THE XXXXXXX XXXXXX COMPANY
CONVERTIBLE NOTE
$250,000.00 January 2, 2006
THE XXXXXXX XXXXXX COMPANY, (OTCBB: JKRI) a Florida corporation (the
Company"), for value received hereby promises to pay to the order of VANTAGE
POINT CONSULTING and or assignee ("Payee"), the Principal Amount of Two Hundred
Fifty Thousand and No/100 Dollars ($250,000.00), as per the Fee Agreement
executed on November 12, 2005 and incorporated herein as Exhibit A, on or before
the Due Date of this Note at the office of the Payee at 000 Xxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, with accrued interest payments & principal from
the date of issuance of this Note at the rate of eight percent (8.0%) per annum
due and payable on or before January 1, 2007 (the "Due Date").
For the purpose of calculating interest for any period for which interest
shall be payable, such interest shall be calculated on the basis of a 30 day
month and a 360 day year. Except as otherwise provided herein, all sums of past
due principal and interest shall bear interest at the maximum rate of interest
permitted by applicable law.
1. Covenants. The Company covenants that so long as this Note shall be
outstanding:
(a) The Company shall maintain an office at 000 Xxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other place as the Company may
designate by written notice given pursuant to the terms hereof, where
notices, presentations and demands to or upon the Company in respect of
this Note may be made or given.
(b) The Company shall promptly cause to be paid and discharged all
lawful taxes, assessments and governmental charges or levies imposed upon
the Company or any subsidiary or upon the income and profits of, or upon
any property belonging to the Company or any subsidiary before the same
shall become in default, as well as all lawful claims for labor, materials
and supplies which, if unpaid, might become a lien or charge upon such
property or any part thereof; provided, however, that the Company shall
not be required to cause to be paid and discharged any such tax,
assessment, charge, levy or claim so long as the amount or validity
thereof shall be contested in good faith by appropriate proceedings, and
the Company or such subsidiary, as the case may he, shall set aside on its
books reserves with respect thereto which the Company and the independent
public accountants who are at the time employed to audit the books and
accounts of the Company or such subsidiary consider adequate.
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(c) The Company shall at all times cause its physical property and
the physical property of its subsidiaries used or desirable in the conduct
of the business of the Company or its subsidiaries to be maintained,
preserved, protected and kept in good repair, working order and condition,
and from time to time cause to be made all needful and proper repairs,
replacements, betterments and improvements thereto, so that the business
carried on in connection therewith may in the opinion of the Company be
properly and advantageously conducted at all times; provided, however,
that nothing in this Paragraph 1(c) shall require the Company or any
subsidiary to maintain, preserve, protect or keep in good repair, working
order or condition any physical property which, in the sole discretion of
the Company, is obsolete or surplus or unfit for use or may not be used
advantageously in the conduct of the business of the Company or such
subsidiary, as the case may be.
(d) The Company shall at all times keep, and cause each subsidiary
to keep, true and complete books of record and accounts in accordance with
generally accepted accounting principles and practices and file timely all
required reports with the Securities and Exchange Commission.
(e) The Company shall at all times cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, rights, and franchises, and the corporate existences, rights
and franchises of each subsidiary, and comply with and cause each
subsidiary to comply with, all laws and governmental requirements
applicable to the Company or such subsidiary; provided, however, that
nothing in this Paragraph 1(e) shall (i) require the Company or any
subsidiary to maintain, preserve or renew any right or franchise which in
the opinion of the Board of Directors of the Company is not necessary or
desirable in the conduct of the business of the Company or of such
subsidiary, as the case may be; or (ii) prevent the termination of the
corporate existence of any subsidiary if in the opinion of the Board of
Directors of the Company such termination is in the best interest of the
Company and not disadvantageous to the Payee; or (iii) prevent any
consolidation or merger involving the Company or a subsidiary.
2. Piggy Back Registration Rights. The Shares issued to the Payee shall
be entitled to "Piggy Back Registration Rights" pursuant to a
registration of the Company's securities made effective during the
term of this Note. Upon effectiveness of said Registration
Statement, Xxxxx's Shares shall be immediately registered and
therefore eligible for trading under any and all restrictions that
may apply.
(a) The Payee is an "accredited investor" as defined under Rule
501 under the Securities Act.
(b) The Payee acknowledges that the Shares have not been
registered under the Securities Act or the securities laws of
any state and are being offered pursuant to applicable
exemptions from such registration for nonpublic offerings as
"restricted securities" as defined by Rule 144 promulgated
pursuant to the Securities Act. The Shares may not be resold
in the absence of an effective registration thereof under the
Securities Act and applicable state securities laws unless, in
the opinion of the Company's counsel, an applicable exemption
from registration is available.
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(c) The Payee is acquiring the Shares for its own account, for
investment purposes only and not with a view to, or for sale
in connection with, a distribution, as that term is used in
Section 2(11) of the Securities Act, in a manner which would
require registration under the Securities Act or any state
securities laws.
(d) The Payee understands and acknowledges that the Shares will
bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR
VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION THEREOF
UNDER THE SECURITIES ACT OF 1933 AND/OR THE SECURITIES ACT OF
ANY STATE HAVING JURISDICTION OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR ACTS.
(e) The Payee acknowledges that an investment in the Shares is not
liquid and is transferable only under limited conditions. The
Payee acknowledges that such securities must be held
indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is
available. The Payee is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited
resale of securities purchased in a private placement subject
to the satisfaction of certain conditions and that such Rule
is not now available and, in the future, may not become
available for resale of the Shares.
(f) Payee Sophistication and Ability to Bear Risk of Loss. The
Payee acknowledges that it is able to protect its interests in
connection with the acquisition of the Shares and can bear the
economic risk of investment in such securities without
producing a material adverse change in Payee's financial
condition. The Payee otherwise has such knowledge and
experience in financial or business matters that it is capable
of evaluating the merits and risks of the investment in the
Shares.
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(g) Purchases by Groups. The Payee represents, warrants, and
covenants that it is not acquiring the Shares as part of a
group within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
3. Conversion of Note.
(a) On or after the Due Date or upon an effective registration of
the Company's stock, the Payee may convert all or part of the remaining
principal balance, plus accrued interest, of this Note into the common
stock, par value $0.001 per share, of the Company (the "Common Stock"). In
the event of a conversion, the number of shares of the Common Stock to be
issued shall be determined by dividing (i) the unpaid principal balance of
this Note, plus any accrued interest by (ii) eighty percent (80%) of the
average of the lowest three closing bid prices in past 20 trading days
immediately preceding any such conversion. All such Common Stock
conversions shall not exceed 4.99% of the then outstanding Common Stocks
of the Company. If this Note is surrendered for conversion, it shall be
duly endorsed, or be accompanied by a written instrument of transfer in a
form satisfactory to the Company duly executed by the holder of this Note.
For convenience, the conversion of all or a portion, as the case may be,
of the principal, plus accrued interest, of this Note into the Common
Stock is hereinafter sometimes referred to as the conversion of this Note.
In the event that this Note is converted in part only, upon such
conversion the Company shall execute and deliver to the Payee, without
service charge, a new Note or Notes, of any authorized denomination or
denominations as requested by the Payee, in aggregate principal amount
equal to and in exchange for the unconverted portion of the principal and
accrued interest of the Note so surrendered.
(b) As promptly as practicable after the surrender, as herein
provided, of this Note or portion thereof in proper form for conversion,
the Company shall deliver a certificate or certificates representing the
number of fully paid and nonassessable shares of the Common Stock into
which this Note (or portion thereof) may be converted in accordance with
the provisions of this Note. Subject to the following provisions of this
Paragraph 3, such conversion shall be deemed to have been made immediately
prior to the close of business on the date that this Note or portion
thereof shall have been surrendered for conversion, accompanied by written
notice, so that the rights of the Payee as holders thereof shall cease
with respect to this Note (or the portion thereof being converted) at such
time, and the person or persons entitled to receive the shares of the
Common Stock upon conversion of this Note or portion thereof shall be
treated for all purposes as having become the record holder of such shares
of the Common Stock at such time. Provided, however, that no such
surrender on any date when the stock transfer books of the Company shall
be closed shall be effective to constitute the person or persons entitled
to receive the shares of the Common Stock upon such conversion as the
record holder or holders of such shares of the Common Stock on such date,
but such surrender shall be effective to constitute the person or persons
entitled to receive such shares of the Common Stock as the record holder
or holders thereof for all purposes immediately prior to the close of the
business on the next succeeding day on which such stock transfer books are
open.
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(c) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of this Note. If more than one Note
shall be surrendered for conversion at one time by the Payee, the number
of full shares issuable upon conversion thereof shall be computed on the
outstanding shares of the Common Stock, or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Payee shall have the right
thereafter to convert this Note into the kind and amount of shares of
stock of the Company or of such successor or purchasing corporation and
other securities and property receivable upon such reclassification,
change, consolidation, merger, sale, or conveyance by the Payee of the
number of shares of Common Stock into which this Note might have been
converted immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. The provisions of this
paragraph shall similarly apply to successive reclassifications, changes,
consolidations, mergers, sales, or conveyances.
(e) The Company covenants that it will at times reserve and keep
available out of its authorized Common Stock solely for the purpose of
issue upon conversion of this Note as herein provided, such number of
shares of the Common Stock as shall then be issuable upon the conversion
of unpaid balance, including accrued interest, of this Note. The Company
covenants that a]l shares of the Common Stock which shall be so issuable
shall, when issued, be duly and validly issued and fully paid and
nonassessable.
(f) The Company covenants that upon conversion of this Note as
herein provided, there will be credited to the Common Stock stated capital
from the consideration for which the shares of the Common Stock issuable
upon such conversion are issued an amount per share of the Common Stock so
issued as determined by the Board of Directors, which amount shall not be
less than the amount required by law and by the Company's Articles of
Incorporation, as amended, as in effect on the date of such conversion.
For the purposes of this covenant, the principal amount of the Note
converted, less the amount of cash paid in lieu of the issuance of
fractional shares of such conversion, shall be deemed to be the amount of
consideration for which the shares of the Common Stock issuable upon such
conversion are issued.
(g) The issuance of certificates for shares of the Common Stock upon
the conversion of this Note shall be made without charge to the Payee so
converting for any tax in respect of the issuance of such certificates,
and such certificates shall be issued in the name of, or in such names as
may be directed by, the Payee; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in
the name other than that of the Payee, and the Company shall not be
required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
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4. Events of Default.
(a) If any one or more of the following events (herein individually
referred to as an "Event of Default") shall have occurred for any reason
and shall be continuing at the time of any notice thereof from the Payee:
(i) Default shall be made in the due observance and
performance of any covenant, agreement or condition in this Note
(including the payment of any interest or principal) and such
default shall continue for a period of 30 days after written notice
thereof to the Company by the Payee; or
(ii) The Company shall:
(1) Admit in writing its inability to pay its debts
generally as they become due;
(2) File a petition in bankruptcy or a petition to take
advantage of any insolvency act;
(3) Make an assignment for the benefit of its creditors;
(4) Consent to the appointment of a receiver of itself
or of the whole or any substantial part of its property; or
(5) On a petition in bankruptcy filed against it, be
adjudicated a bankrupt;
(iii) The Company or any subsidiary shall file a petition or
answer seeking reorganization or arrangement under the federal
bankruptcy laws or any other applicable law or statute of the United
States of America or any state or district or territory thereof; or
(iv) A court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent of the Company or
such subsidiary, a receiver of the Company or any of its
subsidiaries or of the whole or any substantial part of its
property, or approving a petition filed against the Company or any
of its subsidiaries seeking reorganization or arrangement under the
federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state or district or territory
thereof, and such order, judgment or decree shall not be vacated or
set aside or stayed within 60 days from the date of the entry
thereof; or
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(v) Under the provisions of any other law for the relief or
aid of debtors, any court of competent jurisdiction shall assume
custody or control of the Company or any of its subsidiaries or of
the whole or any substantial part of its property, and such custody
or control shall not be terminated or stayed within 60 days from the
date of assumption of such custody or control;
then, at the option of the Payee, this Note shall thereupon become and be
due and payable, without any other presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived.
(b) If any event shall occur that constitutes, or after continuance
for a specified period would constitute, an Event of Default under this
Paragraph 4, or if the holder of this Note shall demand payment or take
any other action permitted upon the occurrence of any such event, the
Company will at once give notice to all Payee, specifying the nature of
such event or of such demand or action, as the case may be.
(c) In case any one or more of the Events of Default specified above
in this Paragraph 4 shall have happened and be continuing, the holder of
this Note may proceed to protect and enforce its rights either by suit in
equity and/or by action at law, or by other appropriate proceeding,
whether for the specific performance (to the extent permitted by law) of
any covenant or agreement contained in this Note or in aid of the exercise
of any power granted in this Note, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the holder
of this Note.
(d) No remedy herein contained on the holder hereof is intended to
be exclusive of any other remedy and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder
or now or hereafter existing at law or in equity or by statute or
otherwise.
5. Miscellaneous.
(a) No Sinking Fund. The Company is not required to establish any
sinking fund with respect to this Note.
(b) Collection Fees. In the event of default hereunder and if this
Note is placed in the hands of an attorney for collection (whether or not
suit is filed) or if this Note is collected by suit or legal proceedings
or through bankruptcy proceedings, the Company agrees to pay in addition
to all sums then due hereon, including principal and interest, all
reasonable expenses of collection including reasonable attorneys' fees.
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(c) Registered Owner Transfer. The Company and any agent of the
Company may treat the person whose name appears above as the absolute
owner hereof for the purpose of receiving payment of, or on account of,
the principal or interest due hereon and for all other purposes, and
neither the Company nor any such agent shall be affected by notice to the
contrary. Subject to compliance with applicable federal and state
securities laws, this Note is transferable only on the books of the
Company by the registered holder in person or by attorney on surrender of
this Note properly endorsed.
(d) No Recourse. This Note is the obligation of the Company only,
and no recourse shall be had for the payment hereof or the interest hereon
against any incorporator, shareholder, director or officer as such
(whether past, present or future) of the Company or any successor entity
whether by virtue of any constitution, statute or rule of law or equity,
or by the enforcement of any assessment or penalty, or otherwise, all such
liability of the incorporators, shareholders, directors and officers as
such being expressly waived and released by the holder hereof by the
acceptance of this Note.
(e) Successor Entity. The Company may not consolidate with or merge
into, or transfer all or substantially all of its assets to, another
corporation unless the successor corporation assumes all of the
obligations of the Company under this Note and immediately after the
transaction no default exists with respect to this Note. Thereafter, all
such obligations of the Company shall terminate.
(f) Maximum Rate of Interest. Notwithstanding any provisions to the
contrary in this Note or in any of the documents relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum amount permitted by the
laws of the State of Florida. If any such excess of interest is contracted
for, charged or received under this Note or under the terms of any of the
documents relating hereto, or in the event the maturity of the
indebtedness evidenced by this Note is accelerated in whole or in part, or
in the event that all or part of the principal or interest of this Note
shall be prepaid, so that under any of such circumstances the amount of
interest contracted for, charged or received under this Note or under any
of the documents relating hereto, on the amount of principal actually
outstanding from time to time under this Note shall exceed the maximum
amount of interest permitted by the laws of the State of Florida, then in
any such event:
(i) The provisions of this Paragraph 5(f) shall govern and
control;
(ii) Neither the Company nor any other person or entity now or
hereafter liable for the payment hereof, shall be obligated to pay
the amount of such interest to the extent that it is in excess of
the maximum amount of interest permitted by the laws of the State of
Florida;
(iii) Any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal amount
hereof or refunding to the Company, at the holder's option; and
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(iv) The effective rate of interest shall be automatically
reduced to the maximum lawful rate of interest allowed under the
laws of the State of Florida as now or hereafter construed by the
courts having jurisdiction thereof,
(g) Rate of Interest. It is further agreed that without limitation
of the foregoing, all calculations of the rate of interest contracted for,
charged or received under this Note or under such other documents which
are made for the purpose of determining whether such rate exceeds the
maximum lawful rate of interest, shall be made, to the extent permitted by
the laws of the State of Florida, by amortizing, prorating, allocating and
spreading during the period of the full stated term of the indebtedness
evidenced hereby, all interest at any time contracted for, charged or
received from the Company or otherwise by the holder or holders hereof in
connection with such indebtedness.
Issued this 2nd day of January, 2006.
THE XXXXXXX XXXXXX COMPANY
By _____________________________
Xxxxxxx X. Xxxxxxxx, CEO
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