EXHIBIT 10.16
CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT, dated as of March 31, 2004
(the "AGREEMENT"), is made by and between Penge Corp., a Nevada corporation
("PENGE") and the purchaser identified as the Purchaser on the signature page
hereof (the "PURCHASER"). In consideration of the mutual promises contained
herein and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. SALE AND ISSUANCE OF THE NOTE. Subject to the terms and conditions of this
Agreement, the Purchaser agrees to purchase and the Company agrees to sell and
issue to Purchaser a convertible promissory note (the "NOTE") in the original
principal amount of $300,000 (the "PURCHASE PRICE") made up of $150,000 from
each of the two entities listed below. The Note shall be in the form attached to
this Agreement as EXHIBIT B. Immediately following the execution of this
Agreement, the Company shall deliver the Note to the Purchaser and the Purchaser
shall deliver to the Company the amount of the Purchase Price for such Note in
immediately available funds.
2. CONVERSION. The Purchaser shall have the option of converting the entire
outstanding principal amount of the Note, and any accrued interest thereon, into
shares of the Company's common stock (the "COMMON STOCK") pursuant to the terms
and conditions set forth in the Note. If the Note is converted into Common Stock
as provided above, no fractional shares will be issued in connection with such
conversion. In lieu of fractional shares which would otherwise be issuable, the
Company shall pay cash equal to the product of such fraction multiplied by the
Conversion Price.
3. STOCK BUY BACK. The Purchaser shall have the option of requiring the Company
to buy back some or all of the shares of Common Stock the Holder receives upon
the conversion of the Note in accordance with Section 2 above. The price at
which the Company shall buy back such shares of Common Stock will be thirty four
and a half cents per share ($0.345). This buy back option is valid on the date
of conversion only unless extended by the mutual written agreement of the
parties hereto.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser hereby represents
and warrants to the Company that:
(a) AUTHORIZATION. This Agreement constitutes the Purchaser's valid and
legally binding obligation, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency, and other similar laws affecting creditors'
rights, and rules of law governing specific performance, and the Purchaser has
full power and authority to enter into this Agreement.
(b) REPRESENTATIONS NOT MADE BY COMPANY. The Purchaser represents and
affirms that none of the following information has ever been represented,
guaranteed or warranted to the Purchaser, expressly or by implication, by any
person: (i) the approximate or exact length of time that the Purchaser will be
required to remain a security holder of the Company; (ii) the percentage of
profit and/or amount of or type of consideration, profit or loss to be realized,
if any, as a result of an investment in the Company; or (iii) the possibility
that the past performance or experience on the part of the Company or any
affiliate, or any officer, director, employee or agent of the foregoing, might
in any way indicate or predict the results of ownership of any of the Securities
(as defined below) or the potential success of the Company's operations.
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(c) PURCHASE FOR OWN ACCOUNT. The Purchaser is the sole and true party
in interest, is acquiring the Note and the Common Stock that may be issuable in
connection therewith (collectively, the "SECURITIES") for its own account for
investment, is not purchasing the Securities for the benefit of any other
person, and has no present intention of holding or managing the Securities with
others or of selling, distributing or otherwise disposing of any portion of the
Securities. If an entity, the Purchaser is duly organized and in good standing
in its jurisdiction of organization and has its principal place of business in
the state set forth below the Purchaser's name on the signature page hereof. If
an individual, the Purchaser has his or her principal residence in the state set
forth below the Purchaser's name on the signature page hereof.
(d) DISCLOSURE AND REVIEW OF INFORMATION. The Purchaser acknowledges
and represents that it has received and reviewed a copy of the Summary (as
defined below). In addition, the Purchaser acknowledges and represents that the
Purchaser has been given a reasonable opportunity to review all documents, books
and records of the Company pertaining to this investment, and has been supplied
with all additional information concerning the Company and the Securities that
has been requested by the Purchaser, has had a reasonable opportunity to ask
questions of and receive answers from the Company or its representatives
concerning this investment, and that all such questions have been answered to
the full satisfaction of the Purchaser. The Purchaser has received, and
acknowledges that it is receiving, no representations, written or oral, from the
Company or its officers, directors, employees, attorneys or agents other than
those contained in this Agreement and the Summary. In making its decision to
purchase the Securities, the Purchaser has relied solely upon its review of the
Summary, this Agreement, and independent investigations made by it or its
representatives without assistance of the Company.
(e) SPECULATIVE INVESTMENT. The Purchaser understands that (i) it must
bear the economic risk of the investment in the Securities for an indefinite
period of time because the Securities have not been registered under the
Securities Act or qualified under the Securities Act of 1933, as amended (the
"SECURITIES ACT") or the securities laws of any other jurisdiction and (ii) its
investment in the Company represented by the Securities is highly speculative in
nature and is subject to a high degree of risk of loss in whole or in part. The
Purchaser has adequate means of providing for its current needs and possible
contingencies, and is able to bear the high degree of economic risk of this
investment, including, but not limited to, the possibility of the complete loss
of the Purchaser's entire investment and the limited transferability of the
Securities, which may make the liquidation of this investment impossible for the
indefinite future.
(f) ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
investor" within the meaning of Rule 501(a) promulgated under the Securities
Act.
(g) INVESTMENT EXPERIENCE. The Purchaser has experience as an investor
in securities and acknowledges that it can bear the economic risk of its
investment in the Securities. By reason of the Purchaser's business or financial
experience or the business or financial experience of its professional advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, the Purchaser
has the capacity to protect its own interests in connection with its purchase of
the Securities. The Purchaser has the financial capacity to bear the risk of
this investment and has received from the Company all information it has
requested and considers necessary or appropriate for deciding whether to
purchase the Securities. If an entity, the Purchaser has not been organized
solely for the purpose of acquiring the Securities.
(h) RESTRICTED SECURITIES. The Purchaser understands that the
Securities are and will be "restricted securities" under the Securities Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering, and that, under the Securities Act and applicable
regulations thereunder, such Securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,
the Purchaser represents that it is familiar with Rule 144 promulgated under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
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(i) LEGENDS. The Purchaser understands that the certificates evidencing
the Common Stock will bear the legend set forth below, together with any other
legends required by applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES
ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, IS IN EFFECT WITH
RESPECT TO SUCH SECURITIES OR THE COMPANY HAS RECEIVED AN
OPINION FROM LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE COMPANY PROVIDING THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, IS AVAILABLE.
The legend set forth above shall be removed by the Company from any certificate
evidencing any of the Common Stock only (i) upon receipt by the Company of an
opinion from legal counsel in form and substance satisfactory to the Company
that such legend may be removed pursuant to Rule 144 promulgated under the
Securities Act, or (ii) upon confirmation that a registration statement under
the Securities Act is at that time in effect with respect to the legended Common
Stock and that such transfer will not jeopardize the exemption or exemptions
from registration pursuant to which the respective Common Stock was issued.
(j) INDEMNIFICATION. The Purchaser acknowledges that it understands the
meaning and legal consequences of the representations and warranties set forth
in this Section 3 and that the Company and the officers, directors, employees
and agents of the Company have relied and will rely upon such representations
and warranties. The Purchaser hereby agrees to indemnify and hold harmless the
Company and each of its respective officers, directors, employees and agents
from and against any and all loss, claim, damage, liability, cost or expense
(including attorneys' fees) to which any such person may become subject due to
or arising out of: (i) any breach by the Purchaser of any such representation or
warranty; (ii) any inaccuracy in the representations and warranties hereinabove
set forth; (iii) the disposition of any of the Securities by the Purchaser
contrary to the foregoing representations and warranties; and (iv) any action,
suit, proceeding, demand, assessment or judgment incident to or based upon any
of the matters so indemnified against. Notwithstanding the foregoing, however,
no representation, warranty, acknowledgement or agreement made herein by the
Purchaser shall in any manner be deemed to constitute a waiver of any rights
granted to it under federal or state securities laws.
(k) SUMMARY. For purposes of this Section 3, the "SUMMARY" shall mean
1. The Company Business Plan dated 2004 (the "BUSINESS
PLAN"); and
2. The Risk Factors / Capitalization Table delivered to
Purchaser with the Business Plan.
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5. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Note contain a final and
complete integration of all prior expressions of the parties with respect to the
subject matter hereof and thereof and shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
thereof, superseding all prior oral and written or written understandings.
(b) NOTICES. Any notice or other communication provided for under this
Agreement or the Note shall be in writing and shall be sent by (a) personal
delivery, (b) registered or certified mail (return receipt requested) or (c)
nationally recognized overnight courier service, to Company or to the Purchaser
at their respective addresses set forth on the signature pages hereto. A notice
or other communication shall be deemed to have been duly received (a) if
personally delivered, on the date of such delivery, (b) if mailed, on the date
set forth on the signed return receipt or (c) if delivered by overnight courier,
on the date of actual delivery (as evidenced by the receipt of the overnight
courier service).
(c) BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding upon
and inure to the benefit of Company and Purchaser and their respective
successors and permitted assigns. Neither party may assign this Agreement or any
of its rights hereunder without the prior written consent of the other party
hereto.
(d) EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement may be
executed in counterparts, both of which when so executed shall be deemed to be
an original and both of which when taken together shall constitute one and the
same agreement. Signature pages transmitted via facsimile shall be deemed to be
original. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) AMENDMENT AND WAIVER. This Agreement and any provision hereof may
be changed, waived, discharged or terminated only by a written instrument signed
by both of the parties hereto.
(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada. The Company and the Purchaser
hereby irrevocably consent to the exclusive jurisdiction and venue of State and
federal courts within the city of Las Vegas, Nevada for any dispute arising out
of this Agreement.
(g) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Convertible Note Purchase Agreement to be executed by their duly authorized
representatives as of the date first written above.
"PURCHASER"
MONITOR FINANCE LC LC
---------------------- ---------------
Print Name of Purchaser Type of Entity
/S/ MILES PITCHER
-----------------
Signature of Authorized Representative
MANAGING MEMBER
---------------
Capacity of Signatory
(i.e. President, Manager, Member, etc)
BY SIGNING ABOVE, THE PURCHASER REPRESENTS AND WARRANTS TO THE COMPANY
THAT IT HAS REVIEWED THE DEFINITION OF "ACCREDITED INVESTOR" ON EXHIBIT A
ATTACHED HERETO AND THAT PURCHASER IS AN ACCREDITED INVESTOR UNDER PART
_____8_______ OF THAT DEFINITION. _______________
(INITIAL HERE)
(THIS CONVERTIBLE NOTE PURCHASE AGREEMENT IS NOT COMPLETE IF THE FOREGOING HAS
NOT BEEN COMPLETED AND INITIALED)
1. Purchaser's state of principal place of business or principal
residence: UTAH
2. Purchaser's mailing address for all communications:
0000 X. Xxxxxx Xxxx
--------------------
Xxxxx, XX 00000
--------------------
--------------------
--------------------
ACCEPTED BY THE COMPANY AS OF MARCH 31, 2004:
PENGE CORP.,
a Nevada corporation
By: /S/ XX XXXXXX
--------------------------
XX Xxxxxx, Its President
Address: 0000 Xxxxxxx Xxxxxx Xxxxxx, Xxxxx 0-000
Xxx Xxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Convertible Note Purchase Agreement to be executed by their duly authorized
representatives as of the date first written above.
"PURCHASER"
FIRST CAPITAL FUNDING LC LC
--------------------------------------- --------------
Print Name of Purchaser Type of Entity
/S/ XXXXX XXXXXXXX
---------------------------------------
Signature of Authorized Representative
MEMBER
---------------------------------------
Capacity of Signatory
(i.e. President, Manager, Member, etc)
BY SIGNING ABOVE, THE PURCHASER REPRESENTS AND WARRANTS TO THE COMPANY
THAT IT HAS REVIEWED THE DEFINITION OF "ACCREDITED INVESTOR" ON EXHIBIT A
ATTACHED HERETO AND THAT PURCHASER IS AN ACCREDITED INVESTOR UNDER PART
___8_________ OF THAT DEFINITION. _______________
(INITIAL HERE)
(THIS CONVERTIBLE NOTE PURCHASE AGREEMENT IS NOT COMPLETE IF THE FOREGOING HAS
NOT BEEN COMPLETED AND INITIALED)
1. Purchaser's state of principal place of business or principal
residence: UTAH
2. Purchaser's mailing address for all communications:
0000 X. Xxxxxx
--------------------
Xxxxx, XX 00000
--------------------
--------------------
--------------------
ACCEPTED BY THE COMPANY AS OF MARCH 31, 2004:
PENGE CORP.,
a Nevada corporation
By: /S/ XX XXXXXX
---------------------------------
XX XXXXXX, its PRESIDENT
Address: 0000 Xxxxxxx Xxxxxx Xxxxxx, Xxxxx 0-000
Xxx Xxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
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EXHIBIT A
---------
DEFINITION OF ACCREDITED INVESTOR
"ACCREDITED INVESTOR" shall mean any person who comes within any of the
following categories, or who the issuer reasonably believes comes within any of
the following categories, at the time of the sale of the securities to that
person:
(1) Any bank as defined in section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance company as defined in section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
(2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the issuers of
the securities being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his purchase exceed $1,000,000;
(6) Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered whose purchase is
directed by a sophisticated person as described in ss. 230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited investors.
EXHIBIT B
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THE CONVERTIBLE NOTE
[Filed separately as Exhibit 10.11]
