Exhibit 10.7
------------
THIS NOTE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY,
THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM
REGISTRATION UNDER REGULATION S AND/OR REGULATION D PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S.
PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER THE ACT)
UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION
S AND/OR REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH
OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
DEBENTURE
CONDOR CAPITAL INC.
5% Convertible Debenture
Due December 4 ___, 2005
No. ___ $
This Debenture is issued by CONDOR CAPITAL INC., a Nevada corporation (the
"Company"), to ____________________________ (together with its permitted
successors and assigns, the "Holder") pursuant to exemptions from registration
under the Securities Act of 1933, as amended.
ARTICLE I.
---------
Section 1.01 Principal and Interest. For value received, on December 4
____, 2000, the Company hereby promises to pay to the order of the Holder in
lawful money of the United States of America and in immediately available funds
the principal sum of _________DOLLARS (US $____), together with interest on the
unpaid principal of this Debenture at the rate of five percent (5%) per year
(computed on the basis of a 365-day year and the actual days elapsed) from the
date of this Debenture until paid. At the Company's option, the entire principal
amount and all accrued interest shall be either (a) paid to the Holder on the
five (5) year anniversary from the date hereof or (b) converted in accordance
with Section 4.02 herein.
Section 1.02 Optional Conversion. The Holder is entitled, at its option, to
convert at any time and from time to time until payment in full of this
Debenture, all or any part of the principal amount of the Debenture, plus
accrued interest, into shares (the "Conversion Shares") of the Company's common
stock, $0.001 par value ("Common Stock"), at the price per share (the
"Conversion Price") equal to the lower of either (a) an amount equal to 120 % of
the of the closing bid price of the Common Stock ( the "Fixed Price") as listed
on a Principal Market (as defined herein), as quoted by Bloomberg L.P. (the
"Closing Bid Price") as of the date hereof, or (b) an amount equal to eighty
percent (80%) of the averaged five (5) lowest Closing Bid Price of the Common
Stock for the twenty (20) trading days immediately preceding the Conversion Date
(as defined herein). Subparagraphs (a) and (b) above are individually referred
to as a "Conversion Price". As used herein, "Principal Market" shall mean the
Nasdaq Bulletin Board System, Nasdaq SmallCap Market, or American Stock
Exchange. If the Common Stock is not traded on a Principal Market, the Closing
Bid Price shall mean, the reported Closing Bid Price for the Common Stock, as
furnished by the National Association of Securities Dealers, Inc., for the
applicable periods. No fraction of shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. To convert this Debenture, the Holder hereof
shall deliver written notice thereof, substantially in the form of Exhibit "A"
to this Debenture, with appropriate insertions (the "Conversion Notice"), to the
Company at its address as set forth herein. The date upon which the conversion
shall be effective (the "Conversion Date") shall be deemed to be the date set
forth in the Conversion Notice, provided that the Company or the transfer agent
delivers the Conversion Shares within ten (10) business days after receipt of a
Conversion Notice. If such Conversion Shares are not delivered within such ten
(10) business day period, the Conversion Date shall be the date such shares are
actually delivered to the Holder.
Section 1.03 Reservation of Common Stock. The Company shall reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Debenture, such number of
shares of Common Stock as shall from time to time be sufficient to effect such
conversion, based upon the Conversion Price. If at any time the Company does not
have a sufficient number of Conversion Shares authorized and available, then the
Company shall call and hold a special meeting of its stockholders within
thirty (30) days of that time for the sole purpose of increasing the number of
authorized shares of Common Stock.
Section 1.04 Registration Rights. The Company is obligated to register the
resale of the Conversion Shares under the Securities Act of 1933, as amended,
pursuant to the terms of a Registration Rights Agreement, between the Company
and the Holder of even date herewith (the "Registration Rights Agreement").
Section 1.05 Interest Payments. The interest so payable will be paid at the
time of maturity or conversion to the person in whose name this Debenture is
registered. At the time such interest is payable, the Company, in its sole
discretion, may elect to pay interest in cash (via wire transfer or certified
funds) or in the form of Common Stock. In the event of default, as described in
Article III Section 3.01 hereunder, the Holder may elect that the interest be
paid in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of Common Stock, the amount of stock to be issued
will be calculated as follows: the value of the stock shall be the Closing Bid
Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
2
Section 1.06 Paying Agent and Registrar. Initially, the Company will act as
paying agent and registrar. The Company may change any paying agent, registrar,
or Company-registrar by giving the Holder not less than ten (10) business days'
written notice of its election to do so, specifying the name, address, telephone
number and facsimile number of the paying agent or registrar. The Company may
act in any such capacity.
Section 1.07 Subordinated Nature of Debenture. This Debenture and all
payments hereon, including principal or interest, shall be subordinate and
junior in right of payment to all accounts payable of the Company incurred in
the ordinary course of business and/or bank debt of the Company not to exceed
$500,000.
ARTICLE II.
----------
Section 2.01 Amendments and Waiver of Default. The Debenture may be amended
with the consent of the Holder. Without the consent of the Holder, the Debenture
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company obligations to the Holder or to make any change that
does not adversely affect the rights of the Holder.
ARTICLE III.
------------
Section 3.01 Events of Default. An Event of Default is defined as follows:
(a) failure by the Company to pay amounts due hereunder within ten (10) business
days of the date of maturity of this Debenture; (b) failure by the Company to
advise its transfer agent to issue Common Stock to the Holder within ten (10)
business days of the Company's receipt of the attached Notice of Conversion from
Holder; (c) failure by the Company for the (10) business days after notice to it
to comply with any of its other agreements in the Debenture; (d) events of
bankruptcy or insolvency; (e) a breach by the Company of its obligations under
the Registration Rights Agreement which is not cured by the Company within
fifteen (15) business days after receipt of written notice thereof. The Holder
may not enforce the Debenture except as provided herein.
Section 3.02 Failure to Issue Unrestricted Common Stock. As indicated in
Article III Section 3.01, a breach by the Company of its obligations under the
Registration Rights Agreement shall be deemed an Event of Default, which if not
cured within ten (10) days, shall entitle the Holder accelerated full repayment
of all debentures outstanding. The Company acknowledges that failure to honor a
Notice of Conversion shall cause hardship to the Holder.
ARTICLE IV.
----------
Section 4.01 Rights and Terms of Conversion. This Debenture, in whole or in
part, may be converted at any time following the date of closing, into shares of
Common Stock at a price equal to the Conversion Price as described in
Section 1.02 above.
3
Section 4.02 Re-issuance of Debenture. When the Holder elects to convert a
part of the Debenture, then the Company shall reissue a new Debenture in the
same form as this Debenture to reflect the new principal amount.
Section 4.03 Limitation on Right and Power to Exercise. Any provision in
this Debenture or any other document to the contrary not withstanding, the
Holder shall not have the right or power to convert this Debenture into Common
Stock, either in whole or in part, and any attempt to do so shall be void, if,
after having given effect to such conversion, the Holder shall be or shall be
deemed to be the beneficial owner of ten percent (10%) or more of the then
outstanding Common Stock within the meaning or for the purposes of Section 13(d)
or 13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or as the term "beneficial owner" is defined in Rule 13d-3 of the Act.
Section 4.04 Termination of Conversion Rights. The Holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on the date that is the five (5) year anniversary from the date
hereof and this Debenture shall be automatically converted on that date in
accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of Common Stock and amount of interest shall be issued to the
Holder.
ARTICLE V.
---------
Section 5.01 Anti-dilution. In the event that the Company shall at any time
subdivide the outstanding shares of Common Stock, or shall issue a stock
dividend on the outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
Section 5.02 Consent of Holder to Sell Common Stock. So long as any of the
principal of or interest on this Note remains unpaid and unconverted, the
Company shall not, without the prior consent of the Holder, issue or sell
(i) any Common Stock without consideration or for a consideration per share less
than its fair market value determined immediately prior to its issuance, or
(ii) issue or sell any warrant, option, right, contract, call, or other security
or instrument granting the holder thereof the right to acquire Common Stock
without consideration or for a consideration per share less than such Common
Stock's fair market value determined immediately prior to its issuance.
ARTICLE VI.
----------
Section 6.01 Notice. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: Condor Capital Inc.,.
Attention:
4
With a copy to:
If to Holder:
Section 6.02 Governing Law. This Debenture shall be deemed to be made under
and shall be construed in accordance with the laws of the State of New York
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens to the bringing
of any such proceeding in such jurisdictions.
Section 6.03 Severability. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
Section 6.04 Entire Agreement and Amendments. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
Section 6.05 Counterparts. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Company
as executed this Debenture as of the date first written above.
CONDOR CAPITAL INC.
By: /s/ Xxx Xxxx
-----------------------------
Name: Xxx Xxxx
Title: President/CEO
5
EXHIBIT "A"
-----------
NOTICE OF CONVERSION
--------------------
(To be executed by the Holder in order to Convert the Note)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal
amount of the above Note into Shares of Common Stock of Condor Capital Inc.,
according to the conditions stated therein, as of the Conversion Date written
below.
Conversion Date:
Applicable Conversion Price:
Signature:
Name:
Address:
A-1
