AGREEMENT TO CONVERT DEBT
This
Agreement to Convert Debt (the “Agreement”) is made as of October 15, 2007 (the
“Effective Date”) by and among Inseat Solutions, LLC, a California Limited
Liability Company (the “Holder”), and Hemcure, Inc., a Nevada
corporation.
RECITALS
A. Pursuant
to the promissory notes and other debt listed on Schedule I attached hereto,
as
of May 31, 2007, the Company’s wholly owned subsidiary, AuraSound, Inc., a
California corporation, owes Inseat, in principal and accrued interest, the
total sum of $3,646,344.63 (the “Total Amount Owed”), out of which Inseat has
agreed to convert $2,500,000 (the “Converted Amount”) in accordance with this
Agreement.
B. The
Company wishes to pay the Converted Amount by issuing securities to the Holder
and the Holder has agreed to accept the Company’s securities as full and final
payment of the Converted Amount, in accordance with the terms of this
Agreement.
Therefore,
the Company and the Holder agree as follows:
AGREEMENT
1. Issuance
of Securities and Cancellation of Debt.
(a) Securities
to be Issued.
The
Holder agrees to accept, and the Company agrees to issue to the Holder, as
full
and final payment of the Converted Amount, 1,666,667 shares (the “Shares”) of
the Company’s $0.01 par value per share common stock (“Common Stock”), and a
warrant, in the form attached hereto as Exhibit
A,
to
purchase 1,666,667 shares of Common Stock at an exercise price of $1.50 per
share (the “Warrant”).
(b) Exchange
of Documents.
A
certificate representing the Shares and the Warrant shall be delivered to the
Holder as soon as practicable. Upon receipt of the Shares and the Warrant,
(i)
the Holder will return to the Company for cancellation on its books and records
all the original executed promissory notes listed on Schedule I hereto (the
“Promissory Notes”), (ii) the Company shall record the payment of the Converted
Amount on its books and records, and (iii) the Company shall issue a new
promissory note to Inseat, bearing simple interest at the rate of 9% per annum,
in the principal amount of $1,146,344.63, representing the difference between
the Total Amount Owed and the Converted Amount.
2. Representations
by Company.
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 Nevada.
(ii) The
Company has all requisite power and authority (corporate or otherwise) to
execute, deliver and perform this Agreement and the transactions contemplated
hereby, 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).
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(iii) The
execution, delivery and performance by the Company of this Agreement have been
duly authorized by all requisite corporate action of the Company; and this
Agreement has been duly executed and delivered by the Company.
(iv) The
Shares and, when issued, the shares issuable upon exercise of the Warrant (the
“Warrant Shares”), will be duly and validly issued, fully paid and
nonassessable, and free of any liens or encumbrances.
3. Representations
by the Holder.
The
Holder hereby represents and warrants to the Company as follows:
(i) The
Holder has all requisite power and authority (corporate or otherwise) to
execute, deliver and perform this Agreement and the transactions contemplated
hereby, 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 sole shareholder of the Holder is a director and
officer of the Company.
(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 Warrant in
the
jurisdiction in which it is subject, and the Holder has obtained any consent,
approval or permission required in that jurisdiction.
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(v) The
Holder understands and acknowledges that none of the Shares, the Warrant or
the
Warrant Shares have been registered with the Securities and Exchange Commission
under Section 5 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 Warrant and the Warrant
Shares 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 representing the Shares and the Warrant stating that the Shares
and the Warrant 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
Warrant or the Warrant Shares it 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 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 the Holder resides.
4. 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) 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
00000 Xxxx Xxxxx Xxxxxx Xxxxx Xx Xxxxxxx, Xxxxxxxxxx 00000, facsimile number
(000) 000-0000, Attn: Chief Executive Officer 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 00000 Xxxx Xxxxx Xxxxxx
Xxxxx Xx Xxxxxxx, Xxxxxxxxxx 00000, facsimile number (000) 000-0000, Attn:
Chief
Executive Officer. 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. (Pacific
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.
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(c) 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 its rights or obligations hereunder without the prior written consent
of
the other.
(d) 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.
(e) 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.
(f) Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
[SIGNATURES
FOLLOW]
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IN
WITNESS WHEREOF, the parties have executed this Agreement to Convert Debt as
of
the date first written above.
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HEMCURE,
INC.
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By:
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/s/
Xxxxxx Xxx
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Xxxxxx
Xxx, Chief Executive Officer
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INSEAT
SOLUTIONS, LLC
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By:
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/s/
Xxxxx Xxxxxxxxxxxx
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Xxxxx
Xxxxxxxxxxxx, Chief Executive
Officer
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