DEBT CONVERSION AGREEMENT
This Debt
Conversion Agreement (the "Agreement") dated May 14, 2009, is by and between,
Epazz, Inc., an Illinois corporation (the "Company") and Xxxxxxxx Xxxxxxx, an
individual (the "Creditor").
WITNESSETH:
WHEREAS, the Company owes
$8926.88 to the Creditor in consideration for $6000 loaned to the Company in
July 31, 2006, evidenced by the promissory note, attached hereto as Exhibit A. which loan
was to bear interest at the rate of 15% per annum and was due and payable on
August 1, 2010 (the "Loan");
WHEREAS, the Company desires
to convert the Loan into shares of newly issued restricted Series A common stock
of the Company, $0.01 par value per share at a rate of three hundred (300)
shares of Series A common stock for every $1 of the Loan (the "Common Stock" and
the "Conversion Rate;
WHEREAS, the Creditor agrees
to convert the Loan into Common Stock at the Conversion Rate and to forgive any
accrued and unpaid interest on the Loan ("Accrued Interest");
and
WHEREAS, the Company and the
Creditor desire to set forth in writing the terms and conditions of their
agreement and understanding concerning conversion of the
Loan.
NOW, THEREFORE, in
consideration of the premises and the mutual covenants, agreements, and
considerations herein contained, the parties hereto agree as
follows:
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1.
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Consideration. In
consideration and in satisfaction of the forgiveness of the entire
$8926.88 owed pursuant to and in connection with the Loan, which
amount is owed to the Creditor, the Company agrees to issue the
Creditor an aggregate of 2,679,064 shares of Common Stock (three
hundred shares for every $1.00 of the Loan converted into shares of common
stock)(the "Shares"). 2,500,000 shares of the 2,679,064 will be
issue on May 14, 2009. The remainder amount (179,064) will be
issue on July 15, 2009.
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In
consideration for the issuance of me Shares, the Creditor agrees to forgive the
Loan and to waive and forgive any accrued and unpaid interest payable there
under.
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2.
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Restricted
Shares. The Creditor agrees and understands that the Shares of the
Company to be issued to the Creditor have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), nor
registered under any state securities law, and will be
"restricted securities" as that term is defined in Rule 144 under the
1933 Act. As such, the Shares may not
be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the 1933
Act, or pursuant to an exemption from registration, under the 1933
Act. The shares to be issued to the Creditor will bear an appropriate
restrictive legend.
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The
Creditor understands that the Company has not registered the Shares under the
1933 Act or the applicable securities laws of any state in reliance on
exemptions from registration, and farther understands that such exemptions
depend upon the Creditor's investment intent at the time be acquires the Shares.
The Creditor therefore represents and warrants she is receiving the Shares for
her own account for investment and not with a view to distribution, assignment,
resale or other transfer of the Shares. Because the Shares are not registered,
the Creditor is aware that she must hold them indefinitely unless they are
registered under the 1933 Act and any applicable state securities laws or she
must obtain exemptions from such registration. Creditor acknowledges that me
Company is under no duty to comply -with any exemption in the connection, with
the Creditor's sale, transfer or other disposition under applicable rules and
regulations. Creditor understands mat in the event she desires to sell, assign,
transfer, hypothecate or in any way alienate or encumber the Shares in the
future, the Company can require that the Creditor provide, at Creditor's own
expense, an opinion of counsel satisfactory to the Company to the effect that
such action will not result in a violation of applicable federal or state
securities laws and regulations or other applicable federal or state laws and
regulations.
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3.
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Full
Satisfaction. Creditor agrees that she is accepting the Shares
in full satisfaction of the Loan which is being converted into Common
Stock and that as such Creditor will no longer have any rights of
repayment against the Company as to the $8926.88 previously
outstanding under the Loan which is being converted into Shares
pursuant to this Agreement (or any accrued or unpaid interest which is
being waived by Creditor as described above), at such time as
the Shares have been issued to
Creditor.
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4. Mutual Representations.
Covenants and Warranties.
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(a)
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The
parties have all requisite power and authority, corporate or otherwise,
to execute and deliver this Agreement and
to consummate the transactions contemplated hereby and
thereby. The parties have duly and validly executed and delivered
this Agreement and will, on or prior to the consummation of
the transactions contemplated herein, execute, such other
documents as may be required hereunder and, assuming the due
authorization, execution and delivery of this Agreement by the
parties hereto and thereto, this Agreement constitutes, the legal, valid
and binding obligation of the parties enforceable against each party
in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally and general equitable
principles.
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(b)
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The execution and delivery by the parties of this Agreement and the consummation
of the transactions contemplated hereby and thereby do not and shall
not, by the lapse of time, the giving of notice or otherwise: (a)
constitute a violation of arty law; or (b) constitute a breach or
violation of any provision contained in the Articles of Incorporation
or Bylaws, or such other documents) regarding organization and/or
management of the parties, if applicable; or (c) constitute
a breach of any provision contained in, or a default
under, any governmental approval, any writ, injunction, order,
judgment or decree of any governmental authority or any contract to
which either the Company or the Creditor is a party or by which
either the Company or the Creditor is bound
or affected.
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5.
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Creditor Representations and Warranties. The Creditor
represents and warrants to the Company that the
Creditor has such knowledge and experience in financial and
business matters that the Creditor is capable of evaluating the
merits and risks of an investment in the Shares and that the Creditor
is an "accredited investor" as such term is defined under the
1933 Act The Creditor represents that she is familiar with the
Company's business objectives and the financial arrangements in
connection therewith and she believes that the Shares are the kind of
securities that she wishes to hold for investment and that the nature and
amount of the Shares are consistent with her investment program. The
Creditor has been advised and is folly aware that investing in
securities such as the Shares is a speculative and uncertain
undertaking whose advantages and benefits are generally limited to a
certain class of investors who understand the nature of the proposed
operations of the Company and for whom the investment
is suitable. The Creditor recognizes that an investment in the hares
involves certain risks and she has taken full cognizance of and
understands all of the risk factors related to the business
objectives of the Company and the
Shares.
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6. Miscellaneous.
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(a)
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Assignment. All of the terms,
provisions and conditions of this Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted
assigns.
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(b)
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Applicable
law. This Agreement
shall be construed in accordance with and governed by the laws of the
State of Illinois, excluding any provision which would require the
use of the laws of any other
jurisdiction.
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(c)
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Entire Agreement.
Amendments and Waivers. This Agreement
constitutes the entire agreement of the parties regarding the subject
matter of the Agreement
and expressly supersedes all prior and contemporaneous understandings
and commitments, whether written or oral, -with respect to the
subject matter hereof. No variations, modifications, changes or
extensions of this Agreement or any other terms
hereof shall be binding upon any party hereto unless set forth in a
document duly executed by such party or an authorized agent or such
party.
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(d)
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Section
headings. Section headings
are for convenience only and shall not define or limit the provisions
of this Agreement.
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(e)
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Effect
of Facsimile
and Photocopied Signatures. This Agreement
may be executed in several counterparts, each of which is an original. It
shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other
counterparts. A copy of this Agreement signed by one party and faxed to
another party shall be deemed to have been executed and delivered by the
signing party as though an original. A photocopy of this Agreement shall
be effective as an original for all
purposes.
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[Remainder
of page left intentionally blank. Signature pages
follows.]
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IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the day and year first written
above.
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