Exhibit 10.0
Form of Secured Debenture
SECURED DEBENTURE
Principal Amount: $150,000 Dated: [________ ___, 2006]
FOR VALUE RECEIVED, ECOLOCLEAN INDUSTRIES, INC., a Nevada corporation
(the "Borrower"), promises to pay to the order of CROWN NORTHERN WAY CAPITAL,
LLC, a Missouri limited liability company ("Crown"), at 540 Maryville Centre,
Suite 120, St. Louis, Missouri 63141, or at such other place as Crown may from
time to time designate to Borrower in writing, the principal sum of One Hundred
Fifty Thousand Dollars ($150,000), or such lesser amount as Crown shall have
advanced to the Borrower, in lawful money of the United States, together with
interest, subject to the terms and condition set forth in this Secured Debenture
(the "Debenture"), and any and all duly executed modifications, alterations or
amendments hereto. Capitalized terms are defined in Paragraph 20 of this
Debenture, unless otherwise defined in this Debenture.
1. INTEREST. Subject to Paragraph 7 below, interest shall accrue on the unpaid
balance due under this Debenture from and after the date hereof at the rate of
ten percent (10%) per annum (the "Interest Rate"). The Interest Rate shall be
computed on the basis of a 360-day year and the number of calendar days elapsed
during each year.
2. MONTHLY INSTALLMENT PAYMENTS. Borrower shall make monthly payments of
principal in the amount of Twenty Five Thousand Dollars ($25,000) on each of the
four (4) and five (5) month anniversaries of the date of this Debenture (i.e. on
[__________ __, 2006, and __________ __, 2006)], together with all accrued but
unpaid interest due and owing under this Debenture on each such monthly payment
date.
3. TERM; FINAL PAYMENT. Notwithstanding anything herein to the contrary, and
subject to acceleration given an Event of Default (as defined below), the term
of this Debenture (the "Term") shall be six (6) months from the date of this
Debenture. The outstanding principal amount of this Debenture, together with all
accrued but unpaid interest then due and owing hereunder, shall be due and
payable at the expiration of the Term (i.e. ___________ ___, 2006) [insert 6
month anniversary date of issuance of this Debenture] or at such earlier time as
this Debenture is accelerated in accordance with Paragraph 7 below.
4. METHOD OF PAYMENT. Borrower shall make each payment under this Debenture,
whether pursuant to Paragraphs 2, 3 or 12 hereof, at Crown's option, either by
good check, subject to collection, or wire transfer of immediately available
funds to an account designated in writing by Crown. All payments under this
Debenture shall be applied when received by Crown, first in reduction of accrued
but unpaid interest, then to any late or other charge(s), and any balance in
reduction of principal. If the date any payment is due is not a Business Day,
such payment shall be due on the next Business Day.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants
to Crown as follows:
(a) The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada and has all requisite
corporate power and authority to carry on its business as now conducted and to
own its properties.
(b) The Borrower has full power and authority and has taken all
requisite action on the part of the Borrower, its officers, directors and
stockholders necessary for (i) the authorization, execution and delivery of the
Agreements, and (ii) authorization of the performance of all of the Borrower's
obligations under the Agreements. The Agreements constitute legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors' rights generally.
(c) This Debenture and the Warrants have been duly and validly
authorized. Upon the due exercise of the Warrants, the shares of Borrower Common
Stock issuable upon exercise thereof will be validly issued, fully paid and
non-assessable, free and clear of all encumbrances and restrictions, except for
restrictions on transfer imposed by applicable securities laws. The Borrower has
reserved a sufficient number of shares of Borrower Common Stock for issuance
upon exercise of the Warrants.
(d) The execution, delivery and performance by the Borrower of the
Agreements and the offer, issuance and sale of the Warrants require no consent
of, action by or in respect of, or filing with, any Person, governmental body,
agency, or official other than those consents that have been obtained and
post-sale filings pursuant to applicable state and federal securities laws which
the Borrower undertakes to file within the applicable time periods.
(e) The execution, delivery and performance of the Agreements by the
Borrower and the issuance and sale of this Debenture and the Warrants will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under (i) the Borrower's Articles of
Incorporation or Bylaws, both as in effect on the date of this Debenture, or
(ii)(a) any statute, rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the Borrower or
any of its properties, or (b) any agreement or instrument to which the Borrower
is a party or by which the Borrower is bound or to which any of the properties
of the Borrower is subject.
(f) The Borrower has made available to Crown through the EDGAR system
true and complete copies of the Borrower's most recent Annual Report on Form
10-KSB for the fiscal year ended December 31, 2004 (the "10-K"), and all other
reports filed by the Borrower pursuant to the Securities Exchange Act of 1934,
as amended (the "1934 Act"), since the filing of the 10-K and prior to the date
of this Debenture (collectively, the "SEC Filings"). The SEC Filings are the
only filings required of the Borrower pursuant to the 1934 Act for such period.
The Borrower and its subsidiaries, if any, are engaged in all material respects
only in the businesses described in the SEC Filings and the SEC Filings contain
a complete and accurate description in all material respects of the businesses
of the Borrower and its subsidiaries, if any.
(g) At the time of filing thereof, the SEC Filings complied as to form
in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(h) Except as disclosed in the SEC Filings, there are no pending
actions, suits or proceedings against or affecting the Borrower, its
subsidiaries, if any, or any of their respective properties; and to the
Borrower's knowledge, no such actions, suits or proceedings are threatened or
contemplated.
(i) The financial statements included in each SEC Filing fairly present
the financial position of the Borrower and its subsidiaries, if any, as of the
dates shown and their results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis. Except as set forth in the financial statements of the Borrower included
in the SEC Filings filed prior to the date of this Debenture, the Borrower has
no liabilities, contingent or otherwise, except those which individually or in
the aggregate would not have a material adverse effect on the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Borrower and its subsidiaries taken as a whole.
(j) The Borrower has no liability or responsibility for the payment of
any commission or finder's fee to any third party in connection with or
resulting from the Agreements or the transactions contemplated thereby by reason
of any agreement of or action taken by the Borrower.
(k) The net proceeds received by the Borrower pursuant to the Loan
Letter Agreement shall be used for working capital purposes, including the
acquisition of certain patent rights.
6. EVENTS OF DEFAULT. The occurrence of any one or more of the following events
shall constitute an event of default (hereinafter "Event of Default") under this
Debenture:
A. The failure of the Borrower to make any payment due and payable under
this Debenture, when the same is due and payable;
B. The failure of the Borrower to perform or observe, in a prompt and
timely manner, any term, provision, covenant or agreement (including
without limitation the failure to make any payment when due) in this
Debenture or the other Agreements;
C. Any representation or warranty made by the Borrower in this Debenture
or in any of the other Agreements shall have been untrue or misleading
in any material respect;
D. If the Borrower or any of its subsidiaries files a petition in
bankruptcy or for reorganization under any of the provisions of title
11, U.S. Code or any similar federal or state law for the relief of
debtors, or if any such petition shall be filed against the Borrower or
any of its subsidiaries and such petition is not dismissed within
forth-five (45) days, or if the Borrower or any subsidiary of the
Borrower makes an assignment for the benefit or creditors or otherwise
becomes insolvent, or if a trustee, receiver, custodian or other
fiduciary is appointed with respect to the business or assets of the
Borrower or any subsidiary of the Borrower;
E. If the Borrower or any subsidiary of the Borrower discontinues
operation for any reason whatsoever;
F. If the Borrower or any subsidiary of the Borrower sells substantially
all of its assets to, merges or consolidates with or into, or
participates in any joint venture or other business combination with,
any entity;
G. If the Person(s) who, on the date of this Debenture, own fifty percent
(50%) or more of the capital stock of the Borrower, at any time (i)
collectively cease to be the legal and beneficial owners of at least,
or (ii) sell, transfer or dispose of any of its stock in the Borrower
to any third party resulting in such Person(s) collectively owning less
than, or (iii) individually or together participate in any stock
transaction with any third party resulting in such Person collectively
owning less than, fifty percent (50%) of the voting stock of the
Borrower;
H. If the Borrower Common Stock ceases to be quoted on the National
Association of Securities Dealers, Inc. OTC Bulletin Board; or
I. If, for any or no reason, the security interests granted to Crown in
the Pledge and Security Agreement or the Mortgage shall be determined
to be void, voidable, invalid or unperfected or are ineffective to
provide Crown with a perfected, security interest in the collateral
covered by the Pledge and Security Agreement or the Mortgage senior to
all other security interests in such collateral.
7. REMEDIES; ACCELERATION. If an Event of Default under Paragraph 6(D) shall
occur, then this Debenture shall immediately become due and payable, without
notice. Upon the occurrence of any other Event of Default, and notwithstanding
anything to the contrary in this Debenture or in any of the other Agreements,
and in addition to any rights or remedies available to Crown at law or in
equity, Crown, in its sole and absolute discretion, may declare the whole
principal sum with accrued interest (and all other amounts payable under this
Debenture and all of the other Agreements) to be immediately due and payable. In
addition, upon the occurrence of an Event of Default, the interest rate payable
on the indebtedness evidenced by this Debenture shall automatically be increased
to the lesser of twenty percent (20%) or the maximum rate permitted by
applicable law (the "Default Rate"). Exercise of any rights by Crown under this
Paragraph 7 shall not be deemed an election of remedies, precluding the further
exercise of any rights or remedies in response to or in connection with the
events giving rise to such exercise.
8. LATE CHARGE. In the event that the Borrower fails to make any payment as and
when required under this Debenture, such late payment, automatically and without
notice, shall be subject to, and the Borrower agrees to pay, a "late charge",
equal to FIVE PERCENT (5%) of the overdue payment. Acceptance by Crown of
payment of a late charge shall in no way be considered an election of remedies
or waiver by Crown of its rights at law or under this Debenture, precluding the
further exercise of any rights or remedies in response to or in connection with
such late payment.
9. COSTS OF COLLECTION. All expenses incurred by Crown or any of its affiliates,
including its agents (including, but not limited to, attorneys' fees) in
enforcing this Debenture or in protecting, enforcing or foreclosing any lien,
charge or other security interest granted to Crown (or its designee) to secure
payment of this Debenture, whether through judicial proceedings or otherwise, or
in defending or prosecuting any actions or proceedings arising out of or related
to Crown's transactions with the Borrower, shall be paid for by the Borrower,
and shall be added to the amount of this Debenture, with interest to accrue on
such amounts at the Default Rate set forth herein, if not paid on demand.
10. SECURED OBLIGATION. This Debenture is secured by the collateral described in
the Mortgage and the Pledge and Security Agreement which grants Crown certain
rights with respect to such collateral upon an Event of Default.
11. WAIVER OF PRESENTMENT, DEMAND FOR PAYMENT, ETC. The Borrower waives
presentment, demand for payment, protest and notice of protest and notice of
dishonor of this Debenture.
12. PREPAYMENT. The Borrower may, in its sole discretion, prepay this Debenture,
in full or in part, at any time upon three (3) days' advance written notice to
Crown.
13. AMENDMENT; WAIVER. The terms and conditions of this Debenture shall not be
amended, changed, terminated or waived except by a writing, duly executed by
Crown and the Borrower.
14. GOVERNING LAW. This Debenture has been delivered in the State of New York
and is to be construed and enforced according to, and governed by, the laws of
the State of New York without respect to otherwise applicable rules or
principles of conflict of laws.
15. BINDING EFFECT, AUTHORITY. This Debenture shall be binding upon the
Borrower, its successors and assigns, and shall inure to the benefit of Crown,
and its designees, successors and assigns.
16. CONSTRUCTION. Whenever possible, each provision of this Debenture shall be
interpreted independent of each other provision hereof, and in such manner as to
be effective and valid under applicable law. If any provision hereof shall be
prohibited by or shall be invalid under any law, such provision shall be
effective to the extent permitted by such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Debenture. Since the enforcement of this Debenture after an Event of Default
will require the attention of Crown's senior management and consequently
distract senior management from running its business, the harm occasioned by an
Event of Default will be both impractical and impossible to measure or forecast
given the distraction and lost opportunities suffered as a result of such Event
of Default, and therefore, the parties hereto specifically agree that the
increase in the Interest Rate and the charges specified in Paragraphs 7 through
9 above are not penalties, but freely negotiated and bargained for damages
agreed to in good faith by the parties hereto. The Borrower, for itself, its
successors and assigns, hereby knowingly, voluntarily and intentionally waives
any claim that, and any right to assert any claim that, the aforesaid charges
and interest are unenforceable as penalties or otherwise.
17. CONSENT TO JURISDICTION. The Borrower hereby irrevocably submits to the
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York for
the purposes of any suit, action or other proceeding brought by Crown arising
out of or based upon this Debenture, and agrees that any such suit, action of
other proceeding shall only be brought in such courts. THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES AND AGREES NOT TO ASSERT, BY WAY
OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING,
ANY CLAIM THAT BORROWER IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAMED COURTS, THAT BORROWER'S PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT
OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
DEBENTURE MAY NOT BE ENFORCED IN OR BY SUCH COURT.
18. RIGHTS, CUMULATIVE; FORBEARANCE. The rights, powers and remedies given to
Crown under this Debenture shall be in addition to and not in lieu of all
rights, powers and remedies given to it by virtue of any of the other
Agreements, or otherwise available to Crown under the law or in equity. Any
forbearance, failure or delay by Crown in exercising any right, power or remedy
under this Debenture or in any of the other Agreements, or otherwise available
to Crown shall not be deemed to be a waiver of such right, power or remedy, nor
shall any single or partial exercise of any right, power or remedy preclude the
further exercise thereof.
19. WAIVER OF JURY TRIAL. THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO REQUEST OR TO HAVE A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS DEBENTURE AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER. By accepting this Note, Crown also
waives its right to request a trial by jury.
20. DEFINED TERMS. For purposes of this Debenture, the following terms shall
have the meanings set forth below:
(a) "Agreements" means this Debenture, the Loan Letter Agreement, the
Mortgage and the Warrants.
(b) "Borrower Common Stock" means the common stock, par value $0.001
per share, of the Borrower.
(c) "Business Day" means any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
(d) "Loan Letter Agreement" means that certain letter agreement, dated
as of the date hereof, between Crown and Borrower relating to, among other
things, the loan from Crown to Borrower in the aggregate amount of up to One
Hundred Fifty Thousand Dollars ($150,000).
(e) "Mortgage" means that certain first mortgage in favor of Crown on
the Borrower's Lafayette, Louisiana offices.
(f) "Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
(g) "Pledge and Security Agreement" means that certain Pledge and
Security Agreement, dated as of the date hereof, between Crown and [_________],
as pledgor, pursuant to which the pledgor is pledging certain shares of Borrower
Common Stock owned by him to secure the obligations of the Borrower under this
Debenture. "
IN WITNESS WHEREOF, the Borrower has caused this Debenture to be duly
executed and delivered as of the day and year first above written.
BORROWER:
ECOLOCLEAN INDUSTRIES, INC.
By:________________________
Name:______________________
Title:_____________________