EXHIBIT 99.1.B
CONVERTIBLE SUBORDINATED DEBENTURE
THIS DEBENTURE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY STATE SUCEUTITIES LAW, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OR UNLESS THE SAME IS REGISTERED AND QUALIFIED
IN ACCORDANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
PIZZA DONINI INC.
ONE (1) YEAR CONVERTIBLE SUBORDINATED DEBENTURE
PRINCIPAL AMOUNT: $500,000
DUE: SEPTEMBER 1, 2001
PIZZA DONINI INC. a corporation duly organized and existing under the laws of
Canada, hereinafter referred to as the Company, for value received, hereby
promises to pay to Bartholemew International Investments, (the registered Holder
hereof) the principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) on
September 1, 2001, upon presentation and surrender of this Debenture at the
office of the Company in Montreal, Quebec, (or such other office as the Company
may designate), in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts, and to pay interest thereon at such office from the date hereof at the
rate of fourteen percent (14%) payable from the date of any default by the
Company. Notwithstanding the foregoing, in the event this Debenture is converted
prior to the due date no interest shall be due.
1. CONVERSION. This Debenture shall be converted into fifteen (15%)
percent shares of Common Stock to be received in connection with the acquisition
of the majority of shares of PRS Sub VI and will be registered by the Company as
part of its next succeeding registration statement on Form SB-2 or S-1. The
issuance of shares of common stock to the Holder shall be on a fully diluted
basis and the number shall be adjusted accordingly.
Each stock certificate evidencing the Common shares of the Company
delivered pursuant to conversion, as set forth herein, shall be registered in
the name of the registered holder hereof, subject to compliance with federal and
state security laws. No fractional shares will be issued upon conversion, but an
adjustment in cash will be made.
The following legend will be placed on all stock certificates
representing Common shares of the Company issued in accordance with the terms of
this Debenture.
THE SHARES OF COMMON STOCK OF THE COMPANY EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND
QUALIFIED IN ACCORDANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
2. SUBORDINATION. The indebtedness evidenced by this Debenture is
subordinate and subject to the prior payment in full of all indebtedness of
borrowed money as may be evidenced by a note or similar instrument ("Senior
Indebtedness") of the Company, whether outstanding at the date of the Debenture
or thereafter incurred, and the holder of this Debenture, by his or her
acceptance hereof or thereof, agrees to and shall be bound by such subordination
agreement or other evidence of subordination as any holder, or prospective
holder, of Senior Indebtedness may require.
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3. DEFAULT. In case an "Event of Default" shall have occurred and be
continuing, the principal hereof may be declared, and upon such declaration
shall become due and payable, in the manner, with the effect, and subject to the
following conditions. An Event of Default shall occur if any payment is not made
within fifteen (15) business days following receipt by the Company of written
notice from the registered holder the payment of monies due hereunder has not
been made, or if the Company shall fail to provide the appropriate number of
shares of Common Stock in the event of conversion hereunder; provided, however,
that the Company must first receive notice from the registered holder hereof
that any such conversion was incorrectly dealt with, and after the Company has
been given every opportunity to correct any deficiency in its performance
regarding such conversion. Upon the occurrence of an Event of Default the holder
of this Debenture may:
(A) Declare all unpaid principal and interest owing holder to be
forthwith due and payable; and
(B) Collect interest on the principal balance owing hereunder at the
rate of fourteen percent (14%) from the date of such default, and, in addition,
if this Debenture is referred to an attorney for collection, collect a
reasonable attorney's fee not to exceed ten (10%) of the amount owing thereon as
collection costs, plus court costs, which sum shall be added to the amount due
on the Debenture, and shall be chargeable to and payable by the Company.
4. REGISTRATION RIGHTS. The Holder of this Debenture may elect to have
the shares of Common Stock into which this Debenture is convertible included in
any registration statement filed provided the Company unless any underwriter
shall determine that such inclusion will unduly impair the primary corporate
purpose of the underwriting.
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5. CORPORATE CHANGES.
(A) Stock Changes. If the Company issues additional shares of its stock
via a stock dividend, stock split, or stock subdivision of its Common Shares,
then: (1) the number of shares for which the holder of this Debenture retains
the right to purchase will be automatically adjusted to cover the proportionate
percentage to which it would be applicable without such action; and (2) the
conversion agreement stipulated in Paragraph "1" of this Debenture will be
adjusted so that the total holdings of the registered Holder hereof remain in
the same ratio to the number of shares outstanding.
(B) Corporate Reorganizations. If there is a consolidation, merger or
capital reorganization of the Company, or any sale of substantially all of the
assets, or a majority of the Common Stock, of the Company to another corporation
or entity, the Company with the result that its or its successors shares of
Common Stock are traded publicly in the U.S. securities market will notify the
registered holder hereof, and such holder shall have thirty (30) days to elect
to:
(i) Convert all, but not part, of the principal and
earned interest into Common Stock of the Company or
its successors in accordance with the terms of this
Debenture; and
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(ii) Failing any such conversion, the Company may, on the
effective date of any such action by the Company
elect to either; (a) pay the principal amount and
earned interest then outstanding as adjusted to
twelve percent (12%); or (b) retain the principal
amount as debt, with the registered holder losing all
rights to any further conversion of either principal
or interest, and pay the registered holder such
principal and interest thereon, at the times
specified in this debenture; and
(iii) In the case of the sale of a majority of Common Stock
of the Company, as set forth in paragraph 5 (B),
above, and the registered holder has elected to
convert all of the principal and earned interest into
Common Stock of the Company, or its successor as set
forth in paragraph 5 (B) (i), above, then, and in
only such an event, the registered holder shall:
a) At the request of the Company agree to sell
the same proportionate part of the aggregate
of such registered holder's Common Stock
(received hereunder) as the majority agrees
to sell for the same consideration per
Common Share and otherwise on the same terms
and conditions obtained by the majority; and
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b) Shall have the right to sell the same
proportionate part of the aggregate of such
registered holder's Common Stock (received
hereunder) as the majority agrees to sell
for the same consideration per Common Share
and otherwise on the same terms and
conditions obtained by the majority.
6. TAXES. The tax consequences associated with this Debenture are
complex and can depend upon the particular circumstances of the registered
Holder. Accordingly, the registered Holder should consult a tax advisor with
respect to the tax treatment of any monies received hereunder.
7. ASSIGNMENT. Neither this debenture, nor any of the rights of the
registered Holder hereunder, shall be assigned or assignable by the registered
Holder, except in the event of his or her disability, incapacity or death,
without the express written consent of the Company.
8. PRINCIPAL OBLIGATION. No provision of this Debenture shall alter or
impair the obligation of the Company to fulfill its obligations under this
Debenture, which are absolute and unconditional, and, except in the event of
conversion or other occurrence as set forth herein, to pay the principal and
interest on this Debenture, at the place, at the respective times, at the rate,
and in the currency herein prescribed.
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9. AUTHENTICATION. This Debenture shall not become valid or obligatory
for any purpose until signed on behalf of the Company by its President, the
corporate seal affixed hereto, and attested by the signature of the Secretary or
Assistant Secretary.
ATTEST: PIZZA DONINI INC.
By: /s/ PETER DEROS
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, Secretary Peter Deros, President
Date: September 1, 2000
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