DEBT CONVERSION AGREEMENT
EXHIBIT
10.12
THIS
DEBT CONVERSION AGREEMENT (this
“Agreement”), is
entered into as of May 20, 2005 (the “Closing
Date”), by
and among Sequiam Corporation, a California corporation (the “Company”), and
Xxx Xxxxxxxx Xxxxxx (“Xxxxxx” or the
“Lender”).
RECITALS
WHEREAS, On
September 30, 2004, the Company made that certain promissory note, dated as of
November 19, 2004, in favor of Xxxxxx and in the principal amount of $75,000
(the “Xxxxxx
Note”);
WHEREAS,
The
Company has requested the Lender to convert the outstanding principal balance of
the Note into shares of the common stock, par value $.001 per share, of the
Company (the “Shares”), on
the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS,
The
Lender is willing to convert the outstanding principal balance of the Note into
the Shares, on the terms and subject to the conditions set forth in this
Agreement.
NOW,
THEREFORE, in
consideration of the foregoing premises and the mutual covenants contained in
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE
1
CERTAIN
DEFINITIONS
1.1 CERTAIN
DEFINITIONS. The
following capitalized terms have the meanings set forth below:
(a) “Commission” means
the Securities and Exchange Commission.
(b) “Exchange
Act” means
the Securities Exchange Act of 1934, as amended.
(c) “Governmental
Authority” means
any government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or
quasi-governmental authority (in each case, whether federal, state or local and
whether domestic or foreign).
(d) “Laws” means,
collectively, all statutes, laws, codes and ordinances, and any rules or
regulations of any Governmental Authority (in each case, whether federal, state
or local and whether foreign or domestic).
(e) “Liens” means
any lien, encumbrance, change, security interest, restriction (including any
restriction on voting rights or disposition), equity, claim or third party right
of any nature whatsoever.
(f) “Person” means
any natural person, corporation, trust, partnership, limited liability company
or partnership, joint venture, unincorporated organization, Governmental
Authority, or other entity.
(g) “Registrable
Securities” means:
(i) the Shares to be issued to the Lender under this Agreement; (ii) any Shares
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for, or in replacement of, such Shares; and (iii) 552,593
Shares of the Company which are either (A) currently held by the Lender; or (B)
are issuable upon exercise of outstanding common stock purchase warrants held by
the Lender.
(h) “Rule
144” means
Rule 144 of the Commission’s General Rules and Regulations under the Securities
Act, or any similar or substitute rule permitting the sale of restricted
securities that may hereafter be adopted by the Commission.
(i) “Securities
Act” means
the Securities Act of 1933, as amended.
ARTICLE
2
ISSUANCE
OF THE SHARES
2.1 ISSUANCE
OF THE SHARES. Upon
the terms and subject to the conditions of this Agreement, on the Closing Date,
the Lender hereby agrees to convert the principal and accrued interest of
$2,363.00 on their respective Note into the Shares at a conversion price of $.14
per share (the “Debt Conversion”). As a result of the Debt Conversion, the Note
will be cancelled and the Lender will be the holder of an aggregate of 552,593
Shares. These shares shall have piggyback registration rights in customary form
for all registrations and public offerings by the Company as described
below.
2.2 DELIVERIES.
On the
Closing Date, the Lender shall deliver its respective Note for cancellation and
payment for the Shares it acquires in the Debt Conversion (as described above in
Section 2.1) and the Company shall deliver to the Lender certificates
representing the Shares to which the lender is entitled as a result of the Debt
Conversion.
2.3 REGISTRATION
RIGHTS. The
Company grants the Lender piggyback registration rights for all of the common
shares and warrants owned by the Lender, whereby these shares will be registered
for resale by Lender on the first applicable Registration Statement filed by the
Company with the U.S. Securities & Exchange Commission. Lender’s piggyback
registration rights shall remain in effect until all of
his shares are sold, registered or freely tradable under Rule 144. All costs and
expenses of any such registration statement (excluding underwriting discounts
and commissions) shall be at the sole expense of the Company.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
3.1 REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
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(a) The
Company has been duly organized and is validly existing as a corporation in good
standing under the laws of its state of incorporation, with full power and
authority (corporate and other) to own, lease and operate its properties and
assets and to conduct its business, as it is now being conducted. The Company is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction of the United States, or any other country, state, province,
or political subdivision in which the character of the business conducted by it
or the nature of the properties owned or leased by it makes such qualification
necessary for the conduct of its business, except where the failure to so
qualify would not have a material adverse effect on the Company.
(b) The
Company has full right, power and authority to enter into this Agreement, and
this Agreement has been duly authorized, executed and delivered by the Company
and constitutes the legal, valid and binding agreement of the Company,
enforceable against it in accordance with its terms.
(c) No
consent, approval or authorization of, or registration, qualification or filing
with, any Governmental Authority or any other Person is required to be made by
the Company in connection with the execution, delivery or performance by the
Company of this Agreement or the consummation by it of the transactions
contemplated by this Agreement.
(d) The
execution, delivery and performance of this Agreement and the consummation by
the Company of the transactions contemplated hereby and thereby, do not and will
not: (i) violate or conflict with the organizational documents of the Company;
(ii) assuming that the consents and approvals referred to in Schedule
3.1(c) are duly
obtained, (A) violate, conflict with or result in a breach any of the provisions
of or constitute a default (or an event which with notice or lapse of time or
both would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of Lien upon any of the assets or properties of the
Company or any of its subsidiaries under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries may be bound or to which the Company or any of its subsidiaries or
any of its respective properties or assets may be subject; or (B) violate any
Law, judgment, ruling, order, writ, injunction or decree applicable to the
Company or any of its subsidiaries or any of its respective properties or
assets.
(e) The
Company has duly authorized the issuance of the Shares to the Lender or their
designee by all necessary corporate action and, when paid for in accordance with
the terms of this Agreement, the Shares will be validly issued and outstanding,
fully paid and nonassessable, free and clear of all Liens, including any
preferential rights of other shareholders of any nature or third parties and the
Lender or their designee will be entitled to all rights accorded to a holder of
the Shares.
(f) The
Company is not in violation of any Law, judgment, ruling, order, writ,
injunction or decree to which it may be subject and the business of the Company
has been and is presently being conducted in accordance with all applicable
Laws, except where the failure to be in accordance would not have a material
adverse effect on the Company. The Company has received all franchises, permits,
licenses, consents and other authorizations and approvals of all Governmental
Authorities necessary for the conduct of its business as now being conducted by
it, except where the failure to receive such franchises, permits, licenses,
consents and other authorizations and approvals would not have a material
adverse effect on the Company.
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(g) The
Company has duly filed with the Commission all reports (individually a
“SEC
Report” and
collectively the “SEC
Reports”)
required to be filed by it under the Securities Act and the Exchange Act. The
consolidated financial statements of the Company and the related Note contained
in the Company’s Annual Report on Form 10-K for the fiscal year ended December
31. 2003 and its Quarterly Report on Form l0-Q for the quarter ended September
30, 2004, present fairly the consolidated financial position of the Company as
of the dates indicated therein and the consolidated results of its operations
and cash flows for the periods therein specified. Such financial statements
(including the related Note) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods therein specified. The SEC Reports complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, as of their respective filing or effective dates, and the information
contained therein was true and correct in all material respects as of the date
or effective date of such documents and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(h) There is
no action, suit, claim, investigation or proceeding (“Litigation”)
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries which questions the validity of this Agreement and the
transactions contemplated by this Agreement, or any action taken or to be taken
pursuant to this Agreement. Except as disclosed in the SEC Reports, there is no
Litigation pending or, to the knowledge of the Company, threatened, against or
involving the Company or any of its subsidiaries or any of its respective
properties or assets, or any outstanding orders, judgments, injunctions, awards
or decrees of any Governmental Authority against the Company or any of its
subsidiaries.
3.2 REPRESENTATIONS
AND WARRANTIES OF THE LENDER.
(a) The
Lender acknowledge that the offer, issuance and sale to it of the Shares is
intended to be exempt from the registration requirements of the Securities Act,
pursuant to the provisions of Regulation D promulgated by the Commission under
the Securities Act.
(b) The
Lender is an “accredited investor,” as such term is defined in Rule 501(a) of
the Commission’s General Rules and Regulations under the Securities
Act.
(c) Without
limiting or conditioning the Representations and Warranties of the Company
contained in Section 3.1 above, the Lender acknowledge that: (i) during the
course of the transaction and prior to this Agreement they have received
information relating to the Company; (ii) they have been given a reasonable
opportunity to ask questions of and receive answers from the Company and its
representatives concerning the Company; (iii) they have reviewed the SEC Reports
of the Company; and (iv) they have the requisite knowledge and experience in
financial business matters to be capable of evaluating the merits and risks of
investing in the Company;
(d) It is the
present intention of the Lender that the Shares being acquired by the Lender are
for the accounts of the Lender or their designee and not with a present view to
or for sale in connection with any distribution thereof.
The
Lender understand that: (i) the issuance of the Shares to the Lender has not
been registered under the Securities Act; (ii) they may not sell, pledge,
hypothecate or otherwise transfer the Shares or any interest therein except in a
transaction which is registered under the Securities Act or which is exempt from
the registration requirements of the Securities Act; and (iii) The Company will
make a notation on the certificate evidencing the Shares and shall instruct its
transfer agent to such effect.
4
Article
4
CONDITIONS
4.1 CONDITIONS
TO OBLIGATIONS OF THE LENDER. The
obligation of the Lender to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of each and every one of the following
conditions on or prior to the Closing Date, any or all which may be waived in
whole or in part by the Lender:
(a) The
representations and warranties of the Company contained in this Agreement will
be true and correct in all material respects as of the Closing Date.
(b) The
Company will have performed and complied, in all material respects, with all
agreements and conditions required by this Agreement to be performed and
complied with by them prior to or on the Closing Date.
(c) The
Company will have delivered to the Lender, stock certificates, in the name of
the Lender or its designee, evidencing the Shares.
4.2 CONDITIONS
TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of each and every one of the following
conditions on or prior to the Closing Date, any or all of which may be waived,
in whole or in part by the Company:
(a) The
representations and warranties of the Lender contained in this Agreement will be
true and correct in all material respects as of the Closing Date.
(b) The
Lender will have performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by the Lender prior
to or on the Closing Date.
(c) The
Lender shall have delivered to the Company for cancellation their
Note.
ARTICLE
5
SURVIVAL
AND INDEMNIFICATION
5.1 RELIANCE
ON AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the parties in this Agreement, and in any of
the certificates, documents or other agreements delivered in connection with
this Agreement, will: (a) be deemed to have been relied upon by the parties,
notwithstanding any investigation hereto or hereafter made by any party; and (b)
will survive the execution and delivery of this Agreement.
5.2 INDEMNIFICATION.
(a) The
Company shall indemnify the Lender and hold them harmless, upon demand, from and
against any losses, damages, costs, claims, expenses and liabilities, including,
without limitation, reasonable attorneys’, paralegals' and accountants' fees and
expenses, before and at trial and at all appellate levels (individually and
collectively, “Losses”), which
the Lender may sustain, suffer or incur arising from or in connection with the
Company’s material breach any covenant, representation, warranty, agreement,
obligation or undertaking of the Company hereunder or in any other documents,
instruments and agreements contemplated hereby.
5
(b) The
Lender shall indemnify the Company and hold it harmless, upon demand, from and
against any Losses which the Company may sustain, suffer or incur arising from
or in connection with the Lender’s material breach any covenant, representation,
warranty, agreement, obligation or undertaking of the Lender hereunder or in any
other documents, instruments and agreements contemplated hereby.
(c) A party
hereunder shall have no liability under this Agreement to indemnify under either
Section 6.2(a) or Section 6.2(b) above, in each case unless the party against
whom such claim is asserted (the “Indemnifying
Party”)
receives notice of claim in writing from the party seeking indemnification (the
“Indemnified
Party”).
(d) All third
party claims by any Indemnified Party hereunder shall be asserted and resolved
in accordance with the following provisions. If any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party is asserted against
or sought to be collected from such Indemnified Party by such third party, said
Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand stating with reasonable specificity
the circumstances of the Indemnified Party’s claim for indemnification;
provided, however, that any failure to give such notice will not waive any
rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are actually prejudiced or to the extent that any applicable
period set forth in Section 6.2(c) has expired without such notice being given.
After receipt by the Indemnifying Party of such notice, then upon reasonable
notice from the Indemnifying Party to the Indemnified Party, or upon the request
of the Indemnified Party, the Indemnifying Party shall defend, manage and
conduct any proceedings, negotiations or communications involving any claimant
whose claim is the subject of the Indemnified Party’s notice to the Indemnifying
Party as set forth above, and shall take all actions necessary, including but
not limited to the posting of such bond or other security as may be required by
any governmental authority, so as to enable the claim to be defended against or
resolved without expense or other action by the Indemnified Party. The
Indemnifying Party shall not, without the written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed), settle,
compromise or offer to settle or compromise any such claim or demand on a basis
which would result in the imposition of a consent order, injunction or decree
which would restrict the future activity or conduct of the Indemnified Party or
any subsidiary or not result in a full release of the Indemnified Party. Upon
request of the Indemnifying Party, the Indemnified Party shall, to the extent it
may legally do so and to the extent that it is compensated in advance by the
Indemnifying Party for any costs and expenses thereby incurred:
(i) take such
action as the Indemnifying Party may reasonably request in connection with such
action;
(ii) allow the
Indemnifying Party to dispute such action in the name of the Indemnified Party
and to conduct a defense to such action on behalf of the Indemnified Party;
and
(iii) render to
the Indemnifying Party all such assistance as the Indemnifying Party may
reasonably request in connection with such dispute and defense.
6
Article
6
MISCELLANEOUS
6.1 ENTIRE
AGREEMENT; AMENDMENT. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes and terminates any prior
communication, agreement or understanding, whether written or oral. This
Agreement may be modified only by a writing signed by all parties.
6.2 ASSIGNMENTS. No
party shall assign his or its rights or obligations under this Agreement without
the prior written consent of each party to this Agreement, which consent can be
withheld in the sole discretion of any party.
6.3 BINDING
EFFECT. All of
the terms and provisions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
administrators, personal representatives, legal representatives, heirs,
successors and permitted assigns, whether so expressed or not.
6.4 BROKERS. the
parties represents and warrants that such party has dealt with no broker or
finder in connection with any of the transactions contemplated by this
Agreement, and, insofar as such party knows, no broker or other person is
entitled to any commission or finder’s fee in connection with any transaction or
entity. The parties each agree to indemnify and hold one another harmless
against any loss, liability, damage, cost, claim or expense incurred by reason
of any brokerage commission or finder’s fee alleged to be payable because of any
act, omission or statement of the indemnifying party
6.5 EQUITABLE
REMEDIES. the
parties acknowledges that the parties will be irreparably damaged (and damages
at law would be an inadequate remedy) if this Agreement is not specifically
enforced. Therefore, in the event of a breach or threatened breach by any party
of any provision of this Agreement, then the other parties shall be entitled, in
addition to all other rights or remedies, (a) to an injunction restraining such
breach, without being required to show any actual damage or to post an
injunction or other bond, or (b) to a decree for specific performance of the
provisions of this Agreement, or both.
6.6 EXPENSES. Except
as otherwise provided in this Agreement, the parties shall bear and pay all
direct costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of its own financial or other consultants, investment bankers,
accountants, and counsel.
6.7 SECTION
HEADINGS. The
section headings contained herein are for reference purposes only and shall not
in any way affect the meaning or interpretation of this Agreement.
6.8 EXECUTION
IN COUNTERPARTS; FACSIMILE SIGNATURES. This
Agreement may be executed in several counterparts, which shall be an original
and all of which together shall constitute one and the same instrument.
Facsimile signatures hereto or signed signature pages transmitted and received
by facsimile shall have the same legal force and effect as original
signatures.
6.9 FURTHER
ASSURANCES. The
parties hereby agree from time to time to execute and deliver such further and
other transfers, assignments and documents and do all matters and things which
may be convenient or necessary to more effectively and completely carry out the
intentions of this Agreement.
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6.10 JURISDICTION
AND VENUE. The
parties acknowledge that a substantial portion of the negotiations, anticipated
performance and execution of this Agreement occurred or shall occur in Orange
County, Florida. Any civil action or legal proceeding arising out of or relating
to this Agreement shall be brought in the courts of record of the State of
Florida in Orange County or the United States District Court, Middle District of
Florida. Each party consents to the jurisdiction of such Florida court in any
such civil action or legal proceeding and waives any objection to the laying of
venue of any such civil action or legal proceeding in such Florida court.
Service of any court paper may be effected on such party by mail, as provided in
this Agreement, or in such other manner as may be provided under applicable
laws, rules of procedure or local rules.
6.11 GOVERNING
LAW. This
Agreement and all transactions contemplated by this Agreement shall be governed
by, and construed and enforced in accordance with, the internal laws of the
State of Florida without regard to principles of conflicts of laws.
6.12 ATTORNEYS'
FEES. The
prevailing party in any dispute with respect to this Agreement shall be entitled
to recover from the other party all of its reasonable costs and expenses
incurred in connection with such dispute, including, but not limited to,
reasonable attorneys’, paralegals’, accountants’ and other professionals' fees
and costs incurred before and at trial, at any other proceeding, at all
appellate levels and whether or not suit or any other proceeding is
brought.
6.13 SEVERABILITY. If any
provision of this Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law of any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Agreement nor the legality,
validity or enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby. If any provision
of this Agreement may be construed in two or more ways, one of which would
render the provision invalid or otherwise voidable or unenforceable and another
of which would render the provision valid and enforceable, such provision shall
have the meaning which renders it valid and enforceable.
6.14 JURY
WAIVER. IN ANY
CIVIL ACTION, COUNTERCLAIM, OR PROCEEDING, WHETHER AT LAW OR IN EQUITY, WHICH
ARISES OUT OF, CONCERNS, OR RELATES TO THIS AGREEMENT, ANY AND ALL TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, THE PERFORMANCE OF THIS AGREEMENT, OR THE
RELATIONSHIP CREATED BY THIS AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT,
STRICT LIABILITY, OR OTHERWISE, TRIAL SHALL BE TO A COURT OF COMPETENT
JURISDICTION AND NOT TO A JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT, AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES TO THIS AGREEMENT OF THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. NEITHER
PARTY HAS MADE OR RELIED UPON ANY ORAL REPRESENTATIONS TO OR BY ANY OTHER PARTY
REGARDING THE ENFORCEABILITY OF THIS PROVISION. EACH PARTY HAS READ AND
UNDERSTANDS THE EFFECT OF THIS JURY WAIVER PROVISION. EACH PARTY ACKNOWLEDGES
THAT IT HAS BEEN ADVISED BY ITS OWN COUNSEL WITH RESPECT TO THE TRANSACTION
GOVERNED BY THIS AGREEMENT AND SPECIFICALLY WITH RESPECT TO THE TERMS OF THIS
SECTION.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
| THE COMPANY: | ||
| SEQUIAM CORPORATION | ||
| By: |
/s/ Xxxxxxxx XxxxxxXxxxxx | |
| Name: |
Xxxxxxxx
XxxxxxXxxxxx | |
| Title: |
CEO | |
| THE LENDER: | ||
| /s/ Xxx Xxxxxxxx Xxxxxx | ||
| Xxx Xxxxxxxx Xxxxxx | ||
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