EXHIBIT 10.26
FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
AMOUNT $120,000
DEBENTURE NUMBER JUNE-2002-101
ISSUANCE DATE JUNE 12, 2002
MATURITY DATE JUNE 12, 2004
FOR VALUE RECEIVED, CAN-CAL Resources, Ltd., a Nevada corporation (the
"Company"), hereby promises to pay DUTCHESS PRIVATE EQUITIES FUND, L.P. (the
"Holder") on June 12, 2004, (the "Maturity Date"), the principal amount of One
Hundred Twenty Thousand Dollars ($120,000) U.S., 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 this
Debenture (the "Debenture") at the time of each conversion until the principal
amount hereof is paid in full or has been converted. The Debentures shall pay
eight percent (8%) cumulative interest, in cash or in shares of common stock,
par value $.001 per share, of the Company ("Common Stock"), at the Company's
option, at the time of each conversion. The closing shall be deemed to have
occurred on the date the funds (less advisory fees, escrow fees and attorney
fees) are received by the Company (the "Closing Date"). If the interest is to be
paid in cash, the Company shall make such payment within five (5) business days
of the date of conversion. If the interest is to be paid in Common Stock, said
Common Stock shall be delivered to the Holder, or per Holder's instructions,
within five (5) business days of the date of conversion. The Debentures are
subject to automatic conversion at the end of two (2) years from the date of
issuance at which time all Debentures outstanding will be automatically
converted based upon the formula set forth in Section 3.2.
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Article 2. Method of Payment
This Debenture 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 1 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
Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right to convert it into
shares of Common Stock at any time following the Closing Date and which is
before the close of business on the Maturity Date, except as set forth in
Section 3.1(c) below. The number of shares of Common Stock issuable upon the
conversion of this Debenture is determined pursuant to Section 3.2 and rounding
the result to the nearest whole share.
(b) Less than all of the principal amount of this Debenture may be
converted into Common Stock 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. This Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture remains outstanding
on the Maturity Date, the unconverted portion of such Debenture will
automatically be converted into shares of Common Stock on such date in the
manner set forth in Section 3.2.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon receipt by the Company or its designated attorney of a
facsimile or original of Holder's signed Notice of Conversion (See Exhibit A
attached hereto) preceded by, together with or followed by receipt of the
original Debenture to be converted in whole or in part in the manner set forth
in 3.2(b) below, the Company shall instruct its transfer agent to issue one or
more Certificates representing that number of shares of Common Stock into which
the Debenture is convertible. The Company shall act as Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Conversion Procedures. The face amount of this Debenture may be
converted, in whole or in part, anytime following the Closing Date. Such
conversion shall be effectuated by surrendering to the Company, or its attorney,
this Debenture to be converted together with a facsimile or original of the
signed Notice of Conversion which evidences Holder's intention to convert the
Debenture indicated. The date on which the Notice of Conversion is effective
("Conversion Date") shall be deemed to be the date on which the Holder has
delivered to the Company a facsimile or original of the signed Notice of
Conversion, as long as the original
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Debenture(s) to be converted are received by the Company within five (5)
business days thereafter. Notwithstanding the above, any Notice of Conversion
not received by 5:00 P.M. EST, shall be deemed to have been received the next
business day.
(c) Common Stock to be Issued. Upon the conversion of any Debentures and
upon receipt by the Company or its attorney of a facsimile or original of
Holder's signed Notice of Conversion the Company shall instruct its transfer
agent to issue stock certificates without restrictive legend or stop transfer
instructions, if at that time the Registration Statement has been deemed
effective (or with proper restrictive legend if the Registration Statement has
not as yet been declared effective), in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion, as applicable. The Company warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely resold, except as may be set
forth herein.
(d) Conversion Rate. Holder is entitled to convert the face amount of this
Debenture, plus accrued interest, anytime following the Closing Date, at the
lesser of (i) $0.41; (ii) 100% of the average of the lowest five (5) closing bid
prices during the fifteen (15) trading days prior to the Closing Date or (iii)
80% of the average of the three (3) lowest closing bid prices during the fifteen
(15) trading days prior to conversion, each being referred to as the "Conversion
Price". 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.
(e) Nothing contained in this Debenture shall be deemed to establish or
require the payment of interest to the Holder at a rate in excess of the maximum
rate permitted by governing law. In the event that the rate of interest required
to be paid 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 law and such excess shall be returned
with reasonable promptness by the Holder to the Company.
(f) 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. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Holder a new Debenture equal
to the unconverted amount, if so requested in writing by Holder.
(g) Within five (5) business days after receipt of the documentation
referred to above in Section 3.2(b), the Company shall deliver a certificate, in
accordance with Section 3.2(c) for the number of shares of Common Stock issuable
upon the conversion. In the event the Company does not make delivery of the
Common Stock, as instructed by Holder, within five (5) business days after the
Conversion Date, then in such event the Company shall pay to Holder one percent
(1%) in cash, of the dollar value of the Debentures being converted per each day
after the fifth (5th) business day following the Conversion Date that the Common
Stock is not delivered to the Purchaser.
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The Company acknowledges that its failure to deliver the Common Stock
within five (5) business days after the Conversion Date will cause the Holder to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Debenture a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Debenture.
To the extent that the failure of the Company to issue the Common Stock
pursuant to this Section 3.2(g) is due to the unavailability of authorized but
unissued shares of Common Stock, the provisions of this Section 3.2(g) shall not
apply but instead the provisions of Section 3.2(h) shall apply.
The Company shall make any payments incurred under this Section 3.2(g) in
immediately available funds within five (5) business days from the date the
Common Stock is fully delivered. Nothing herein shall limit a Holder's right to
pursue actual damages or cancel the conversion for the Company's failure to
issue and deliver Common Stock to the Holder within five (5) business days after
the Conversion Date.
(h) The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Debentures by all Holders of
the entire amount of Debentures then outstanding. If, at any time Holder submits
a Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are available, and the Notice of
Conversion as to any Debentures requested to be converted but not converted (the
"Unconverted Debentures"), may be deemed null and void upon written notice sent
by the Holder to the Company. The Company shall provide notice of such
Conversion Default ("Notice of Conversion Default") to all existing Holders of
outstanding Debentures, by facsimile, within three (3) business day of such
default (with the original delivered by overnight or two day courier), and the
Holder shall give notice to the Company by facsimile within five business days
of receipt of the original Notice of Conversion Default (with the original
delivered by overnight or two day courier) of its election to either nullify or
confirm the Notice of Conversion.
The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the amount
of (N/365) x (.24) x the initial issuance price of the outstanding and/or
tendered but not converted Debentures held by each Holder where N = the number
of days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of
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Common Stock have been authorized, the Authorization Date and the amount of
Holder's accrued Conversion Default Payments. The accrued Conversion Default
shall be paid in cash or shall be convertible into Common Stock at the
Conversion Rate, upon written notice sent by the Holder to the Company, which
Conversion Default shall be payable as follows: (i) in the event Holder elects
to take such payment in cash, cash payments shall be made to such Holder of
outstanding Debentures by the fifth day of the following calendar month, or (ii)
in the event Holder elects to take such payment in stock, the Holder may convert
such payment amount into Common Stock at the conversion rate set forth in
section 3.2(d) at anytime after the 5th day of the calendar month following the
month in which the Authorization Notice was received, until the expiration of
the mandatory two (2) year conversion period.
The Company acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion
of the Debentures will cause the Holder to suffer damages in an amount that will
be difficult to ascertain. Accordingly, the parties agree that it is appropriate
to include in this Agreement a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties' good faith effort to quantify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to deliver the Common Stock
pursuant to the terms of this Debenture. Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock.
(i) If, by the fifth (5th) business day after the Conversion Date of any
portion of the Debentures to be converted (the "Delivery Date"), the transfer
agent fails for any reason to deliver the Common Stock upon conversion by the
Holder and after such Delivery Date, the Holder purchases, in an open market
transaction or otherwise, shares of Common Stock (the "Covering Shares") solely
in order to make delivery in satisfaction of a sale of Common Stock by the
Holder (the "Sold Shares"), which delivery such Holder anticipated to make using
the Common Stock issuable upon conversion (a "Buy-In"), the Company shall pay to
the Holder, in addition to any other amounts due to Holder pursuant to this
Debenture, and not in lieu thereof, the Buy-In Adjustment Amount (as defined
below). The "Buy In Adjustment Amount" is the amount equal to the excess, if
any, of (x) the Holder's total purchase price (including brokerage commissions,
if any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Holder from the sale of the Sold Shares.
The Company shall pay the Buy-In Adjustment Amount to the Holder in immediately
available funds within five (5) business days of written demand by the Holder.
By way of illustration and not in limitation of the foregoing, if the Holder
purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which the Company will be required to pay to the Holder will be $1,000.
(j) The Company shall furnish to Holder such number of prospectuses and
other documents incidental to the registration of the shares of Common Stock
underlying the Debentures, including any amendment of or supplements thereto.
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(k) Limitation on Issuance of Shares. If the Company's Common Stock becomes
listed on the Nasdaq SmallCap Market after the issuance of the Debentures, the
Company may be limited in the number of shares of Common Stock it may issue by
virtue of (X) the number of authorized shares or (Y) the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, including, but not necessarily limited to, NASDAQ Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable (collectively, the
"Cap Regulations"). Without limiting the other provisions thereof, the
Debentures shall provide that (i) the Company will take all steps reasonably
necessary to be in a position to issue shares of Common Stock on conversion of
the Debentures without violating the Cap Regulations and (ii) if, despite taking
such steps, the Company still cannot issue such shares of Common Stock without
violating the Cap Regulations, the holder of a Debenture which cannot be
converted as result of the Cap Regulations (each such Debenture, an "Unconverted
Debenture") shall have the right to elect either of the following remedies:
(x) if permitted by the Cap Regulations, require the Company to
issue shares of Common Stock in accordance with such holder's Notice
of Conversion at a conversion purchase price equal to the average of
the closing bid price per share of Common Stock for any five (5)
consecutive trading days (subject to certain equitable adjustments for
certain events occurring during such period) during the sixty (60)
trading days immediately preceding the Conversion Date; or
(y) require the Company to redeem each Unconverted Debenture for
an amount (the "Redemption Amount"), payable in cash, equal to the sum
of (i) one hundred thirty-three percent (133%) of the principal of an
Unconverted Debenture, plus (ii) any accrued but unpaid interest
thereon through and including the date (the "Redemption Date") on
which the Redemption Amount is paid to the holder.
A holder of an Unconverted Debenture may elect one of the above remedies
with respect to a portion of such Unconverted Debenture and the other remedy
with respect to other portions of the Unconverted Debenture. The Debentures
shall contain provisions substantially consistent with the above terms, with
such additional provisions as may be consented to by the Holder. The provisions
of this section are not intended to limit the scope of the provisions otherwise
included in the Debentures.
(l) Limitation on Amount of Conversion and Ownership. Notwithstanding
anything to the contrary in this Debenture, in no event shall the Holder be
entitled to convert that amount of Debenture, and in no event shall the Company
permit that amount of conversion, into that number of shares, which when added
to the sum of the number of shares of Common Stock beneficially owned, (as such
term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange
Act of 1934, as may be amended, (the "1934 Act")), by the Holder, would exceed
4.99% of the number of shares of Common Stock outstanding on the Conversion
Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. In the
event that the number of shares of Common Stock outstanding as determined in
accordance with Section 13(d) of the 1934 Act is different on any Conversion
Date than it was on the Closing Date, then the number of shares of Common Stock
outstanding on such Conversion Date shall govern for purposes of
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determining whether the Holder would be acquiring beneficial ownership of more
than 4.99% of the number of shares of Common Stock outstanding on such
Conversion Date.
(m) Legend. The Holder acknowledges that each certificate representing the
Debentures, and the Common Stock unless registered pursuant to the Registration
Rights Agreement, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (ii) TO THE EXTENT APPLICABLE,
RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO
THE DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
(n) Prior to conversion of all the Debentures and exercise of all the
Warrants, if at anytime the conversion of all the Debentures and exercise of all
the Warrants outstanding would result in an insufficient number of authorized
shares of Common Stock being available to cover all the conversions, then in
such event, the Company will move to call and hold a shareholder's meeting or
have shareholder action with written consent of the proper number of
shareholders within thirty (30) days of such event, or such greater period of
time if statutorily required or reasonably necessary as regards standard
brokerage house and/or SEC requirements and/or procedures, for the purpose of
authorizing additional shares of Common Stock to facilitate the conversions. In
such an event management of the Company shall recommend to all shareholders to
vote their shares in favor of increasing the authorized number of shares of
Common Stock. Management of the Company shall vote all of its shares of Common
Stock in favor of increasing the number of shares of authorized Common Stock.
Company represents and warrants that under no circumstances will it deny or
prevent Holder's right to convert the Debentures as permitted under the terms of
this Subscription Agreement or the Registration Rights Agreement. Nothing in
this Section shall limit the obligation of the Company to make the payments set
forth in Section 3.2(g). In the event the Company's shareholder's meeting does
not result in the necessary authorization, the Company shall redeem the
outstanding Debentures for an amount equal to (x) the sum of the principal of
the outstanding Debentures plus accrued interest thereon multiplied by (y) 133%.
(o) Redemption. The Company shall use its best efforts to file an amended
Registration Statement (such as a Form S-1, Form S-2, Form S-3, etc) with the
SEC covering all underlying shares within 45 calendar days of closing date. The
Company shall use its best efforts to have the Registration Statement declared
effective within 105 calendar days following the closing date. The Company must
also respond to any comments from SEC regarding the registration within 15
calendar days. In the event that the Company (a) does not have the Registration
Statement filed within 45 calendar days of Closing Date; (b) does not have the
Registration Statement declared effective within 105 calendar days following the
Closing Date or (c) does not respond to any comments from SEC regarding the
registration within 15 calendar days following receipt
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from the SEC, then in such event, in the Investor's sole and absolute discretion
pursuant to written notice sent to the Company, the Company must issue put
notices to draw down on the equity line with the proceeds being credited against
120% of the principal amount owed on the Debenture, plus accrued interest, and
such draw downs shall continue until the earlier of the date the Debenture is
redeemed in full or the date the Registration Statement is declared effective.
Section 3.3. Fractional Shares. The Company shall not issue fractional
shares of Common Stock, or scrip representing fractions of such shares, 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 the number
of shares of Common Stock required pursuant to and upon the terms set forth in
the Subscription Agreement 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 Sale. This Debenture has not been registered
under the Securities Act of 1933, as amended, (the "Act") and is being issued
under Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the
Act. This Debenture and the Common Stock issuable upon the conversion thereof
may only be 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 in
writing the obligations of the Company under this 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 written assumption.
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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 by
conversion into Common Stock within ten (10) business days of the Maturity Date,
upon redemption or otherwise, (b) the Company does not make a payment, other
than a payment of principal, for a period of five (5) business days thereafter,
(c) any of the Company's representations or warranties contained in the
Subscription Agreement or this Debenture were false when made or the Company
fails to comply with any of its other agreements in the Subscription Agreement
or 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) 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 sixty (60) calendar days, (e) the Company's Common Stock is suspended
or no longer listed on any recognized exchange including electronic
over-the-counter bulletin board for in excess of five (5) consecutive trading
days. 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 thirty (30) business days after
the receipt of such notice, unless the Company commences to cure such default
within such period, 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 remaining principal
amount of this Debenture, together with all accrued interest and any liquidated
damages, to be due and payable. Upon such declaration, the remaining principal
amount shall be due and payable immediately.
Section 6.3 Concerning Seniority. Except as disclosed in the Company's
SEC filings, no indebtedness of the Company is senior to this Debenture in right
of payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise.
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Section 6.4 Liquidation Value. The liquidation value of this Debenture
shall be equal to 125% of the outstanding balance remaining on this Debenture
plus accrued but unpaid interest and liquidated damages.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures which are identical except as to the principal amount and date of
issuance thereof. 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 them. 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 of the rights
and powers as the absolute owner hereof.
Section 7.3. 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.
Article 8. Notice.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Debenture must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
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If to the Company:
CAN-CAL Resources, Ltd.
8221 Cretan Blue Lane
Las Vegas, NV 89128
Attention: Ronald D. Sloan, President
Telephone: 702-243-1849
Facsimile: 702-243-1869
With a copy to:
The Law Office of Stephen E. Rounds
4635 East Eighteenth Avenue
Denver, Colorado USA 80220
Attention: Stephen E. Rounds, Esq.
Telephone: 303-377-6997
Facsimile: 303-377-0231
If to the Investor:
At the address listed in the Questionnaire.
With a copy to:
Joseph B. LaRocco, Esq.
49 Locust Avenue, Suite 107
New Canaan, CT 06840
Telephone: 203-966-0566
Facsimile: 203-966-0363
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
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 a 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. A "business day" shall
mean a day on which the banks in New York are not required or allowed to be
closed.
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Article 10. No Assignment
This Debenture shall not be assignable.
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 Nevada applicable to agreements that are negotiated, executed,
delivered and performed solely in the State of Nevada.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction. Any litigation arising out
of, under, or in connection with, this Debenture or any course of conduct,
course of dealing, statements (whether oral or written) or actions of the
Company or Holder shall be brought and maintained exclusively in the courts of
the State of New York. The Company hereby expressly and irrevocably submits to
the jurisdiction of the state and federal courts of the State of New York for
the purpose of any such litigation as set forth above and irrevocably agrees to
be bound by any final judgment rendered thereby in connection with such
litigation. The Company further irrevocably consents to the service of process
by registered mail, postage prepaid, or by personal service within or without
the State of New York. The Company hereby expressly and irrevocably waives, to
the fullest extent permitted by law, any objection which it may have or
hereafter may have to the laying of venue of any such litigation brought in any
such court referred to above and any claim that any such litigation has been
brought in any inconvenient forum. To the extent that the Company has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Company hereby irrevocably waives such immunity in respect of its
obligations under this Debenture.
(b) Waiver of Jury Trial. The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this Debenture, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the Company.
The Company acknowledges and agrees that it has received full and sufficient
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consideration for this provision and that this provision is a material
inducement for the Holder purchasing this Debenture.
(c) Governing Law. The terms of this Debenture shall be governed by and
construed and enforced in accordance with the laws of the State of Nevada
without regard to the conflicts of laws principles thereof.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
CAN-CAL Resources, Ltd.
By /s/ Ronald D. Sloan
----------------------------------
Name: Ronald D. Sloan
Title: President
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EXHIBIT C
NOTICE OF CONVERSION
(To be Executed by the Registered owner in order to Convert the Debentures.)
The undersigned hereby irrevocably elects, as of ______________, 200_ to
convert $__________ of Convertible Debentures into Common Stock of CAN-CAL
Resources, Ltd. (the "Company") according to the conditions set forth in the
Debenture dated June of 2002, and issued by the Company.
This conversion is being made for an immediate sale.
Date of Conversion_________________________________________________
Applicable Conversion Price________________________________________
Number of Shares Issuable upon this conversion_____________________
Name (Print) ______________________________________________________
Address____________________________________________________________
___________________________________________________________________
Phone_______________________ Fax_________________________________
By: ____________________________
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