Date of Issuance: June 1st, 2009 8% CONVERTIBLE DEBENTURE DUE June 1st, 2011
Exhibit
4.1
NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Date of
Issuance: June 1st, 2009
$74,192
8%
CONVERTIBLE DEBENTURE
DUE June
1st, 2011
THIS
DEBENTURE is one of two duly authorized and issued 8% Convertible Debentures of
Skins, Inc., a Nevada corporation, having a principal place of business at
▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"),
designated as its 8% Convertible Debenture, due June 1, 2011 (the
Debenture").
FOR VALUE
RECEIVED, the Company promises to pay to ▇▇▇ or its registered assigns (the
"Holder"), the principal sum of Seventy Four Thousand, One Hundred and Ninety
Two Dollars ($74,192) on June 1 2011 or such earlier date as the Debentures are
required or permitted to be repaid as provided hereunder (the "Maturity Date"),
and to pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Debenture at the rate of 8% per annum,
payable on the Maturity Date, unless the Debenture is converted to
shares of common stock in accordance with the terms and conditions
herein.
THE
COMPANY MAY PREPAY ANY PORTION OF THE PRINCIPAL AMOUNT AT 150% OF
SUCH AMOUNT ALONG WITH ANY ACCRUED INTEREST OF THIS DEBENTURE AT ANY TIME UPON
SEVEN DAYS WRITTEN NOTICE TO THE HOLDER
This Debenture is subject to the
following additional provisions:
Section 1. This Debenture is
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration of transfer or
exchange.
Section 2. This Debenture may be
transferred or exchanged only in compliance with applicable federal and state
securities laws and regulations. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the Person in whose name this Debenture is duly registered on the Debenture
Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Debenture is overdue,
and neither the Company nor any such agent shall be affected by notice to the
contrary.
Section 3. Events of
Default.
a) "Event of Default", wherever used
herein, means any one of the following events (whatever the reason and whether
it shall be voluntary or involuntary or effected by operation of law or pursuant
to any judgment, decree or order of any court, or any order, rule or regulation
of any administrative or governmental body):
i) any default in the payment of the
principal of, interest (including Late Fees) on, or liquidated damages in
respect to this Debenture, free of any claim of subordination, as and when the
same shall become due and payable (whether on a Conversion Date or the Maturity
Date or by acceleration or otherwise) which default is not cured,
if possible to cure, within 3 days of notice of such default sent by
the Holder;
ii) the Company or any of its
subsidiaries shall commence, or there shall be commenced against the Company or
any such subsidiary a case under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
subsidiary thereof or there is commenced against the Company or any subsidiary
thereof any such bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 60 days; or the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company or any
subsidiary thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property which continues undischarged or unstayed
for a period of 60 days; or the Company or any subsidiary thereof makes a
general assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay, or shall be unable to pay, its
debts generally as they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Company or any subsidiary
thereof shall by any act or failure to act expressly indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or other
action is taken by the Company or any subsidiary thereof for the purpose of
effecting any of the foregoing; or
(iii)
the Company shall fail to timely file all reports required to be filed by it
with the SEC pursuant to Section 13 or 15(d) of the Securities and Exchange Act
of 1934, as amended (the “Exchange Act”), or otherwise required by the Exchange
Act.
b) If any Event of Default occurs and
is continuing, the full principal amount of this Debenture, together with
interest and other amounts owing in respect thereof, to the date of acceleration
shall become at the Holder's election, immediately due and payable in cash.. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by ▇▇▇▇▇▇ at any time prior to payment
hereunder and the Holder shall have all rights as a Debenture holder until such
time, if any, as the full payment under this Section shall have been received by
it. No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon.
Section 4. Conversion.
a)
i) ▇▇▇▇▇▇'s Conversion Right. At any time after
the Original Issue Date until this Debenture is no longer outstanding, this
Debenture, including interest and principal, shall be convertible into shares of
Common Stock at a price of thirty-five percent (35%) of the lowest closing bid
price, determined on the then current trading market for the Company’s common
stock, for 10 trading days prior to conversion. (the “Set Price”) at the option
of the Holder, in whole at any time and from time to time. The Holder
shall effect conversions by delivering to the Company the form of Notice of
Conversion attached hereto as Annex A (a "Notice of Conversion"), specifying the
date on which such conversion is to be effected (a "Conversion Date"). If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is provided hereunder. To
effect conversions hereunder, the Holder shall not be required to physically
surrender Debentures to the Company. The Company shall deliver any objection to
any Notice of Conversion within 2 Business Days of receipt of such notice. In
the event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. If the Company
does not request the issuance of the shares underlying this Debenture after
receipt of a Notice of Conversion within 4 Business days following the period
allowed for any objection, ▇▇▇▇ ▇▇▇▇▇ shall, in his personal capacity, be
responsible for any differential in the value of the converted shares underlying
this Debenture between the value of the closing price on the date the shares
should have been delivered and the date the shares are delivered. The Holder
and any assignee, by acceptance of this Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture
may be less than the amount stated on the face hereof.
ii) If the Company, at any time while
this Debenture is outstanding: (A) shall pay a stock dividend or otherwise make
a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company pursuant to this Debenture, including as
interest thereon), (B) subdivide outstanding shares of Common Stock
into a larger number of shares, (C) combine (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or
(D) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then the Set Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
iii) Whenever the Set
Price is adjusted pursuant to any of Section 4, the Company shall promptly mail
to each Holder a notice setting forth the Set Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.
iv) If (A) the Company shall declare
a dividend (or any other distribution) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the
Common Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all
or substantially all of the assets of the Company, of any compulsory share
exchange whereby the Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then, in
each case, the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of the Debentures, and shall cause to
be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
v) If, at any time while this
Debenture is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any sale of all
or substantially all of its assets in one or a series of related transactions,
(C) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Underlying Share
that would have been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the "Alternate
Consideration"). For purposes of any such conversion, the determination of the
Set Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Set Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the
Alternate consideration it receives upon any conversion of this Debenture
following such Fundamental Transaction. To the extent necessary to effectuate
the foregoing provisions, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new debenture
consistent with the foregoing provisions and evidencing the Holder's right to
convert such debenture into Alternate Consideration. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (c) and insuring that this Debenture (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a Change of Control Transaction, then at the request of the Holder
delivered before the 90th day
after such Fundamental Transaction, the Company (or any such successor or
surviving entity) will purchase the Debenture from the Holder for a purchase
price, payable in cash within five Trading Days after such request (or,
if later, on the effective date of the Fundamental Transaction),
equal to the 100% of the remaining unconverted principal amount of this
Debenture on the date of such request, plus all accrued and unpaid interest
thereon, plus all other accrued and unpaid amounts due hereunder.
(d) The Company covenants that it
will at all times reserve and keep available out of its authorized and unissued
shares of Common Stock solely for the purpose of issuance upon conversion of the
Debenture
(e) Any and all notices or other
communications or deliveries to be provided by the Holders hereunder, including,
without limitation, any Notice of Conversion, shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service, addressed to the Company, at the address
set forth or such other address or facsimile number as the Company
may specify for such purposes by notice to the Holders 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 each Holder at the facsimile
telephone number or address of such ▇▇▇▇▇▇ appearing on the
books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the Holder. 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. (New
York City 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. (New York City time) on any date and earlier than 11:59 p.m. (New York
City 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.
Section 5. Definitions. For the
purposes hereof, in addition to the terms defined elsewhere in this Debenture:
(a) capitalized terms not otherwise defined herein have the meanings given to
such terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:
"Business Day" means any day except
Saturday, Sunday and any day which shall be a federal legal holiday in the
United States or a day on which banking institutions in the State of New York
are authorized or required by law or other government action to
close.
"Common Stock" means the common
stock, $.001 par value per share, of the Company and stock of any
other class into which such shares may hereafter have been reclassified or
changed.
"Person" means a corporation, an
association, a partnership, organization, a business, an individual, a
government or political subdivision thereof or a governmental
agency.
"Securities Act" means the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
"Set Price" shall have the meaning
set forth in Section 4.
Section 6. Except as expressly
provided herein, no provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, interest and liquidated damages (if any) on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct debt obligation of the Company. This Debenture ranks pari
passu with all other Debentures now or hereafter issued under the terms set
forth herein. As long as this Debenture is outstanding, the Company shall not
and shall cause it subsidiaries not to, without the consent of the Holder, (a)
amend its certificate of incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Holder; (b) repay, repurchase or offer to
repay, repurchase or otherwise acquire more than a de minimis number of shares
of its Common Stock or other equity securities other than as to the Underlying
Shares to the extent permitted or required under the Transaction Documents or as
otherwise permitted by the Transaction Documents; or (c) enter into any
agreement with respect to any of the foregoing.
Section 7. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Debenture, or
in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost, stolen
or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
Section 8. So long as any portion of
this Debenture is outstanding, the Company will not and will not permit any of
its subsidiaries to, directly or indirectly, enter into, create, incur, assume
or suffer to exist any indebtedness of any kind, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom that is senior in any respect to the
Company's obligations under the Debentures without the prior consent of the
Holder, which consent shall not be unreasonably withheld.
Section 9. All questions concerning
the construction, validity, enforcement and interpretation of this Debenture
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by any
of the Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced in the state and federal courts sitting in the City of New
York, Borough of Manhattan (the "New York Courts"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such
New York Courts are improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Debenture and agrees that such Service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Debenture or the transactions
contemplated hereby. If either party shall commence an action or proceeding to
enforce any provisions of this Debenture, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorneys
fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.
Section 10. Any waiver by the Company
or the Holder of a breach of any provision of this Debenture shall not operate
as or be construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Debenture. The failure of the Company
or the Holder to insist upon strict adherence to any term of this Debenture on
one or more occasions shall not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Debenture. Any waiver must be in writing.
Section 11. For six
months from the date of this Debenture, the Holders shall be entitled to
“piggyback” registration rights on registrations initiated by the Company on
forms which permit the general sale of securities to the public, subject to
customary cut-backs if deemed necessary or advisable by the underwriters for any
such registration; except for any draw down or “Pipe” transactions.
Section 12. If any provision of this
Debenture is invalid, illegal or unenforceable, the balance of this Debenture
shall remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons and
circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates applicable laws governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal the
maximum permitted rate of interest. The Company covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on the Debentures as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
Section 13. Whenever any payment or
other obligation hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day.
*********************
IN WITNESS WHEREOF, the Company has
caused this Convertible Debenture to be
duly executed by a duly authorized officer as of the date first above
indicated.
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By:
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Name:
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Title:
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ANNEX
A
NOTICE OF
CONVERSION
The
undersigned hereby elects to convert principal under the 8% Convertible
Debenture of Skins, Inc. (the "Company"), due on June 1, 2011, into ____________
shares of common stock, $.001 par value per share (the "Common Stock"), of the
Company according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
By the
delivery of this Notice of Conversion the undersigned represents and warrants to
the Company that its ownership of the Company's Common Stock does not exceed the
amounts determined in accordance with Section 13(d) of the Exchange Act,
specified under Section 4 of this Debenture.
Conversion
calculations:
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Date
to Effect Conversion: ____________________
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35%
of the lowest closing bid price for 10 trading days prior to
conversion.
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_____________________________________
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Principal
Amount of Debentures to be Converted:
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_______________________________________
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Interest
Amount of Debentures to be Converted
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___________________________________
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Number
of shares of Common Stock to be issued:
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_________________________________
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Signature:
____________________________
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Name:
_______________________________
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Address:_____________________________
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