EXHIBIT 6.12
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AGREEMENT TO CONVERT DEBT
This Agreement to Convert Debt (the "Agreement") is made as of the 17th day
of March 2004 by and between Challure Holdings or its assigns (referred to
herein as the "Holder") and SBS Interactive, Co., a Florida corporation
(referred to herein as the "Company"). This Agreement memorializes a verbal
agreement reached by the parties on February 6, 2004 based on the following:
RECITALS
A. The Holder has loaned money to the Company or its wholly-owned
subsidiary, SBS Interactive, Inc., a Nevada corporation (the "Subsidiary"). The
Company and the Holder agree that, as of the date of this Agreement, the total
amount of principal and interest owed under all loans made by the Holder to the
Company or its Subsidiary, including that certain promissory note dated August
2001 in the amount of CDN$26,000, that certain promissory note dated October
2001 in the amount of CDN$16,000, that certain promissory note dated June 2002
in the amount of CDN$13,000, that certain promissory note dated April 4, 2003 in
the amount of CDN$20,000 and that certain promissory note dated April 11, 2003
in the amount of CDN$20,000, is CDN$95,000 (US$73,077) (the "Amount Owed").
B. The Company wishes to pay the Amount Owed by issuing securities to the
Holder and the Holder has agreed to accept the Company's securities as full and
final payment of the Amount Owed, in accordance with the terms of this
Agreement.
Therefore, the Company and the Holder agree as follows:
AGREEMENT
1. Transfer of Securities and Cancellation of Debt.
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(a) Securities to be Issued. Upon execution of this Agreement, the
Holder agrees to accept, and the Company agrees to issue and transfer to the
Holder, the following securities in full and final payment of the Amount Owed:
(i) 324,786 shares of the Company's Common Stock, $0.001 par
value, (the "Shares");
(ii) Subject to subparagraph (b), a warrant to purchase 324,786
shares of the Company's Common Stock at a price of $1.00 per share.
The warrant shall have a term of 3 years; and
(iii) Subject to subparagraph (b), a warrant to purchase 399,000
shares of the Company's Common Stock at a price of $0.85 per share.
The warrant shall have a term of 3 years.
Collectively, the warrants described in subsections (ii) and (iii) above shall
be referred to in this Agreement as the "Warrants". The Warrants shall be
substantially in the form attached hereto as Attachment 1 to this Agreement.
Upon receipt of the Shares and the Warrants, the Holder will xxxx all
instruments evidencing the Amount Owed (the "Debt Instruments") as "Paid" and
will return them to the Company, in accordance with subparagraph (c) below.
(b) Price Adjustment to Warrants. If within 75 days of the date of this
Agreement the Company undertakes a financing through the sale of its securities
which financing includes warrants (the "Offering Warrants"), and any Offering
Warrant has an exercise price that is less than the exercise price set forth in
subparagraph (a)(ii) above, then the exercise price of the Warrant described in
subparagraph (a)(ii) above shall be reduced to the lowest Offering Warrant
exercise price and the exercise price set forth in subparagraph (a)(iii) above
shall be reduced to 85% of the lowest Offering Warrant exercise price.
(c) Exchange of Documents. The certificate representing the Shares and
the agreements representing the Warrants shall be delivered to the Holder as
soon as practicable. Upon receipt of the Shares and the Warrants, the Holder
shall deliver the Debt Instruments to the Company.
2. Registration Rights.
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(a) Demand Registration. Upon receipt of a written request from the
Holder, which request shall not be made prior to August 1, 2004, the Company
shall prepare and file with the Securities and Exchange Commission (the
"Commission") a "shelf" registration statement covering the resale of the Shares
and the Common Stock underlying the Warrants (collectively, the "Registrable
Securities") for an offering to be made on a continuous basis pursuant to Rule
415. Subject to the terms of this Agreement, the Company shall use its best
efforts to cause the registration statement to be declared effective under the
Securities Act of 1933 (the "Securities Act") as promptly as possible after the
filing thereof, but in any event prior to December 31, 2004, and shall use its
best efforts to keep such registration statement continuously effective under
the Securities Act until the date which is two years after the date that such
registration statement is declared effective by the Commission or such earlier
date when the Registrable Securities covered by such registration statement have
been sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent and the
Holder (the "Effectiveness Period").
(b) Piggyback Registration. If at any time prior to August 1, 2004 the
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders of the Company other than the Holder) securities
under the Securities Act on Form X-0, X-0, X-0 or SB-2 (or any replacement or
successor forms) (a "Piggyback Registration"), the Company shall cause to be
included in such registration statement and use reasonable efforts to be
registered under the Securities Act all the Registrable Securities that the
Holder shall request to be registered; provided, however, that such right of
inclusion shall not apply to any registration statement covering an underwritten
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offering unless the underwriter or its agent agrees in writing to the inclusion
of the Registrable Securities. The Company shall have the absolute right to
withdraw or cease to prepare or file any registration statement for any offering
referred to in this Section 2 without any obligation or liability to the Holder.
(c) Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the registration statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the OTCBB, and (B) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in writing
(including, without limitation, fees and disbursements of counsel for the
Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdiction as requested by
the Holder), (ii) printing expenses (including, without limitation, expenses of
printing certificates for the Registrable Securities and of printing
prospectuses requested by the Holder), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company for review of
the registration statement, including the prospectus, and any pre-effective
amendments thereto, and (v) fees and expenses of all other persons retained by
the Company in connection with the consummation of the transactions contemplated
by this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with its obligations under this Section
2 (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of the
Registrable Securities on the OTCBB. In no event shall the Company be
responsible for any broker or similar commissions of the Holder.
(d) Company's Obligation. In connection with the Company's registration
obligations hereunder, the Company shall:
(i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and
the prospectus used in connection therewith as may be necessary to
keep the registration statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional registration
statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause any related prospectus
to be amended or supplemented by any required prospectus supplement
and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible, and in any event
within 20 trading days, to any comments received from the Commission
with respect to a registration statement or any amendment thereto; and
(iv) comply in all material respects with the provisions of the
Securities Act and the Securities Exchange Act of 1934 with respect to
the disposition of all Registrable Securities covered by the
registration statement during the applicable period in accordance with
the intended methods of disposition by the Holder set forth in such
registration statement as so amended or in such prospectus as so
supplemented.
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(ii) Notify the Holder (which notice shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made) as promptly as reasonably possible (u)(A) when
a prospectus or any prospectus supplement or post-effective amendment
to a registration statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of
such registration statement and whenever the Commission comments in
writing on such registration statement (the Company shall provide true
and complete copies thereof and all written responses thereto to the
Holder); and (C) with respect to the registration statement or any
post-effective amendment, when the same has become effective; (v) of
any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the
registration statement or prospectus or for additional information;
(w) of the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement covering any or all of the
Registrable Securities or the initiation of any proceedings for that
purpose; (x) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for
such purpose; (y) of the occurrence of any event or passage of time
that makes the financial statements included in a registration
statement ineligible for inclusion therein or any statement made in a
registration statement or prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to a registration statement,
prospectus or other document so that, in the case of a registration
statement or the prospectus, as the case may be, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (z) the occurrence or existence of any pending
corporate development with respect to the Company that the Company
believes may be material and that, in the determination of the
Company, makes it not in the best interests of the Company to allow
continued availability of the registration statement or prospectus;
provided, however, that any and all of such information shall remain
confidential to the Holder until such information otherwise becomes
public, unless disclosure by the Holder is required by law.
(iii) Promptly deliver to the Holder, without charge, as many
copies of the prospectus or prospectuses (including each form of
prospectus) and each amendment or supplement thereto as the Holder may
reasonably request. Subject to the terms of this Agreement, the
Company hereby consents to the use of such prospectus and each
amendment or supplement thereto by the Holder in connection with the
offering and sale of the Registrable Securities covered by such
prospectus and any amendment or supplement thereto.
(iv) Use commercially reasonable efforts to register or qualify
the resale of such Registrable Securities as required under applicable
securities or Blue Sky laws of each State within the United States as
the Holder requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period; provided, that the Company shall not be required
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to qualify generally to do business in any jurisdiction where it is
not then so qualified or subject the Company to any material tax in
any such jurisdiction where it is not then so subject.
(v) Cooperate with the Holder to facilitate the timely
preparation and delivery of certificates representing the Registrable
Securities to be delivered to a transferee pursuant to a registration
statement, which certificates shall be free of all restrictive legends
(to the extent allowed by law), and to enable such Registrable
Securities to be in such denominations and registered in such names as
the Holder may request.
(vi) Upon the occurrence of any event contemplated by this
Section 2, as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to a registration
statement or a supplement to the related prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither a registration statement nor such prospectus will contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Company notifies the Holder in accordance with
clauses (ii) through (vi) of Section 2(d)(ii) above to suspend the use
of any prospectus until the requisite changes to such prospectus have
been made, or the Company otherwise notifies the Holder of its
election to suspend the availability of a registration statement and
prospectus pursuant to clause (z) of Section 2(d)(ii), then the Holder
shall suspend use of such prospectus. The Company will use its best
efforts to ensure that the use of the prospectus may be resumed as
promptly as is practicable, except that in the case of suspension of
the availability of a registration statement and prospectus pursuant
to clause (z) of Section 2(d)(ii), the Company shall not be required
to take such action until such time as it shall determine that the
continued availability of the registration statement and prospectus is
no longer not in the best interests of the Company.
(vii) Comply with all applicable rules and regulations of the
Commission.
(viii) Use its reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of a registration statement, or (ii) any suspension of
the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(ix) The Company may require the Holder to furnish to the Company
a statement as to the number of shares of Common Stock beneficially
owned by the Holder and, if requested by the Commission, the
controlling person thereof, within three trading days of the Company's
request.
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3. Indemnifications Relating to Registration.
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(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless the Holder, the
officers, directors, agents and employees of the Holder, each person who
controls any the Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in a registration statement, any prospectus or any form
of prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions or alleged untrue statements or omissions are
based upon information regarding the Holder furnished in writing to the Company
by the Holder expressly for use therein, or to the extent that such information
relates to the Holder or the Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by the
Holder expressly for use in a registration statement, such prospectus or such
form of prospectus or in any amendment or supplement thereto or (2) in the case
of an occurrence of an event of the type specified in Section 2(d)(ii)(u)-(x),
the use by the Holder of an outdated or defective prospectus after the Company
has notified the Holder in writing that the prospectus is outdated or defective
and prior to the receipt by the Holder of a writing by the Company that the use
of the applicable prospectus may be resumed. The Company shall notify the Holder
promptly of the institution, threat or assertion of any proceeding arising from
or in connection with the transactions contemplated by this Agreement of which
the Company is aware.
(b) Indemnification by Holder. The Holder shall indemnify and hold
harmless the Company, its directors, officers, agents and employees, each person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling persons, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising out of or based upon any untrue statement of a material fact contained
in any registration statement, any prospectus, or any form of prospectus, or in
any amendment or supplement thereto, or arising solely out of or based solely
upon: (i) the Holder's failure to comply with the prospectus delivery
requirements of the Securities Act or (ii) any untrue statement or omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, such untrue
statement or omission is contained in any information so furnished in writing by
the Holder to the Company specifically for inclusion in such registration
statement or such prospectus or to the extent that (1) such information relates
to the Holder or the Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by the Holder
expressly for use in the registration statement, such prospectus or such form of
prospectus or in any amendment or supplement thereto or (2) in the case of an
occurrence of an event of the type specified in Section 2(d)(ii)(u)-(x), the use
by the Holder of an outdated or defective prospectus after the Company has
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notified the Holder in writing that the prospectus is outdated or defective and
prior to the receipt by the Holder of a writing by the Company that the use of
the applicable prospectus may be resumed.
(c) Conduct of Indemnification Proceedings. If any proceeding shall be
brought or asserted against any person entitled to indemnity hereunder (an
"Indemnified Party"), the Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided,
however, that the failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that such failure shall have
prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such proceeding and to employ counsel reasonably satisfactory to the
Indemnified Party in any such proceeding; or (3) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party, and the Indemnified Party shall have been advised by
counsel that a material conflict of interest is likely to exist if the same
counsel were to represent the Indemnified Party and the Indemnifying Party (in
which case, if the Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and the expense of one such counsel for the Indemnified Party shall be
at the expense of the Indemnifying Party). The Indemnifying Party shall not be
liable for any settlement of any such proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of the
Indemnified Party from all liability on claims that are the subject matter of
such proceeding.
Subject to the terms of this Agreement, all fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten trading days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided,
however, that the Indemnifying Party may require the Indemnified Party to
undertake to reimburse all such fees and expenses to the extent it is finally
judicially determined that the Indemnified Party is not entitled to
indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 3(a) or
3(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying the
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Indemnified Party, shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, the Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 3(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
4. Representations by Company.
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The Company hereby represents and warrants to the Holder as follows:
(i) The Company is duly organized, validly existing and in good
standing under the laws of the State of Florida.
(ii) The Company has all requisite power and authority (corporate
or otherwise) to execute, deliver and perform this Agreement and the
transactions contemplated thereby, and the execution, delivery and
performance by the Company of this Agreement has been duly authorized
by all requisite action by the Company and this Agreement, when
executed and delivered by the Company, constitutes a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
(iii) The execution, delivery and performance by the Company of
this Agreement and the Warrants have been duly authorized by all
requisite corporate action of the Company; and this Agreement and the
Warrants have been duly executed and delivered by the Company.
(iv) The Shares and the Common Stock issued upon exercise of the
Warrants will be duly and validly issued, fully paid and
nonassessable, and free of any liens or encumbrances.
5. Representations by the Holder.
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The Holder hereby represents and warrants to the Company as follows:
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(i) The Holder has all requisite power and authority (corporate
or otherwise) to execute, deliver and perform this Agreement and the
transactions contemplated thereby, and the execution, delivery and
performance by the Holder of this Agreement has been duly authorized
by all requisite action by the Holder and this Agreement, when
executed and delivered by the Holder, constitutes a valid and binding
obligation of the Holder, enforceable against the Holder in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar
laws affecting creditors' rights and remedies generally, and subject,
as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(ii) The Holder has a pre-existing personal or business
relationship with the Company and its officers and directors.
(iii) The Holder is an "accredited investor", as that term is
defined in Rule 501 of Regulation D in that the Holder is an entity
whose equity owners are accredited investors.
(iv) The Holder has complied with all applicable investment laws
and regulations in force relating to the legality of an investment in
the Shares and the Warrants in the jurisdiction in which it is
subject, and the Holder has obtained any consent, approval or
permission required in that jurisdiction.
(v) The Holder understands and acknowledges that the Shares and
the Warrants have not been registered with the Securities and Exchange
Commission under Section 5 of the of the Securities Act or registered
or qualified with any applicable state or territorial securities
regulatory agency in reliance upon one or more exemptions afforded
from registration or qualification.
(vi) The Holder understands and acknowledges that the Shares, the
Warrants and the Common Stock underlying the Warrants are deemed to be
"restricted" securities under the Securities Act, and may be re-sold
only pursuant to exemptions provided by the Securities Act. The Holder
understands and acknowledges that the Company is required to place a
legend on each certificate and on each Warrant Agreement stating that
the Shares, the Warrants and the Common Stock underlying the Warrants
have not been registered under the Securities Act.
(vii) The Holder understands and acknowledges that: (i) prior to
any sale, transfer, assignment, pledge, hypothecation or other
disposition of the Shares, the Warrants or the Common Stock underlying
the Warrants, he must either: (1) furnish the Company with an opinion
of counsel, in form and substance reasonably satisfactory to the
Company and to its legal counsel, to the effect that such disposition
is exempted from the registration and prospectus delivery requirement
under the Securities Act and the securities laws of the jurisdiction
in which the Holder resides, and legal counsel for the Company shall
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have concurred in such opinion; or (2) satisfy the Company that a
registration statement on Form SB-2 under the Securities Act (or any
other form appropriate under the Securities Act, or any form replacing
any such form) with respect to the securities proposed to be so
disposed of shall then be effective; and that such disposition shall
have been appropriately qualified or registered in accordance with the
applicable securities laws of the jurisdiction in which it resides.
(viii) The Holder is entering into this transaction for the
Holder's own account, own risk and own beneficial interest, is not
acting as an agent, representative, intermediary, nominee or in a
similar capacity for any other person or entity, nominee account or
beneficial owner, whether a natural person or entity (each such
natural person or entity, an "Underlying Beneficial Owner") and no
Underlying Beneficial Owner will have a beneficial or economic
interest in the Shares or the Warrants (whether directly or
indirectly, including without limitation, through any option, swap,
forward or any other hedging or derivative transaction), has carried
out thorough due diligence as to and established the identities of its
investors, directors, officers, trustees, beneficiaries and grantors
(to the extent applicable, each a "Related Person"), holds the
evidence of such identities, will maintain all such evidence for at
least five years from the date of the Holder's resale or other
disposition of the Registrable Securities, will request such
additional information as the Company may require to verify such
identities as may be required by applicable law, and will make such
information available to the Company upon its request, and does not
have the intention or obligation to sell, pledge, distribute, assign
or transfer all or a portion of the Shares or the Warrants to any
Underlying Beneficial Owner or any other person
(ix) The Holder hereby represents and warrants that the proposed
investment in the Company does not directly or indirectly contravene
United States federal, state, local or international laws or
regulations applicable to the Holder, including anti-money laundering
laws (a "Prohibited Investment").
(x) Federal regulations and Executive Orders administered by the
U.S. Treasury Department's Office of Foreign Assets Control ("OFAC")
prohibit, among other things, the engagement in transactions with, and
the provision of services to, certain foreign countries, territories,
entities and individuals. The lists of OFAC prohibited countries,
territories, persons and entities can be found on the OFAC website at
(xxx.xxxxx.xxx/xxxx). The Holder hereby represents and warrants that
neither the Holder nor any Underlying Beneficial Owner or Related
Person is a country, territory, person or entity named on an OFAC
list, nor is the Holder nor any Underlying Beneficial Owner or Related
Person, a natural person or entity with whom dealings are prohibited
under any OFAC regulations.
(xi) The Holder represents and warrants that neither the Holder
nor any Underlying Beneficial Owner or Related Person is a senior
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foreign political figure, or any immediate family member or close
associate of a senior foreign political figure within the meaning of,
and applicable guidance issued by the Department of the Treasury
concerning, the U.S. Bank Secrecy Act (31 U.S.C. Section 5311 et
seq.), as amended, and any regulations promulgated thereunder.
(xii) The Holder agrees promptly to notify the Company should the
Holder become aware of any change in the information set forth in
subparagraphs (viii) through (xi).
(xiii) The Holder agrees to indemnify and hold harmless the
Company, its affiliates, their respective directors, officers,
shareholders, employees, agents and representatives from and against
any and all losses, liabilities, damages, penalties, costs, fees and
expenses (including legal fees and disbursements) which may result,
directly or indirectly, from the Holder's misrepresentations or
misstatements contained herein or breaches hereof relating to
paragraphs (viii) through (xi).
(xiv) The Holder understands and agrees that, notwithstanding
anything to the contrary contained in any document (including any side
letters or similar agreements), if, following the Holder's investment
in the Company, it is discovered that the investment is or has become
a Prohibited Investment, such investment may immediately be redeemed
by the Company or otherwise be subject to the remedies required by
law, and the Holder shall have no claim against the Company for any
form of damages as a result of such forced redemption or other action.
(xv) Upon the written request from the Company, the Holder agrees
to provide all information to the Company to enable the Company to
comply with all applicable anti-money laundering statutes, rules,
regulations and policies, including any policies applicable to a
portfolio investment held or proposed to be held by the Company. The
Holder understands and agrees that the Company may release
confidential information about the Holder and any Underlying
Beneficial Owner(s) or Related Person(s) to any person if the release
of such information is necessary to comply with applicable statutes,
rules, regulations and policies.
6. Termination of Security Interests and Financing Statements.
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Upon the transfer to the Holder of the Shares and the Warrants, all
security interests created in favor of the Holder, if any, shall terminate and
the Company shall be entitled to terminate any and all financing statements in
favor of the Holder, no matter where filed or recorded, if any. At no cost to
the Holder but without the payment of additional consideration, the Holder shall
cooperate with the Company and perform any acts required on the part of the
Holder to terminate the financing statements.
11
7. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holder.
(b) Compliance. The Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to the
registration statement.
(c) Discontinued Disposition. The Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 2(d)(ii)(u), (v)
or (z), such Holder will forthwith discontinue disposition of such Registrable
Securities under a registration statement until such Holder's receipt of the
copies of the supplemented prospectus and/or amended registration statement, or
until it is advised in writing by the Company that the use of the applicable
prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such prospectus or registration statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
(d) Notices. Any and all notices or other communications or deliveries
to be provided by the Holder hereunder shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to the Company at 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx, Xxxxxx X0X 0X0, facsimile number (000) 000-0000, Attn: Xxxx Xxxxxxx or
such other address or facsimile number as the Company may specify for such
purposes by notice to the Holder delivered in accordance with this Section. Any
and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service addressed to the
Holder at _________________, facsimile number __________________. Any notice or
other communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:30 p.m. (Los Angeles time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30 p.m.
(Pacific time) on any date and earlier than 11:59 p.m. (Pacific time) on such
date, (iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties. Neither the Holder nor the Company may assign his or its rights or
obligations hereunder without the prior written consent of the other.
12
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(g) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement to Convert
Debt as of the date first written above.
SBS INTERACTIVE CO.
By: /s/ Xxxx Xxxxxxx
-----------------------------------------
Xxxx Xxxxxxx, President
Challure Holdings
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Xxxxx Xxxxx
ATTACHMENT 1
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO SBS INTERACTIVE CO. THAT SUCH REGISTRATION IS
NOT REQUIRED.
Right to Purchase ______ Shares of Common Stock of SBS
Interactive Co. (subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2004-__ Issue Date: March __, 2004
SBS INTERACTIVE CO., a corporation organized under the laws of the State of
Florida hereby certifies that, for value received, _________, or assigns (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company from and after the Issue Date of this Warrant and at any time or
from time to time before 5:00 p.m., New York time, through three (3) years after
such date (the "Expiration Date"), up to ________ fully paid and nonassessable
shares of Common Stock, no par value, of the Company, at the Exercise Price (as
defined below). The number and character of such shares of Common Stock and the
Exercise Price are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include SBS Interactive Co. and any
corporation which shall succeed or assume the obligations of SBS Interactive Co.
hereunder.
(b) The term "Common Stock" includes (x) the Company's Common Stock, $0.001
par value per share, and (y) any other securities into which or for which any of
the securities described in (x) may be converted or exchanged pursuant to a plan
of recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 3 or otherwise.
(d) The term "Exercise Price" shall be as follows, subject to adjustment
pursuant to Section 4:
(i) ________ shares at $0.85;
(ii) ________ shares at $1.00
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, shares of Common
Stock of the Company, subject to adjustment pursuant to Section 4, by delivery
of an original or fax copy of the exercise notice attached hereto as Exhibit A
(the "Exercise Notice") along with payment to the Company of the Exercise Price.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which both the Exercise Notice and
payment have been made for such shares. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within 3 business
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as such Holder (upon payment by such holder of any applicable
transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) to which
such Holder shall be entitled on such exercise.
2.2. Exercise.
Payment may be made either in cash or by certified or official bank
check payable to the order of the Company equal to the applicable aggregate
Exercise Price for the number of Common Shares specified in such form (as such
exercise number shall be adjusted to reflect any adjustment in the total number
of shares of Common Stock issuable to the holder per the terms of this Warrant)
and the Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of Common Stock
(or Other Securities) determined as provided herein.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or entity, or (c) transfer all
or substantially all of its properties or assets to any other person or entity
under any plan or arrangement contemplating the dissolution of the Company,
then, in each such case, as a condition to the consummation of such a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder of this Warrant, on the exercise hereof as provided in Section 1 at
any time after the consummation of such reorganization, consolidation or merger
or the effective date of such dissolution, as the case may be, shall receive, in
lieu of the Common Stock (or Other Securities) issuable on such exercise prior
to such consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be, if
such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
2
applicable) receivable by the Holder of the Warrant after the effective date of
such dissolution pursuant to Section 3.1 to a bank or trust company having its
principal office in New York, NY, as trustee for the Holder of the Warrant.
3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 3. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then only in such
event will the Company's securities and property (including cash, where
applicable) receivable by the holders of the Warrant be delivered to the Trustee
as contemplated by Section 3.2.
4. Adjustments for Stock Splits, Combinations, etc. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock Issuable on Exercise of Warrant. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, shares of Common Stock (or Other Securities) from time
to time issuable on the exercise of the Warrant.
3
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") with respect to any
or all of the shares underlying this Warrant. On the surrender for exchange of
this Warrant, with the Transferor's endorsement in the form of Exhibit B
attached hereto (the "Transferor Endorsement Form") and together with evidence
reasonably satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, a legal opinion from
the Transferor's counsel that such transfer is exempt from the registration
requirements of applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth in
that certain Agreement to Convert Debt entered into by the Company and Purchaser
of the Company's Common Stock at or prior to the issue date of this Warrant.
10. Intentionally left blank.
11. Warrant Agent. The Company may, by written notice to each holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
Section 8, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
12. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. Notices, etc. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
14. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
4
15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of California without regard to principles of conflicts of laws.
Any action brought concerning the transactions contemplated by this Warrant
shall be brought only in the state courts of located in the city of Los Angeles,
California or in the federal courts located in the city of Los Angeles,
California. The individuals executing this Warrant on behalf of the Company
agree to submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Warrant. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision. The Company and Holder
each acknowledges that legal counsel participated or had an opportunity to
participate in the preparation of this Warrant and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.
[THIS SPACE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of
the date first written above.
SBS INTERACTIVE CO.
By:_____________________________________
HOLDER
By:_____________________________________
Its:
6
Exhibit A
EXERCISE NOTICE
(To be signed only on exercise of Warrant)
TO: SBS Interactive Co.
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase:
________ shares of the Common Stock covered by such Warrant.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is an
aggregate of $___________.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _________________________________ whose address is
________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________ _______________________________________
(Signature must conform to name of
holder as specified on the face of the
Warrant)
_______________________________________
(Address)
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the Warrant to purchase the number of shares of Common Stock of
SBS Interactive Co. to which such Warrant relates specified under the heading
"Number of Shares Transferred," respectively, opposite the name(s) of such
person(s) and appoints each such person Attorney to transfer its respective
right on the books of SBS Interactive Co. with full power of substitution in the
premises.
Number of Shares
Transferees Transferred
----------- -----------
__________________________________ ________________________
__________________________________ ________________________
__________________________________ ________________________
Dated:__________________, _______ _______________________________________
(Signature must conform to name of
holder as specified on the face of the
warrant)
Signed in the presence of:
_________________________________ _______________________________________
(Name) (address)
_______________________________________
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
_________________________________
(Name)
