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EXHIBIT 10.1
CONVERTIBLE DEBENTURE
THIS AGREEMENT made as of the 2nd day of July, 1996.
B E T W E E N:
M.I. MANEK INC.
a Corporation incorporated pursuant
to the laws of Switzerland
(hereinafter called the "Lender")
OF THE FIRST PART
AND:
PERIPHERAL CONNECTIONS, INC.
a Corporation incorporated pursuant
to the laws of the State of Nevada
(hereinafter called the "Corporation")
OF THE SECOND PART
ARTICLE 1
PROMISE TO PAY
1.1 PERIPHERAL CONNECTIONS, INC. (the "Corporation"), a
corporation incorporated under the laws of the State of Nevada and having its
chief executive office at 0 Xxxxxxxx Xxxxxx Xxxx, Xxxxx 0000, Xxxxx Xxxx,
Xxxxxxx, X0X 0X0, for value received, hereby promises to pay to the order of
M.I. MANEK INC. (the "Lender") at 000 Xxxxxx Xxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxx or at such other place as the Lender may direct at any time and from
time to time, on JULY 31, 2001, the principal amount of TWO HUNDRED THOUSAND
($200,000.00) DOLLARS of law currency of the United States of America, together
with interest on the principal amount at the rate of TWELVE AND ONE-HALF
(12.50%) PERCENT per annum, calculated semi-annually, not in advance, without
reinvestment factor, as well after as before demand, default and judgment.
Interest on the principal amount outstanding shall be payable twice yearly on
the 31st day of January and the 31st day of July in each and every year
calculated from the date hereof until paid in full (the
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principal amount, such interest and all other amounts now or hereafter payable
hereunder being referred to herein as the "Obligations Secured")
ARTICLE 2
CONVERSION RIGHTS
2.1 The Lender may, upon giving notice as hereinafter provided, at
any time prior to the 31st day of June, 2001, convert in whole or in part, the
outstanding principal balance of this Debenture, together with all accrued and
unpaid interest, in to $0.001 Par Value Class A Common Shares in the capital of
the Corporation at a conversion price equal to ten ($0.10) cents per share (the
"Conversion Price").
2.2 If the Lender elects to convert a part only of the outstanding
principal balance of this Debenture, the outstanding principal balance owing on
this Debenture shall be deemed to have been reduced by the amount of the
Debenture so converted and the Lender shall provide to the Corporation such
instruments and acknowledgments as shall be necessary to validly and
effectively amend this Debenture.
2.3 In order to effect the right of conversion herein provided
for, the Lender shall deliver to the Corporation, at the registered office of
the Corporation, a notice in writing setting out the Lender's election to
convert this Debenture, together with all accrued but unpaid interest thereon,
in to $0.001 Par Value Class A Common Shares in the capital of the Corporation.
If the Lender elects to convert a part only of the outstanding principal
balance of this Debenture, such notice shall set out the amount of the
outstanding principal balance of the Debenture which the Lender desires to
convert in to $0.001 Par Value Class A Common Shares in the capital of the
Corporation.
2.4 Within 30 days of the Corporation's receipt of such notice of
the conversion, the Corporation, at its' own cost and expense, shall cause the
certificate or certificates representing the $0.001 Par Value Class A Common
Shares in the capital of the Corporation so converted to be issued in the name
of the Lender or in such name or names as the Lender may direct in writing,
provided that the Lender shall pay any applicable security transfer taxes.
Subject to the provisions of paragraph 2.2 (partial conversion) upon the
issuance of such shares, this Debenture shall be deemed to have been satisfied,
discharged or redeemed and for such purpose, the Lender shall cancel and
discharge this Debenture and execute and deliver to the Corporation such
instruments as shall be necessary to discharge this Debenture and to release or
reconvey to the Corporation any property and assets subject to the security
created hereby.
2.5 From and after the date that the Corporation receives such
notice of conversion, interest shall cease to accrue on that portion of the
outstanding principal amount of this Debenture which is to be converted.
ARTICLE 3
CREATION OF SECURITY INTEREST
3.1 As continuing security for the payment of the Obligations
Secured and the performance by the Corporation of all its covenants and
obligations hereunder, the Corporation hereby grants, assigns, transfers,
mortgages, pledges, charges and hypothecates, by way of a
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security interest to and in favor of the Lender, all of the undertaking,
property and assets of the Corporation, both real and personal, immovable and
moveable, tangible and intangible, legal and equitable, of whatsoever nature
and kind and wheresoever situate, now owned or hereafter acquired by the
Corporation including the goodwill of the Corporation and all proceeds in any
form now or hereafter derived from the sale, lease or other disposition of any
of the property and assets of the Corporation subject to, or intended to be
subject to the security interest hereby created.
3.2 The attachment of the security interest created hereby has not
been postponed and such security interest shall attach to any particular
property intended to be subject to the security interest created hereby as soon
as the Corporation has rights in such property.
3.3 The Corporation covenants that it shall not, without the prior
consent in writing of the Lender create, assume or suffer to exist any Lien,
upon all or any part of the Mortgaged Property ranking or purporting to rank in
priority to or pari passu with this Debenture or the security created hereby
other than the security hereof and any other Lien which the Lender has
expressly consented to in writing.
3.4 No provision hereof shall be construed as a subordination or
postponement of this Debenture and/or the security created hereby to or in
favor of any other Lien, whether or not such Lien is permitted hereunder or
otherwise.
3.5 The Corporation shall at its own expense do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all such further acts, deeds, mortgages, pledges, charges,
assignments, security agreements, hypothecs, and assurances (including
instruments supplemental or ancillary hereto) and such financing statements as
the Lender may from time to time request to better assure and perfect its
security on the Mortgaged Property or any part thereof.
3.6 The Corporation shall have the right at any time and from time
to time, to prepay the whole or any part of the principal sum secured hereunder
without notice or bonus.
ARTICLE 4
EVENTS OF DEFAULT
4.1 The occurrence of any of the following events shall constitute
an Event of Default:
(a) the Corporation defaults in payment of all or any
part of the Obligations Secured;
(b) the Corporation fails to have its' securities listed
for purchase and sale on a recognized stock exchange on or
before September 15, 1996;
(c) the Corporation admits its inability to pay its debts
generally as they become due or otherwise acknowledges its
insolvency;
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(d) except to the extent permitted by the Lender in
writing, the Corporation institutes any proceeding or takes
any corporate action or executes any agreement to authorize
its participation in or commencement of any proceeding:
(i) seeking to adjudicate it a bankrupt or
insolvent, or
(ii) seeking liquidation, dissolution, winding up,
reorganization, arrangement, protection, relief or
composition of it or any of its property or debt, or
making a proposal with respect to it under any law
relating to bankruptcy, insolvency, reorganization or
compromise of debts or other similar laws (including,
without limitation, any application under the
Companies' Creditors Arrangement Act (Canada) or any
reorganization, arrangement or compromise of debt
under the laws of the jurisdiction of incorporation
of the Corporation);
(e) any proceeding is commenced against or affecting the
Corporation:
(i) seeking to adjudicate it a bankrupt or
insolvent,
(ii) seeking liquidation, dissolution, winding up,
reorganization, arrangement, protection, relief or
composition of it or any of its property or debt or
making a proposal with respect to it under any law
relating to bankruptcy, insolvency, reorganization or
compromise of debts or other similar laws (including,
without limitation, any reorganization, arrangement
or compromise of debt under the laws of the
jurisdiction of incorporation of the Corporation);
(iii) seeking appointment of a receiver, trustee,
agent, custodian or other similar official for it or
for any substantial part of its properties and
assets, including the Mortgaged Property or any part
thereof;
and such proceeding is not being contested in good
faith by appropriate proceedings or, if so contested remains
outstanding, undismissed and unstayed more than 60 days from
the institution of such first mentioned proceeding; or
(f) any creditor of the Corporation or any other Person
shall privately appoint a receiver, trustee or similar
official for any substantial part of the Corporation's
properties and assets or for the Mortgaged Property or any
part thereof, and such appointment is not being contested in
good faith and by appropriate proceedings or, if so contested,
such appointment continues for more than 60 days.
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ARTICLE 5
REMEDIES UPON DEFAULT
5.1 Upon the occurrence of an Event of Default, the Obligations
Secured shall, at the option of the Lender, immediately be due and payable by
the Corporation to the Lender and the security hereby created shall become
enforceable.
5.2 If the security created hereby becomes enforceable, the Lender
may in its discretion, take any steps or proceedings of any kind permitted by
law or in equity or otherwise to enforce payment of the Obligations Secured or
performance of any other covenant or obligation of the Corporation contained
herein and exercise all rights and remedies of a secured party under the PPSA
or to realize all or any parts of the security created hereby.:
5.3 All rights, powers and remedies of the Lender under this
Debenture may be exercised separately or in combination and shall be in
addition to, and not in substitution for, any other security now or hereafter
held by the Lender and any other rights, powers and remedies of the Lender
however created or arising. No single or partial exercise by the Lender of any
of the rights, powers and remedies under this Debenture or under any other
security now or hereafter held by the Lender shall preclude any other and
further exercise of any other right, power or remedy pursuant to this Debenture
or any other security or at law, in equity or otherwise. The Lender shall at
all times have the right to proceed against all or any portion of the Mortgaged
Property or any other security in such order and in such manner as it shall
determine without waiving any rights, powers or remedies which the Lender may
have with respect to this Debenture or any other security or at law, in equity
or otherwise. No delay or omission by the Lender in exercising any right,
power or remedy hereunder or otherwise shall operate as a waiver thereof or of
any other right, power or remedy.
5.4 In the case of any judicial or other steps or proceedings to
enforce the security hereby created, and without limiting any right of the
Lender to obtain judgment for any greater amount, the Corporation shall remain
liable to the Lender for any amount which may remain due in respect of the
Obligations Secured after application to the payment thereof of the proceeds of
any sale, lease or other disposition of the Mortgaged Property or any part
thereof.
5.5 The Lender shall not be liable for any failure to exercise its
rights, powers or remedies arising hereunder or otherwise, including without
limitation any failure to take possession of, collect, enforce, realize, sell,
lease or otherwise dispose of, preserve, maintain, complete, protect, replace
or improve all or any part of the Mortgaged Property, to carry on all or any
part of the business of the Corporation relating to the Mortgaged Property or
to take any steps or proceedings for any such purposes, nor shall the Lender
have any obligation to take any steps or proceedings to preserve rights against
prior parties to or in respect of all or any part of the Mortgaged Property.
5.6 Unless required by law, the Lender shall not be required to
give the Corporation any notice of any sale, lease or other disposition of the
Mortgaged Property or any part thereof or the date after which any private
disposition of Mortgaged Property or any part thereof is to be made.
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5.7 If the Lender is at any time or from time to time required to
make a payment to defeat or honor the priority of a mortgage, pledge, charge,
assignment, security interest, hypothec, lien or other encumbrance on or in
respect of all or any part of the Mortgaged Property, any such payment or
payments, and the costs, charges and expenses of the Lender in connection
therewith (including legal fees on a solicitor and his own client basis) shall
be payable by the Corporation on demand.
ARTICLE 6
APPLICATION OF MONEYS
6.1 The moneys arising from the enforcement of the security
created hereby (except following foreclosure or other acceptance of the
Mortgaged Property or part thereof in satisfaction of the Obligations Secured)
shall be applied by the Lender in the following order, except to the extent
otherwise required by law:
(a) first, in payment of the Lender's reasonable costs,
charges and expenses (including legal fees on a solicitor and
his own client basis) incurred in the exercise of all or any
of the rights, powers or remedies granted to it under this
Debenture;
(b) second, in payment of amounts paid by the Lender in
respect of any charges ranking in priority or pari passu with
the security created by this Debenture;
(c) third, in payment of the remainder of the Obligations
Secured in such order of application as the Lender may
determine;
(d) fourth, subject to sections 7.2 and 7.3, to any
Person who has a security interest in the Mortgaged Property
or part thereof that is subordinate to that of the Lender and
whose interest,
(i) was perfected by possession, the continuance
of which was prevented by the Lender taking
possession of the Mortgaged Property; or
(ii) was, immediately before the sale, lease or
other disposition by the Lender perfected by
registration;
(e) fifth, subject to sections 6.2 and 6.3, to any other
Person with an interest in such moneys who has delivered a
written notice to the Lender of the interest before the
distribution of such moneys; and
(f) last, subject to sections 6.2 and 6.3, to the
Corporation or any other Person who is known by the Lender to
be an owner of the Mortgaged Property.
6.2 The Lender may require any Person mentioned in clauses 6.1(d),
6.1(e) or 6.1(f) to furnish proof of that Person's interest, and unless the
proof is furnished within ten days after
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demand by the Lender, the Lender need not pay over any portion of the moneys
referred to therein to such Person.
6.3 Where there is a question as to who is entitled to receive
payment under clauses 6.1(d), 6.1(e) or 6.1(f), the Lender or the Receiver may
pay the moneys referred to therein into court.
ARTICLE 7
GENERAL
7.1 The Lender may in its discretion from time to time release any
part of the Mortgaged Property or any other security either with or without any
sufficient consideration therefor, without responsibility therefor and without
thereby releasing any other part of the Mortgaged Property or any other
security or any Person from the security created by this Debenture or from any
of the covenants herein contained.
7.2 The Corporation hereby appoints the Lender as the
Corporation's attorney, with full power of substitution, in the name and on
behalf of the Corporation, to execute, deliver and do all such acts, deeds,
leases, documents, transfers, demands, conveyances, assignments, contracts,
assurances, consents, financing statements and things as the Corporation has
herein agreed to execute, deliver and do or as may be required by the Lender to
give effect to this Debenture or in the exercise of any rights, powers or
remedies hereby conferred on the Lender and generally to use the name of the
Corporation in the exercise of all or any of the rights, powers or remedies
hereby conferred on the Lender. This appointment, coupled with an interest,
shall not be revoked by the insolvency, bankruptcy, dissolution, liquidation or
other termination of the existence of the Corporation or for any other reason.
7.3 The Corporation shall pay to the Lender on demand all of the
Lender's reasonable costs, charges and expenses (including, without limitation,
legal fees on a solicitor and his own client basis) incurred in connection with
the perfection, preservation or enforcement of any security created hereby.
7.4 The Lender may at any time and from time to time set-off,
appropriate and apply any indebtedness and liability of the Lender to the
Corporation, matured or unmatured, against and on account of the Obligations
Secured when due, in such order of application as the Lender may from time to
time determine.
7.5 After the Obligations Secured have been paid in full, the
Lender shall, at the written request and expense of the Corporation, cancel and
discharge this Debenture and execute and deliver to the Corporation such
instruments as shall be necessary to discharge this Debenture and to release or
reconvey to the Corporation any property and assets subject to the security
created hereby.
7.6 The Lender may grant extensions of time and other indulgences,
take and give up security, accept compositions, make settlements, grant
releases and discharges and otherwise deal with the Corporation, debtors of the
Corporation, sureties and other Persons and with all or any
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part of the Mortgaged Property and other security as the Lender sees fit,
without prejudice to any debts and liabilities of the Corporation to the Lender
or the rights, powers and remedies of the Lender under this Debenture.
7.7 The Corporation authorizes the Lender to file such financing
statements and other documents and do such acts, matters and things (including
completing and adding schedules identifying all or any part of the Mortgaged
Property) as the Lender may consider appropriate to perfect and continue the
security created by this Debenture, to protect and preserve the interest of the
Lender in the Mortgaged Property and to realize upon this Debenture.
7.8 Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be sufficiently given only if
delivered to the party for whom it is intended at the principal address of such
party herein set forth or as changed pursuant hereto. Either party may notify
the other pursuant hereto of any change in such party's principal address to be
used for the purposes hereof.
(1) If to the Lender at:
M.I. MANEK INC.
000 Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx'
X0X 0X0
(2) If to the Corporation at:
0 Xxxxxxxx Xxxxxx Xxxx,
Xxxxx 0000
Xxxxx Xxxx, Xxxxxxx
X0X 0X0
ATTENTION: XX. XXXXXX XXXXXX
With a Copy to its' solicitor at
BARNET X. XXXXXXXX
Barrister and Solicitor
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Notwithstanding the foregoing, if the PPSA requires that a
notice or other communication be given in a specified manner, then any such
notice or communication shall be given in such manner.
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7.9 In this Debenture:
"THIS DEBENTURE", "these presents", "hereto", "herein",
"hereof", "hereby", "hereunder", and any similar expressions refer to this
Debenture and not to any particular Article, section or other portion hereof;
"EVENT OF DEFAULT" has the meaning attributed to such term in
section 4.1;
"LIEN" means any mortgage, pledge, charge, assignment,
security interest, hypothec, lien or other encumbrance, including, without
limitation, any agreement to give any of the foregoing, or any conditional sale
or other title retention agreement;
"MORTGAGED PROPERTY" means all of the undertaking, property
and assets of the Corporation subject to, or intended to be subject to, the
mortgages, pledges, charges, assignments, security interests and hypothecs
created hereby;
"PERSON" means any individual, partnership, limited
partnership, joint venture, syndicate, sole proprietorship, company or
corporation with or without share capital, unincorporated association, trust,
trustee, executor, administrator or other legal personal representative,
regulatory body or agency, government or governmental agency, authority or
entity however designated or constituted;
"PPSA" means the Personal Property Security Act, 1989
(Ontario) as amended from time to time and any Act substituted therefor and
amendments thereto and the following terms, namely, "Chattel Paper", "Consumer
Goods", "Document of Title", "Goods", "Instrument", "Inventory" , "Security",
shall have the respective meaning set out in the PPSA;
"RECEIVER" means any of a receiver, manager, receiver-manager
and receiver and manager;
7.10 The inclusion of headings in this Debenture is for convenience
of reference only and shall not affect the construction or interpretation
hereof.
7.11 Except where otherwise expressly provided, all amounts in this
Debenture are stated and shall be paid in U.S. dollars.
7.12 In this Debenture, unless the context otherwise requires,
words importing the singular include the plural and vice versa and words
importing gender include all genders.
7.13 Each of the provisions contained in this Debenture is distinct
and severable and a declaration of invalidity or unenforceability of any such
provision or part thereof by a court of competent jurisdiction shall not affect
the validity or enforceability of any other provision hereof.
7.14 No amendment or waiver of this Debenture shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any
provision of this Debenture shall
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constitute a waiver of any other provision nor shall any waiver of any
provision of this Debenture constitute a continuing waiver unless otherwise
expressly provided.
7.15 This Debenture shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and the Corporation hereby irrevocably attorns to the
jurisdiction of the courts of Ontario.
7.16 This Debenture shall be binding on the Corporation and its
successors and shall enure to the benefit of the Lender and its successors and
assigns. The Obligations Secured shall be paid, and this Debenture shall be
assignable by the Lender, free of any set-off, counter-claim or equities
between the Corporation and the Lender.
7.17 This Debenture may be executed in counterparts, each of which
shall be effected only upon delivery and thereafter shall be deemed an original
and all of which shall be taken to be one and the same instrument, with the
same effect as if all parties hereto had signed the same signature page.
7.18 The Corporation acknowledges receipt of a copy of this
Debenture and a copy of the financing statement/verification statement
registered under the PPSA in respect of the security created hereby
IN WITNESS WHEREOF the Corporation has executed this Debenture
as of the 2nd day of July, 1996.
PERIPHERAL CONNECTIONS, INC.
Per:
----------------------------
Xxxxxx Xxxxxx
Secretary and Director
Authorized Signing Officer
I have the authority to bind the Corporation
