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Exhibit 4.1
AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
SECURED 8% SERIES "B" CONVERTIBLE DEBENTURE
TOTAL ISSUED: $1,150,000
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$25,000
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THE SECURITIES SUBSCRIBED FOR BY THIS AGREEMENT AND ANY SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
THE SECURITIES SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES SUBSCRIBED FOR BY THIS
AGREEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR
HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE
SECURITIES OFFERED BY THE COMPANY. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
Number ____ of Forty-Six
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AQUA CLARA BOTTLING AND DISTRIBUTION, INC.
A Colorado Corporation
$25,000
SECURED 8% SERIES "B" CONVERTIBLE DEBENTURE
$25,000.00 Clearwater, Florida
May 30, 1999
Aqua Clara Bottling and Distribution, Inc., a Colorado corporation (the
"Company"), the principal office of which is located at 1315 Cleveland Street,
Clearwater, Florida 33755, for value received hereby promises to pay to:
(Type Name)
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(Type Address)
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(Type Fax Number),
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or its registered assigns, the sum of Twenty Five Thousand United States Dollars
(U.S. $25,000.00), or such lesser amount as shall then equal the outstanding
principal amount hereof and any unpaid accrued interest hereon, as set forth
below, shall be due and payable on the earlier to occur of (i) three hundred
sixty five days from the date of this debenture or (ii) when declared due and
payable by the Holder upon the occurrence of an Event of Default (as defined
below). Payment for all amounts due hereunder shall be made by mail to the
registered address of the Holder. This Note is issued in connection with the
transactions described in that certain Securities Purchase Agreement, between
the Company and the Holder, dated as of May 25, 1999 (the "Purchase Agreement")
of which all terms and conditions of said Purchase Agreement are incorporated as
if fully set forth herein. As security for the payment of this Debenture, the
Company has executed on this date a Trust Deed, Mortgage and Security Agreement,
and the Company has agreed to be bound by its terms and conditions, in addition
to the terms and conditions of this Debenture. This Debenture is one of the
Debentures referred to in the Purchase Agreement.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Debenture, agrees:
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1. DEFINITIONS. As used in this Debenture, the following terms,
unless the context otherwise requires, have the following meanings:
(a) "Company" includes any corporation that shall succeed to
or assume the obligations of the Company under this Debenture.
(b) "Holder," when the context refers to a holder of this
Debenture, shall mean any person who shall at the time be the
registered holder of this Debenture.
2. INTEREST. Commencing August 1, 1999, and on each November 1,
February 1 and May 1 thereafter until all outstanding principal and interest on
this Debenture shall have been paid in full, the Company shall pay interest at
the rate (the "Initial Interest Rate") equal to eight percent (8%) per annum on
the principal of this Debenture outstanding during the period beginning on the
date of issuance of this Debenture and ending on the date that the principal
amount of this Debenture becomes due and payable. If the principal amount of
this Debenture is not paid in full when such amount becomes due and payable,
interest at the same rate as the Initial Interest Rate plus ten (10%) shall
continue to accrue on the balance of any unpaid principal until such balance is
paid.
3. EVENTS OF DEFAULT. If any of the events specified in this
Section 3 shall occur (herein individually referred to as an "Event of
Default"), the Holder of the Debenture may, so long as such condition exists,
declare the entire principal and unpaid accrued interest hereon immediately due
and payable, by notice in writing to the Company:
(a) Default in the payment of the principal and unpaid accrued
interest of this Debenture when due and payable if such default is not
cured by the Company within fifteen (15) days after the Holder has
given the Company written notice of such default;
(b) The occurrence of an Event of Default any terms and
conditions of the Purchase Agreement, if such default is not cured by
the Company within fifteen (15) days after the Holder has given the
Company written notice of such default;
(c) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking reorganization
or release under the United States Bankruptcy Code, or any other
applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator,
assignee, trustee or other similar official of the Company, or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the taking of corporate action by the
Company in furtherance of any such action;
(d) If, within sixty (60) days after the commencement of an
action against
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the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, such action shall not have been resolved in
favor of the Company or all orders or proceedings thereunder affecting
the operations of the business of the Company stayed, or if the stay of
any such order or proceeding shall thereafter be set aside, or if,
within sixty (60) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidation of
the Company or all or any substantial part of the properties of the
Company, such appointment shall not have been vacated; or
(e) Any declared default of the Company under any Senior
Indebtedness (as defined below) that gives the holder thereof the right
to accelerate such Senior Indebtedness, and such Senior Indebtedness is
in fact accelerated by the holder.
(f) The Company shall fail to issue the common stock pursuant
to the conversion rights as provided for in Section 7, herein, within
five (5) business days.
4. SURVIVAL OF DEBT. The Company, for itself, its successors and
assigns, covenants and agrees, that the Company, upon an effective registration
of the securities available to a Holder upon conversion, will provide the holder
of the converted securities with the proper documentation, including but not
limited to opinions of counsel, that the shares registered are available for
resale, without restrictive legends. Therefore, in the event the Holder has
converted this debenture into common shares, and a registration is or has become
effective as to those shares, and the Company fails to provide documentation
that the shares may have any restrictive legends removed therefrom and the
actual legend is not removed, the obligation of this Debenture shall be revived,
and the Holder shall be able to pursue any remedy available consistent with the
terms of this Agreement, or any other agreement entered into in conjunction with
this transaction. In order to provide for the election of this remedy, upon the
Holder's election to convert this Debenture, the actual debenture will remain
with the Escrow Agent, and not be delivered to the Company, until such time as
the shares converted hereunder have been delivered or redelivered to the Holder
without restrictive legends. Upon the shares being delivered without restrictive
legends, the Escrow Agent shall then be authorized to mark the Debenture
"CANCELLED" and deliver same to the Company if, after a registration of the
converted shares becomes effective, and the legend(s) are not removed, the
Holder may notify the Escrow Agent, demand redelivery of this Debenture, and
pursue any remedies available under this Debenture, the Registration Agreement
or any other document entered into as part of this transaction providing for
remedies for any default.
5. UNDERTAKING. By its acceptance of this Note, the Holder agrees
to execute and deliver such documents as may be reasonably requested from time
to time by the Company or the lender of any Senior Indebtedness in order to
implement the subordination and subrogation provisions of this Debenture.
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6. PREPAYMENT. The Company shall not have the right to prepay
the obligation evidenced by this Agreement, unless written permission is
received from the Holder, hereof.
7. CONVERSION.
(a) Any Holder of this Debenture has the right, at the
Holder's option, at any time prior to payment in full of the principal
balance of this Debenture, to convert this Debenture, in accordance
with the provisions of Section 7(c) hereof, in whole only, into fully
paid and nonassessable shares of Common Stock, no par value, of the
Company (the "Common Stock") at a conversion Price equal to 65% of the
three day average closing bid price prior to the date of conversion as
provided for in the Security Purchase Agreement (the "Conversion
Price"). At the Corporations option, the amount of accrued and unpaid
interest due as of the Conversion Date shall not be subject to
conversion but instead may be paid in cash as of the Conversion Date.
If the Corporation elects to convert the amount of accrued and unpaid
interest at the Conversion Date into Common Stock, the Common Stock
issued to the Holder shall be valued at the Conversion Price. The
number of shares of Common Stock due upon conversion shall be (i) the
face amount of this Debenture divided by (ii) the applicable Conversion
Price.
(b) The entire principal amount of this Debenture shall be
automatically converted into shares of Common Stock at the Conversion
Price at the time in effect immediately prior to any consolidation or
merger of the Company with or into any other corporation or other
entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization or any transaction or series of
related transactions by the Company in which in excess of 50% of the
Company's voting power is transferred, or a sale of all or
substantially all of the assets of the Company.
(c) Before the Holder shall be entitled to convert this
Debenture into shares of Common Stock pursuant to Section 7(a) of this
Debenture, it shall surrender this Debenture at the office of the
Escrow Company and shall give written notice by mail, postage prepaid,
to the Company at its principal corporate office, of the election to
convert the same pursuant to Section 7(a), and shall state therein the
name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Escrow Agent shall, as soon as
practicable thereafter, deliver at such office to the Holder of this
Debenture a certificate or certificates for the number of shares of
Common Stock to which the Holder of this Debenture shall be entitled as
aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of this Debenture, and the person or persons entitled to
receive the shares of Common
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Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of
such date.
(d) The Company, upon execution of this document, and as a
condition precedent to the release of any funds from the sale of this
security, which terms shall be specifically included in instructions to
the Escrow Agent, shall instruct the Company's transfer agent to issue
a share certificate for Five Million (5,000,000) shares of fully paid
and nonassable common shares of the Company's securities to The
Delaware Escrow Company (EIN # 51-0382821), and deliver same to the
Delaware Escrow Company, by overnight courier to: The Delaware Escrow
Company, 301 Yamato Road, Suite 1200, Boca Raton, Florida 33431. The
above described shares are being issued in advance of any conversion of
this Debenture into the common shares of the Company in order to have
shares available in the event the Holder of this debenture, or any
other debenture of this series elects to exercise the right to convert
as provided for herein. The terms of the Escrow Agreement are set forth
in the "Share Deposit Escrow Agreement" dated March 19, 1999 between
the Company and the Delaware Escrow Company, which terms and conditions
are made a part hereof. In the event the total amount of shares due
converting note holders exceed Five Million (5,000,000), the Escrow
Agent is authorized to request from the Transfer Agent the issuance of
additional shares. The number of additional shares to be issued shall
be communicated to the Transfer Agent from the Escrow Agent by
delivering a written request. The request shall specify the balance of
the shares remaining in the Escrow Account, the total amount due on the
note(s) being converted, the "conversion price" and the number of
additional shares needed to satisfy the Company's obligation. Upon
receipt, the Transfer Agent shall deliver said shares, via overnight
courier, to the Escrow Agent. The Company irrevocably directs the
Transfer Agent to deliver said shares, without further inquiry. Shares
not delivered pursuant to a conversion shall be redelivered to the
Company upon the receipt of all Convertible Debentures of this series
by the Company, marked cancelled. A copy of the cancelled debenture(s)
shall be delivered to the Escrow Agent, who shall then cause the
remaining shares to be redelivered to the Company as provided herein.
In the event, for any reason, and regardless of fault, the holder of
this debenture fails to receive the shares of the Company's common
securities, after the proper Notice of Conversion has been delivered,
pursuant to this Agreement, said Holder shall, as prescribed for in
Section V (C) of the Securities Purchase Agreement, be entitled to all
remedies and penalties provided for therein.
(e) No fractional shares of Common Stock shall be issued upon
conversion of this Debenture. In lieu of the Company issuing any
fractional shares to the Holder upon the conversion of this Debenture,
the Company shall pay to the Holder cash in lieu of fractional shares
in the amount of outstanding principal that is not so converted. Upon
conversion of this Debenture, the Company shall be forever released
from all its obligations and liabilities under this Debenture, except
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that the Company shall be obligated to pay the Holder, within thirty
(30) days after the date of such conversion, any interest accrued and
unpaid on the converted amount of this Debenture (excluding any
interest that has itself been converted to Common Stock) to and
including the date of such conversion, and no more.
8. CONVERSION PRICE ADJUSTMENTS.
(a) In the event the Company should at any time or from time
to time after the date of issuance hereof fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common
Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), the Conversion Price of this Debenture shall be
appropriately decreased so that the number of shares of Common Stock
issuable upon conversion of this Debenture shall be increased in
proportion to such increase of outstanding shares.
(b) The Company warrants, that for so long as this
Debenture(s) shall remain outstanding, it shall not cause the shares of
the Company to be combined, without the specific written consent of
those Holders of not less than fifty one (51%) percent of the total
value of the then remaining outstanding principal balance due for the
series of debentures, herein. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, after consent by
the holders, as set forth herein, then, following the record date of
such combination, the Conversion Price for this Debenture shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion hereof shall be decreased in proportion to such
decrease in outstanding shares.
(c) In the event of:
(1) Any taking by the Company of a record of the
holders of any class of securities of the Company for the
purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend payable out
of earned surplus at the same rate as that of the last such
cash dividend theretofore paid) or other distribution, or any
right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or
property, or to receive any other right; or
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(2) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all of the
assets of the Company to any other person or any consolidation
or merger involving the Company; or
(3) Any voluntary or involuntary dissolution,
liquidation of winding up of the Company, then the Company
will mail to the holder of this Debenture at least ten (10)
days prior to the earliest date specified therein, a notice
specifying:
(A) The date on which any such record is to
be taken for the purpose of such dividend,
distribution or right, and the amount and character
of such dividend, distribution or right; and
(B) The date on which any such
reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or
winding up is expected to become effective and the
record date for determining stockholders entitled to
vote thereon.
(d) If at any time the number of authorized but unissued
shares of Common Stock (and shares of its Common Stock for issuance on
conversion of such Common Stock) shall not be sufficient to effect the
conversion of the entire outstanding principal amount of this
Debenture, in addition to such other remedies as shall be available to
the holder of this Debenture, the Company will use its best efforts to
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common
Stock (and shares of its Common Stock for issuance on conversion of
such Common Stock) to such number of shares as shall be sufficient for
such purposes.
9. REGISTRATION RIGHTS. Subject to all of the terms and
conditions herein, the Company and the Holder have entered into a "Registration
Rights Agreement" which terms and conditions shall be made a part of this
Agreement, as if they were fully set forth herein.
10. REDEMPTION RIGHTS. The Debenture(s) are redeemable, at the
option of the Company, from time to time, in whole or in part, at a redemption
price of 150% of the principal amount, plus accrued interest and unpaid on the
date of redemption. Notice of redemption shall be provided by the Corporation to
the Holder in writing (by registered mail or overnight courier at the Holder's
last address appearing in the Corporation's security registry) not less than ten
(10) nor more than fifteen (15) days prior to the Redemption Date, which notice
shall specify the Redemption Date. Notwithstanding the Company's Notice of
Redemption stated in paragraph 13, the Holder shall retain its rights to convert
into Common Stock under the terms and conditions of the conversion right
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stated in paragraph 7. Should the Holder fail to convert during the 5 business
day conversion period, the Company shall immediately wire the funds to the
Holder's bank account within 3 business days thereafter. The Holder shall notice
the Company concerning specific wiring instructions where the redemption process
shall be paid. If the Company does not have a sufficient number of Common Shares
to effect conversion, the Holder shall have the right to demand redemption on
the terms contained in this paragraph. If the Company elects such redemption the
Holder shall have the same conversion rights as described herein.
11. ASSIGNMENT. Subject to the restrictions on transfer described
in Section 13 below, the rights and obligations of the Company and the Holder of
this Debenture shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
12. WAIVER AND AMENDMENT. Any provision of this Debenture may be
amended, waived or modified upon the written consent of the Company and holders
of at not less than seventy-five (75) percent of the face amount of all then
outstanding Debentures.
13. TRANSFER OF THIS DEBENTURE OR SECURITIES ISSUABLE ON
CONVERSION HEREOF. With respect to any offer, sale or other disposition of this
Debenture or securities into which such Debenture may be converted, the Holder
will give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of such Holder's counsel, to the
effect that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect).
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall notify such
Holder that such Holder may sell or otherwise dispose of this Debenture or such
securities, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this Section 16 that the
opinion of counsel for the Holder is not reasonably satisfactory to the Company,
the Company shall so notify the Holder promptly after such determination has
been made. Each Debenture thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
14. TREATMENT OF DEBENTURE. To the extent permitted by generally
accepted accounting principles, the Company will treat, account and report the
Debenture as debt and not equity for accounting purposes and with respect to any
returns filed with federal, state or local tax authorities.
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15. NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when personally delivered or when deposited in the mail or telegraphed in the
manner set forth above and shall be deemed to have been received when delivered.
16. STOCKHOLDER RIGHTS. As an inducement for the debenture holder
to purchase this debenture, the Holder hereof shall be granted special voting
rights, consistent with the holders of common shares or preferred shares of the
Company, equal to the number of shares that would be issued pursuant to a
conversion on the date of any vote of the shareholders, as required by the laws
of the State of Colorado or the By-Laws of the Company. In addition, the Holder
of this debenture shall be entitled to receive notice of any proposed actions,
as a shareholder would, according to this paragraph, including the election of
directors, any change in capitalization, number of authorized shares, issuance
of special shares, changes or additions in voting rights, or any other action of
the Corporation which would result in a change in the corporate or financial
structure of the Company as of the date of this Debenture.
17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, excluding that
body of law relating to conflict of laws.
18. HEADING; REFERENCES. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be issued this ____ day of ______, 1999.
Aqua Clara Bottling and Distribution, Inc.
By:
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Name: John C. Plunkett
Title: Chairman and CEO
Name of Holder:
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Address:
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[FORM OF CONVERSION NOTICE]
TO:
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The undersigned owner of this 8% Series B 8% Convertible Convertible
Debenture (the "Secured 8% Series "B" Convertible Debenture") issued by Aqua
Clara Bottling and Distribution, Inc. (the "Corporation") hereby irrevocably
exercises its option to convert _________ units of the Secured 8% Series "B"
Convertible Debenture into shares of the common stock, $.00l par value, of the
Corporation ("Common Stock"), in accordance with the terms of the Certificate of
Designations. The undersigned hereby instructs the Corporation to convert the
number of shares of the Secured 8% Series "B" Convertible Debenture specified
above into Shares of Common Stock Issued at Conversion in accordance with the
provisions of Article 6 of the Certificate of Designations. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion, the Secured 8% Series "B" Convertible Debenture recertificated,
if any, not being surrendered for conversion hereby, together with any check in
payment for fractional Common Stock, be issued in the name of and delivered to
the undersigned unless a different name has been indicated below. All
capitalized terms used and not defined herein have the respective meanings
assigned to them in the Certificate of Designations.
Amount of Debenture Converted $25,000.00 x ___ (number of Units) = $___________
Conversion Price: _________
Total amount $_______________ divided by Conversion Price = ___________ (shares)
Dated:
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Signature
Fill in for registration of Secured 8% Series "B" Convertible Debenture:
Please print name and address
(Including zip code):
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