$1,000,000 Issued January 8, 2000
DEBENTURE AGREEMENT
EUROGAS, INC.
CONVERTIBLE DEBENTURE
(Due January 31, 2002)
THE SECURITIES ISSUED PURSUANT THERETO HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"); OR UNDER THE SECURITIES LAWS OF ANY STATE: THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD
IN THE UNITED STATES IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR
OTHER COMPLIANCE UNDER ACT OR THE LAWS OF THE APPLICABLE STATE OR A
"NO ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL REASONABLY [sic] SATISFACTORY
TO THE ISSUER, AND ITS COUNSEL; TO THE EFFECT THAT THE SALE OR
TRANSFER IS EXEMPT FOR REGISTRATION UNDER THE ACT AND SUCH STATE
STATUTES [sic].
This original Debenture Agreement represents your right to
payment, and it is important that you retain it in a safe place.
This original Debenture Agreement must be delivered to
the Company on payment or conversion.
EuroGas, Inc. (the "Company"), hereby promises to pay to the
holder of this debenture, Wolfgang Rauball, or its assigns (the
"Holder"), the principal sum of $1,000,000.00 on or before January
31, 2002, and interest as provided herein, subject to the terms and
conditions set forth below.
1. Payment of Principal and Interest. The Company shall pay to
the Holder of this Debenture the principal sum stated hereon, on
February 10, 2001, at the offices of the Company at 942 East 7145
South Suite A-101, Midvale, Utah, in such lawful money of the United
States of America as at the time of payment shall be legal tender
for the payment of public and private debt, and shall pay annually
in lawful tender interest thereon commencing January 8, 2001 at a
rate of prime plus 2% per annum.
2. Conversion by Holder. The Holder of this Debenture is
entitled at any time prior to maturity, or in case this Debenture or
some portion hereof shall have been called for prepayment prior to
maturity, then until 30 days after the date of the notice of
prepayment, to convert the Debenture (or any portion of the
principal amount and interest hereof at the rate of $.35 per share,
into an aggregate of 285,714,428 [sic] fully paid and nonassessable
shares of common stock, of the Company (the "Shares") and
285,714,428 [sic] warrants. Each warrant shall be convertible into
two shares for each share converted under the debenture. The
warrants shall be exercisable at $.35. The conversion right shall be
exercised by proper surrender of the original of the Debenture to
the Company, accompanied by written notice that the Holder hereof
elects to convert the Debenture.
3. Conversion of Company. Any time after March 1, 2001 the
Company may require the conversion of this Debenture on the terms
set forth in paragraph 2 if the Company's common stock trades on
NASDAQ (either national market, small cap or bulletin board) or a
national exchange at a bid price equal to or in excess $40.00 per
share for a period of twenty-one (21) days.
4. Adjustment of Conversion Rate and Price. The conversion
price, number of Shares issuable upon conversion of the Debenture,
and the trading price for conversion set forth in paragraph 3, shall
be appropriately adjust4ed if the Company declares a stock dividend,
split, reclassification, distribution, or similar event.
5. Prepayment. After July 1, 2001, this Debenture is
subject to prepayment, in whole or in part, at the election of the
Company at any time, on not less than 30 days notice. During the 30
days following the date of any notice of prepayment, the Holder will
have the right to convert the Debenture into shares of Common Stock
on the terms and conditions provided in paragraph 2. On the date
fixed for prepayment, the Debenture shall cease to bear interest
with respect to the amount of principal actually paid. Upon the
surrender of the original of this debenture to the Company for
prepayment, the amount of principal and interest then due shall be
paid. Any Debenture which is prepaid only in part shall be present
to the Company for notation thereon of such partial prepayment.
6. Acceleration of Maturity. In the event of default
on the payment of the Debenture, the holder hereof shall have the
right to accelerate the maturity date of the Debenture and pursue
all of the holder's rights and remedies under the law.
7. Events of Default. "Event of Default," when used
herein, means any one of the following events:
(a) Default in the payment of any interest on any
Debenture when it becomes due and payable, and continuance of such
default of payment for a period of 30 days; or
(b) Default in the payment of principal of any
Debenture in this series when due, whether at maturity, upon
prepayment, or otherwise; or
(c) Default in the performance or breach of any
covenant or warranty of the Company in any Debenture (other than a
convent [sic] or warranty, the breach or default in performance of
which is elsewhere in this section specifically dealt with), and
continuation of such default or breach for a period of 60 days after
there has been given to the Company by registered or certified mail
by the Holder; or
(d) The entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company as bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment, or composition of or in
respect of the Company under Federal Bankruptcy Act or any other
applicable federal or state law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(e) The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or solvency proceedings against it, or a
filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Act, or any
other applicable federal or state law of similar tenor, or
appointing a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any substantial
part of its property, or the making by the Company of an assignment
for benefit creditors [sic], or the admission by it in writing of
its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of any such
action.
8. Notices to Holder, Waiver. Where the Debenture
provide [sic] for notice to Holder of any event, such notice shall
be sufficiently given if in writing and sent by courier providing
for delivery within 72 hours or mailed, return receipt requested and
postage prepaid, to each Holder affected by such event, at his
address as it appears in the Debenture register maintained by the
Company, no later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. Such notice
shall be deemed given as of the date delivered to the courier or
deposited in the mail. Neither the failure to deliver or mail such
notice, nor any defect in any notice so delivered or mailed to any
particular Holder shall affect the sufficiency of such notice with
respect to the Holder of other Debentures issued in this series.
Where the Debenture provides for notice to the Company, such notice
shall be sufficiently given if in writing and mailed, return receipt
requested and postage prepaid, to the Company at its address set
forth above, not later than the latest date, and not earlier than
the earliest date prescribed for the giving of such notice. Where
the Debenture provides for notice in any matter, such notice may be
waived in writing by the person entitled to receive such notice,
whether before or after the event, and any such waiver shall be
equivalent to such notice.
9. Withholding. The Company shall be entitled to
withhold from all payment of principal and inters [sic] on the
Debenture any amounts required to be withheld under the applicable
provisions of the Untied States Internal Revenue Code of 1986, as
amended, applicable state tax laws, or any other applicable law at
the time of such payments.
10. Governing Law. The Debenture shall be governed by
and construed and interpreted in accordance with the laws of the
state of Utah.
11. Miscellaneous. This Debenture is subject to the
following additional terms and conditions:
(a) If this Debenture is placed with an attorney for
collection, or if suit is instituted for collection, or if any other
remedy provided by law is pursued by the registered Holder hereof,
because of any Event of Default, the undersigned agrees to pay
reasonable attorney's fees, costs, and other expenses incurred by
the registered Holder hereof in so doing.
(b) Subject to the limitations on transfer imposed by
United States federal and state securities laws, this Debenture may
be transferred, subject to compliance with provisions hereof.
EUROGAS, INC.
By /S/ Hank Blankenstein
Hank Blankenstein Vice President
ATTEST:
by: /s/ Lynne Martin
Lynne Martin, Corporate Secretary