DEBENTURE
THIS DEBENTURE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER, (THE
"1933 ACT") AND MAY ONLY BE OFFERED OR SOLD PURSUANT TO REGISTRATION UNDER OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
7.0% CUMULATIVE CONVERTIBLE DEBENTURE DUE
$3,350,000 December 14, 1998
FOR VALUE RECEIVED, AmeriResources Technologies, Inc, a Delaware
corporation, (the "Company"), hereby promises to pay to or registered assigns
(the "Holder"), on December 14, 2001 (the "Maturity Date"), the principal amount
of Three Million Three Hundred Fifty Thousand Dollars ($3,350,000) USD, and to
pay interest on the principal amount hereof, in such amounts, at such times and
on such terms and conditions as are specified herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of the
Debenture (the "Debenture") at the rate of Seven Percent (7.0%) per year,
payable at the time of each conversion until the principal amount hereof is paid
in full or has been converted. Interest on this Debenture shall accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from December 14, 1998. Interest shall be computed on the basis of a 360
day year of 12, 30 day months. If the Holder shall convert this Debenture during
any quarter, the Company shall pay to the Holder, upon conversion, the pro-rata
portion of accrued interest payable through the conversion date.
Article 2. Method of Payment
This Xxxxxxxxx must be surrendered to the Company in order for the Holder
to receive payment of the principal amount hereof. The Company shall have the
option of paying the interest on this Debenture in United States dollars or in
Common Stock upon conversion pursuant to Article 3 hereof. The Company may draw
a check for the payment of interest to the order of the Holder of this Debenture
and mail it to the Holder's address as shown on the Register (as defined in
Section 7.2 below). Interest and principal payments shall be subject to
withholding under applicable United States Federal Internal Revenue Service
Regulation.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right , at its option, to
convert it into shares of common stock, par value $0.0001 per share, of the
Company ("Common Stock") at any time after December 14, 2001, except as set
forth in Section 3.1(c) below. The number of shares of Common Stock issuable
upon conversion of this Debenture is determined by dividing the principal amount
hereof to be converted plus all accrued an unpaid interest thereof minus any
required withholding by the conversion price in effect on the conversion date
(as defined in paragraph (b) of this Section 3.1 below) and rounding the result
to the nearest whole share. On conversion, no payment of or adjustment (other
than as provided in the previous sentence) for accrued and unpaid interest shall
be made whether or not such conversion occurs before, on or after an interest
payment date.
(b) The conversion price and procedures are set forth in Section 3.2.
(c) Less than all of the principal amount of this Debenture may be
converted into Common Stock of the Company if the portion converted is $5,000 or
a whole multiple of $5,000 and the provisions of this Article 3 that apply to
the conversion of all of the Debenture shall also apply to the conversion of a
portion of it. All accrued and unpaid interest on this Debenture shall be added
to the amount converted if less than all of the principal amount of this
Debenture is converted and shall be deemed to be paid and discharged thereby.
This Debenture may not be converted, whether in whole or in part, except in
accordance with Section 3.2.
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Section 3.2. Conversion Procedure
(a) Debentures. Upon the conversion of this Debenture, the holder thereof
shall submit such Debenture to the Company, and the Company shall, within
fourteen (14) business days of receipt of such Debenture, instruct the Company's
transfer agent to issue on or more Certificates representing that number of
shares of Common Stock into which the Debenture is convertible in accordance
with the provisions regarding conversion set forth in Exhibit A hereto. The
Company's transfer agent or attorney shall act as Debenture Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Common Stock to be Issued With Restrictive Legend. Upon the conversion
of this Debenture and upon receipt by the Company of a facsimile or original of
Purchaser's signed Notice of Conversion and Purchaser Representation Letter (See
Exhibits A and B attached hereto) the Company shall instruct the Company's
transfer agent to issued Stock Certificates with restrictive legend or stop
transfer instruction in the name of Purchaser (or its nominee as may be
designated by Purchaser prior to the closing) and in such denominations to be
specified at conversion representing the number of shares of Common Stock
issuable upon such conversion, as applicable. Seller warrants that no
instruction other than these instructions have been given or will be given to
the transfer agent and that the Common Stock shall be restricted on the books
and records of the Company. Nothing in this Section 3.2, however, shall affect
in any way Purchaser's or such nominee's obligations and agreements to comply
with all applicable securities laws upon resale of the Securities.
(c) The holder of the Debenture ("Holder") is entitled, at its option, on
December 14, 2001 to convert the original principal amount of the Debenture into
shares of Common Stock, $0.0001 par value per share, of the Company (the "Common
Stock"), at a conversion price for each share of Common Stock equal to the
average closing bid price of the Company's Common Stock for the five (5) trading
days immediately preceding and ending on the day preceding the date of
conversion. Such conversion shall be effectuated by surrendering to the Company,
or its attorney, the original Debenture to be converted together with a
facsimile or original of the signed Notice of Conversion and facsimile or
original of the signed Purchaser Representation Letter, see Exhibits A and B
attached hereto, which evidences such Xxxxxx's intention to convert the
Debenture or a specified portion thereof, and accompanied by proper assignment,
if applicable. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded
up or down, as the case may be, to the nearest whole share. The date on which
notice of conversion is effective ("Conversion Date") shall be deemed to be the
date on which the Holder has delivered to the Company the original Debenture, a
facsimile or original of the signed Notice of Conversion and a facsimile or
original of the signed Purchaser Representation Letter.
(d) Nothing contained in this Debenture or paragraph 3.2(f) hereof, shall
be deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate on interest required to be paid under the Debenture exceeds the maximum
rate permitted by governing law, the rate of interest required to be paid
thereunder shall be automatically reduced to the maximum rate permitted under
the governing and any amounts collected in excess of the permissible amount
shall be deemed a payment of principal. To the extent that such excess amount
exceeds the aggregate principal amount of this Debenture, such excess shall be
returned with reasonable promptness by the Holder to the Company.
(e) Within fourteen (14) business days after receipt of the documentation
referred to above in Section 3.2(c), the Company shall deliver instructions to
its transfer agent to issue the number of shares of Common Stock issuable upon
the conversion. It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. No payment of adjustment shall be made for
accrued and unpaid interest until the earlier of the Conversion Date or the
mandatory conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchase a new Debenture qual
to the unconverted amount, if so requested by Purchaser.
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Section 3.3 Fractional Shares. The Company shall not issue a fractional
share of Common Stock upon the conversion of this Debenture. Instead, the
Company shall round up or down, as the case may be, to the nearest whole share.
Section 3.4 Taxes on Conversion. The Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon the conversion of this Debenture. However, the Holder shall pay any
such tax which is due because the shares are issued in a name other than its
name.
Section 3.5 Company to Reserve Stock. The Company shall reserve out of its
authorized but unissued Common Stock or Common Stock held in treasury a
sufficient number of shares of Common Stock to permit the conversion of this
Debenture. All shares of Common Stock which may be issued upon the conversion
hereof shall upon issuance be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture and the Common Stock
issuable upon the conversion hereof have not been registered under the
Securities Act of 1933, as amended, (the "Act") and have been sold pursuant to
Rule 144 under the Act ("Rule 144"). The Debenture and the Common Stock issuable
upon the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation , sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes the
obligations of the Company under his Debenture and immediately after such
transaction no Event of Default exists. Any reference herein to the Company
shall refer to such surviving or transferee corporation and the obligations of
the Company shall terminate upon such assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on the
Register a copy of any annual, quarterly or current report that it files with
the Securities and Exchange Commission promptly after the filing thereof and a
copy of any annual, quarterly or other report or proxy statement that it gives
to its shareholders generally at the time such report or statement is sent to
shareholders.
Article 6. Defaults and Remedies
Section 6.1 Events of Default. an "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture when the
same becomes due and payable at maturity, upon redemption or otherwise, (b) the
Company does not make a payment, other than a payment of principal, for a period
of 5 days thereafter, (c) the Company fails to comply with any of its other
agreements in this Debenture and such failure continues for the period and after
the notice specified below, (d) the Company pursuant to or within the meaning of
any Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an involuntary
case; (iii) consents to the appointment of a Custodian (as hereinafter defined)
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of it or for all or substantially all of its property or (iv) makes a general
assignment for the benefit of its creditors or (v) a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that : (A) is
for relief against the Company in an involuntary case; (B) appoints a Custodian
of the Company or for all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains unstayed and in
effect for 60 days, (D) the Company shall have its Common Stock delisted from an
exchange or over-the-counter market. As used in this Section 6.1, the term
"Bankruptcy Law" means Title 11 of the United States Code or any similar federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law. A
default under clause (C)above is not an Event of Default until the holders of at
least 25% of the aggregate principal amount of the Debentures outstanding notify
the Company of such default and the Company does not cure it within five (5)
days after the receipt of such notice, which must specify the default, demand
that it be remedied and state that it is a "Notice of Default."
Section 6.2. Acceleration. If an Event of Default occurs and is continuing,
the Holder hereof by notice to the Company, may declare the principal of and
accrued interest on this Debenture to be due and payable. Upon such declaration,
the principal and interest hereof shall be due and payable immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures having an aggregate principal amount of $3,350,000 which are
identical except as to the principal amount and date of issuance thereof and as
to any restriction on the transfer thereof in order to comply with the
Securities Act of 1933 and the regulations of the Securities and Exchange
Commission promulgated thereunder. Such Debentures are referred to herein
collectively as the "Debentures." The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall maintain
a register of the holders of the Debentures (the "Register") showing their names
and addresses and the serial numbers and principal amounts of Debentures issued
to or transferred of record by them from time to time. The Register may be
maintained in electronic, magnetic or other computerized form. The Company may
treat the person named as the Holder of this Debenture in the Register as the
sole owner of this Debenture. The Holder of this Debenture is the person
exclusively entitled to receive payments of interest on this Debenture, receive
notifications with respect to this Debenture, convert it into Common Stock and
otherwise exercise all rights and powers as the absolute owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may be
registered on the books of the Company maintained for such purpose pursuant to
Section 7.2 above (i.e., the Register). Transfers shall be registered when this
Debenture is presented to the Company with a request to register the transfer
hereof and the Debenture is duly endorsed by the appropriate person, reasonable
assurances are made that the endorsements are genuine and effective, and the
Company has received evidence satisfactory to it that such transfer is rightful
and in compliance with all applicable laws, including tax laws and state and
federal securities laws. When this Debenture is presented for transfer and duly
transferred hereunder, it shall be canceled and a new Debenture showing the name
of the transferee as the record holder thereof shall be issued in lieu hereof.
When this Debenture is presented to the Company with a reasonable request to
exchange it for an equal principal amount of Debentures of other denominations,
the Company shall make such exchange and shall cancel this Debenture and issue
in lieu thereof Debentures having a total principal amount equal to this
Debenture in the denominations requested by the Holder. The Company may charge a
reasonable fee for any registration of transfer or exchange other than one
occasioned by a notice of redemption or the conversion hereof.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
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Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. Where time is extended
by virtue of the provisions of this Article 9, such extended time shall not be
included in the computation of interest. A "business day" shall mean a day on
which banks are not required or allowed to be closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may waive a
default or rescind the declaration of an Event of Default and its consequences
except for a default in the payment of principal of or interest on any
Debenture.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture shall be
governed and construed by the provisions hereof and in accordance with the laws
of the State of Kansas.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
AMERIRESOURCES TECHNOLOGIES INC.
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
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Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert
the Debentures.)
The undersigned hereby irrevocably elects, as of , 199 to convert $ of the
Debentures into Shares of Common Stock (the "Shares") of AmeriResources
Technologies, Inc. (the "Company") according to the conditions set forth in the
Stock Purchase Agreement dated December 14, 1998.
Date of Conversion __________________
Applicable Conversion Price _____________
Number of Shares Issuable upon this conversion _______________
Signature ______________________________________
[Name]
Address _____________________________________
_____________________________________________
Phone _______________________ Fax ____________________
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EXHIBIT B
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned , has purchased on December 14, 1998, One (1) convertible
Debenture(s) of AmeriResource Technologies, Inc. (the "Company") in the amount
of $_____________ , (the "Debenture(s)"). In connection with such purchase, the
undersigned has executed and delivered a Stock Purchase Agreement ("Stock
Purchase Agreement") of your design.
The undersigned represents and warrants as follows:
Dated this _____ day of the month of ________________, 1998.
By:
______________________________ ________________________
Official Signature of Purchase Title
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s)
_____________________________________________
unto __________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
(Name, address, and SSN or EIN of assignee)
_____________________________Dollars ($__________________ )
(principal amount of Debenture, $ or integral multiples of $ )
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date:_______________ Signed: ___________________________________________
(Signature must conform in all respects to shown name of Holder of face of
Xxxxxxxxx)
Signature __________________________ Guaranteed:__________________
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