instrument of transfer
in
a form satisfactory to the Company duly executed by the holder of this Note.
For
convenience, the conversion of all or a portion, as the case may be, of the
principal, plus accrued interest, of this Note into the Common Stock is
hereinafter sometimes referred to as the conversion of this Note. In the event
that this Note is converted in part only, upon such conversion the Company
shall
execute and deliver to the Payee, without service charge, a new Note or Notes,
of any authorized denomination or denominations as requested by the Payee,
in
aggregate principal amount equal to and in exchange for the unconverted portion
of the principal and accrued interest of the Note so surrendered.
(b) As
promptly as practicable after the surrender, as herein provided, of this Note
or
portion thereof in proper form for conversion, the Company shall deliver a
certificate or certificates representing the number of fully paid and
nonassessable shares of the Common Stock into which this Note (or portion
thereof) may be converted in accordance with the provisions of this Note.
Subject to the following provisions of this Paragraph 3, such conversion shall
be deemed to have been made immediately prior to the close of business on the
date that this Note or portion thereof shall have been surrendered for
conversion, accompanied by written notice, so that the rights of the Payee
as
holders thereof shall cease with respect to this Note (or the portion thereof
being converted) at such time, and the person or persons entitled to receive
the
shares of the Common Stock upon conversion of this Note or portion thereof
shall
be treated for all purposes as having become the record holder of such shares
of
the Common Stock at such time. Provided, however, that no such surrender on
any
date when the stock transfer books of the Company shall be closed shall be
effective to constitute the person or persons entitled to receive the shares
of
the Common Stock upon such conversion as the record holder or holders of such
shares of the Common Stock on such date, but such surrender shall be effective
to constitute the person or persons entitled to receive such shares of the
Common Stock as the record holder or holders thereof for all purposes
immediately prior to the close of the business on the next succeeding day on
which such stock transfer books are open.
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Point Convertible Note Initials _________ __________
(c) No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of this Note. If more than one Note shall be surrendered for
conversion at one time by the Payee, the number of full shares issuable upon
conversion thereof shall be computed on the outstanding shares of the Common
Stock, or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
Payee shall have the right thereafter to convert this Note into the kind and
amount of shares of stock of the Company or of such successor or purchasing
corporation and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by the
Payee of the number of shares of Common Stock into which this Note might have
been converted immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. The provisions of this paragraph
shall similarly apply to successive reclassifications, changes, consolidations,
mergers, sales, or conveyances.
(d) The
Company covenants that it will at times reserve and keep available out of its
authorized Common Stock solely for the purpose of issue upon conversion of
this
Note as herein provided, such number of shares of the Common Stock as shall
then
be issuable upon the conversion of unpaid balance, including accrued interest,
of this Note. The Company covenants that a]l shares of the Common Stock which
shall be so issuable shall, when issued, be duly and validly issued and fully
paid and nonassessable.
(e) The
Company covenants that upon conversion of this Note as herein provided, there
will be credited to the Common Stock stated capital from the consideration
for
which the shares of the Common Stock issuable upon such conversion are issued
an
amount per share of the Common Stock so issued as determined by the Board of
Directors, which amount shall not be less than the amount required by law and
by
the Company’s Articles of Incorporation, as amended, as in effect on the date of
such conversion. For the purposes of this covenant, the principal amount of
the
Note converted, less the amount of cash paid in lieu of the issuance of
fractional shares of such conversion, shall be deemed to be the amount of
consideration for which the shares of the Common Stock issuable upon such
conversion are issued.
(f) The
issuance of certificates for shares of the Common Stock upon the conversion
of
this Note shall be made without charge to the Payee so converting for any tax
in
respect of the issuance of such certificates, and such certificates shall be
issued in the name of, or in such names as may be directed by, the Payee;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate in the name other than that of the Payee, and the
Company shall not be required to issue or deliver such certificates unless
or
until the person or persons requesting the issuance thereof shall have paid
to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
4. Events
of
Default.
(a) If
any
one or more of the following events (herein individually referred to as an
“Event of Default”) shall have occurred for any reason and shall be continuing
at the time of any notice thereof from the Payee:
(i) Default
shall be made in the due observance and performance of any covenant, agreement
or condition in this Note (including the payment of any interest or principal)
and such default shall continue for a period of 30 days after written notice
thereof to the Company by the Payee; or
(ii) The
Company shall:
(1) Admit
in
writing its inability to pay its debts generally as they become
due;
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Point Convertible Note Initials _________ __________
(2) File
a
petition in bankruptcy or a petition to take advantage of any insolvency
act;
(3) Make
an
assignment for the benefit of its creditors;
(4) Consent
to the appointment of a receiver of itself or of the whole or any substantial
part of its property; or
(5) On
a
petition in bankruptcy filed against it, be adjudicated a bankrupt;
(iii) The
Company or any subsidiary shall file a petition or answer seeking reorganization
or arrangement under the federal bankruptcy laws or any other applicable law
or
statute of the United States of America or any state or district or territory
thereof; or
(iv) A
court
of competent jurisdiction shall enter an order, judgment or decree appointing,
without the consent of the Company or such subsidiary, a receiver of the Company
or any of its subsidiaries or of the whole or any substantial part of its
property, or approving a petition filed against the Company or any of its
subsidiaries seeking reorganization or arrangement under the federal bankruptcy
laws or any other applicable law or statute of the United States of America
or
any state or district or territory thereof, and such order, judgment or decree
shall not be vacated or set aside or stayed within 60 days from the date of
the
entry thereof; or
(v) Under
the
provisions of any other law for the relief or aid of debtors, any court of
competent jurisdiction shall assume custody or control of the Company or any
of
its subsidiaries or of the whole or any substantial part of its property, and
such custody or control shall not be terminated or stayed within 60 days from
the date of assumption of such custody or control;
then,
at
the option of the Payee, this Note shall thereupon become and be due and
payable, without any other presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived.
(b) If
any
event shall occur that constitutes, or after continuance for a specified period
would constitute, an Event of Default under this Paragraph 4, or if the holder
of this Note shall demand payment or take any other action permitted upon the
occurrence of any such event, the Company will at once give notice to all Payee,
specifying the nature of such event or of such demand or action, as the case
may
be.
(c) In
case
any one or more of the Events of Default specified above in this Paragraph
4
shall have happened and be continuing, the holder of this Note may proceed
to
protect and enforce its rights either by suit in equity and/or by action at
law,
or by other appropriate proceeding, whether for the specific performance (to
the
extent permitted by law) of any covenant or agreement contained in this Note
or
in aid of the exercise of any power granted in this Note, or proceed to enforce
the payment of this Note or to enforce any other legal or equitable right of
the
holder of this Note.
(d) No
remedy
herein contained on the holder hereof is intended to be exclusive of any other
remedy and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at
law or in equity or by statute or otherwise.
5. Miscellaneous.
(a) No
Sinking Fund. The Company is not required to establish any sinking fund with
respect to this Note.
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Point Convertible Note Initials _________ __________
(b) Collection
Fees. In the event of default hereunder and if this Note is placed in the hands
of an attorney for collection (whether or not suit is filed) or if this Note
is
collected by suit or legal proceedings or through bankruptcy proceedings, the
Company agrees to pay in addition to all sums then due hereon, including
principal and interest, all reasonable expenses of collection including
reasonable attorneys’ fees.
(c) Registered
Owner Transfer. The Company and any agent of the Company may treat the person
whose name appears above as the absolute owner hereof for the purpose of
receiving payment of, or on account of, the principal or interest due hereon
and
for all other purposes, and neither the Company nor any such agent shall be
affected by notice to the contrary. Subject to compliance with applicable
federal and state securities laws, this Note is transferable only on the books
of the Company by the registered holder in person or by attorney on surrender
of
this Note properly endorsed.
(d) No
Recourse. This Note is the obligation of the Company only, and no recourse
shall
be had for the payment hereof or the interest hereon against any incorporator,
shareholder, director or officer as such (whether past, present or future)
of
the Company or any successor entity whether by virtue of any constitution,
statute or rule of law or equity, or by the enforcement of any assessment or
penalty, or otherwise, all such liability of the incorporators, shareholders,
directors and officers as such being expressly waived and released by the holder
hereof by the acceptance of this Note.
(e) Successor
Entity. The Company may not consolidate with or merge into, or transfer all
or
substantially all of its assets to, another corporation unless the successor
corporation assumes all of the obligations of the Company under this Note and
immediately after the transaction no default exists with respect to this Note.
Thereafter, all such obligations of the Company shall terminate.
(f) Maximum
Rate of Interest. Notwithstanding any provisions to the contrary in this Note
or
in any of the documents relating hereto, in no event shall this Note or such
documents require the payment or permit the collection of interest in excess
of
the maximum amount permitted by the laws of the State of Florida. If any such
excess of interest is contracted for, charged or received under this Note or
under the terms of any of the documents relating hereto, or in the event the
maturity of the indebtedness evidenced by this Note is accelerated in whole
or
in part, or in the event that all or part of the principal or interest of this
Note shall be prepaid, so that under any of such circumstances the amount of
interest contracted for, charged or received under this Note or under any of
the
documents relating hereto, on the amount of principal actually outstanding
from
time to time under this Note shall exceed the maximum amount of interest
permitted by the laws of the State of Florida, then in any such
event:
(i) The
provisions of this Paragraph 5(f) shall govern and control;
(ii) Neither
the Company nor any other person or entity now or hereafter liable for the
payment hereof, shall be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum amount of interest permitted by
the
laws of the State of Florida;
(iii) Any
such
excess which may have been collected shall be either applied as a credit against
the then unpaid principal amount hereof or refunding to the Company, at the
holder’s option; and
(iv) The
effective rate of interest shall be automatically reduced to the maximum lawful
rate of interest allowed under the laws of the State of Florida as now or
hereafter construed by the courts having jurisdiction thereof,
(g) Rate
of
Interest. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Note or under such other documents which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate of interest,
shall
be made, to the extent permitted by the laws of the State of Florida, by
amortizing, prorating, allocating and spreading during the period of the full
stated term of the indebtedness evidenced hereby, all interest at any time
contracted for, charged or received from the Company or otherwise by the holder
or holders hereof in connection with such indebtedness.
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Issued
this 2nd day of January, 2006
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THE
XXXXXXX XXXXXX COMPANY
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| By: | |||
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Xxxxxxx
X. Xxxxxxxx, CEO
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