THIS SECURED DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE
(COLLECTIVELY, THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE
OFFERED OR SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT
TO REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
SECURED DEBENTURE
GLOBAL CONCEPTS, LTD.
5% Secured Convertible Debenture
November 16, 2006
No. CCP-1 US $200,000.00
This Secured Debenture (the "Debenture") is issued on November ___, 2004
(the "Closing Date") by Global Concepts, Ltd., a Colorado corporation (the
"Company"), to CORNELL CAPITAL PARTNERS, LP (together with its permitted
successors and assigns, the "Holder") pursuant to exemptions from registration
under the Securities Act of 1933, as amended.
ARTICLE I.
Section 1.01 Principal and Interest. For value received, the
Company hereby promises to pay to the order of the Holder on November 16,
2006 in lawful money of the United States of America and in immediately
available funds the principal sum of Two Hundred Thousand U.S. Dollars
(US$200,000), together with interest on the unpaid principal of this
Debenture at the rate of five percent (5%) per year (computed on the basis of
a 365-day year and the actual days elapsed) from the date of this Debenture
until paid. At the Company's option, the entire principal amount and all
accrued interest shall be either (a) paid to the Holder on the second (2nd)
year anniversary from the date hereof or (b) converted in accordance with
Section 1.02 herein provided, however, that in no event shall the Holder be
entitled to convert this Debenture for a number of shares of Common Stock in
excess of that number of shares of Common Stock which, upon giving effect to
such conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the Holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such conversion.
Section 1.02 Optional Conversion. The Holder is entitled, at its
option, to convert, and sell on the same day, at any time and from time to
time, until payment in full of this Debenture, all or any part of the
principal amount of the Debenture, plus accrued interest, into shares (the
"Conversion Shares") of the Company's common stock, no par value ("Common
Stock"), at the price per share (the "Conversion Price") equal to the lesser
of (a) an amount equal to one hundred twenty percent (120%) of the closing
bid price of the Common Stock as listed on a Principal Market (as defined
herein), as quoted by Bloomberg L.P. (the "Closing Bid Price") as of the date
hereof, or (b) an amount equal to eighty (80%) of the lowest closing bid
price of the Company's Common Stock, as quoted by Bloomberg, LP, for the five
(5) trading days immediately preceding the Conversion Date (as defined
herein). Subparagraphs (a) and (b) above are individually referred to as a
"Conversion Price". As used herein, "Principal Market" shall mean The
National Association of Securities Dealers Inc.'s Over-The-Counter Bulletin
Board, Nasdaq SmallCap Market, or American Stock Exchange. If the Common
Stock is not traded on a Principal Market, the Closing Bid Price and/or the
VWAP shall mean, the reported Closing Bid Price or the VWAP for the Common
Stock, as furnished by the National Association of Securities Dealers, Inc.,
for the applicable periods. No fraction of shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. To convert this
Debenture, the Holder hereof shall deliver written notice thereof,
substantially in the form of Exhibit "A" to this Debenture, with appropriate
insertions (the "Conversion Notice"), to the Company at its address as set
forth herein. The date upon which the conversion shall be effective (the
"Conversion Date") shall be deemed to be the date set forth in the Conversion
Notice.
Section 1.03 Reservation of Common Stock. The Company shall
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of this
Debenture, such number of shares of Common Stock as shall from time to time
be sufficient to effect such conversion, based upon the Conversion Price. If
at any time the Company does not have a sufficient number of Conversion
Shares authorized and available, then the Company shall call and hold a
special meeting of its stockholders within thirty (30) days of that time for
the sole purpose of increasing the number of authorized shares of Common
Stock.
Section 1.04 Right of Redemption. The Company at its option shall
have the right to redeem, with fifteen (15) business days advance written
notice (the "Redemption Notice"), a portion or all outstanding convertible
debenture. The redemption price shall be one hundred twenty percent (120%)
of the amount redeemed plus accrued interest.
Section 1.05 Registration Rights. The Company is obligated to
register the resale of the Conversion Shares under the Securities Act of
1933, as amended, pursuant to the terms of a Registration Rights Agreement,
between the Company and the Holder of even date herewith (the "Investor
Registration Rights Agreement").
-2-
Section 1.06 Interest Payments. The interest so payable will be
paid at the time of maturity or conversion to the person in whose name this
Debenture is registered. At the time such interest is payable, the Holder,
in its sole discretion, may elect to receive the interest in cash (via wire
transfer or certified funds) or in the form of Common Stock. In the event of
default, as described in Article III Section 3.01 hereunder, the Holder may
elect that the interest be paid in cash (via wire transfer or certified
funds) or in the form of Common Stock. If paid in the form of Common Stock,
the amount of stock to be issued will be calculated as follows: the value of
the stock shall be the Closing Bid Price on: (i) the date the interest
payment is due; or (ii) if the interest payment is not made when due, the
date the interest payment is made. A number of shares of Common Stock with a
value equal to the amount of interest due shall be issued. No fractional
shares will be issued; therefore, in the event that the value of the Common
Stock per share does not equal the total interest due, the Company will pay
the balance in cash.
Section 1.07 Paying Agent and Registrar. Initially, the Company
will act as paying agent and registrar. The Company may change any paying
agent, registrar, or Company-registrar by giving the Holder not less than
ten (10) business days' written notice of its election to do so, specifying
the name, address, telephone number and facsimile number of the paying agent
or registrar. The Company may act in any such capacity.
Section 1.08 Secured Nature of Debenture. This Debenture is
secured by all of the assets and property of the Company as set forth on
Exhibit A to the Security Agreement dated the date hereof between the Company
and the Holder (the "Security Agreement"). As set forth in the Security
Agreement, Holder's security interest shall terminate upon the occurrence of
an Expiration Event as defined in the Security Agreement.
ARTICLE II.
Section 2.01 Amendments and Waiver of Default. The Debenture may
not be amended. Notwithstanding the above, without the consent of the
Holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, or to provide for assumption of the Company obligations to the
Holder.
ARTICLE III.
Section 3.01 Events of Default. An Event of Default is defined as
follows: (a) failure by the Company to pay amounts due hereunder within
fifteen (15) days of the date of maturity of this Debenture; (b) failure by
the Company to comply with the terms of the Irrevocable Transfer Agent
Instructions attached to the Securities Purchase Agreement; (c) failure by
the Company's transfer agent to issue freely tradeable Common Stock to the
Holder within five (5) days of the Company's receipt of the attached Notice
of Conversion from Holder; (d) failure by the Company for ten (10) days after
notice to it to comply with any of its other agreements in the Debenture;
(e) events of bankruptcy or insolvency; (f) a breach by the Company of its
obligations under the Securities Purchase Agreement or the Investor
Registration Rights Agreement which is not cured by the Company within ten
(10) days after receipt of written notice thereof. Upon the occurrence of an
Event of Default, the Holder may, in its sole discretion, accelerate full
repayment of all debentures outstanding and accrued interest thereon or may,
notwithstanding any limitations contained in this Debenture and/or the
Securities Purchase Agreement dated the date hereof between the Company and
Cornell Capital Partners, L.P. (the "Securities Purchase Agreement"), convert
all debentures outstanding and accrued interest thereon into shares of Common
Stock pursuant to Section 1.02 herein.
-3-
Section 3.02 Failure to Issue Unrestricted Common Stock. As
indicated in Article III Section 3.01, a breach by the Company of its
obligations under the Investor Registration Rights Agreement shall be deemed
an Event of Default, which if not cured within ten (10) days, shall entitle
the Holder to accelerate full repayment of all debentures outstanding and
accrued interest thereon or, notwithstanding any limitations contained in
this Debenture and/or the Securities Purchase Agreement, to convert all
debentures outstanding and accrued interest thereon into shares of Common
Stock pursuant to Section 1.02 herein. The Company acknowledges that failure
to honor a Notice of Conversion shall cause irreparable harm to the Holder.
ARTICLE IV.
Section 4.01 Rights and Terms of Conversion. This Debenture, in
whole or in part, may be converted at any time following the Closing Date,
into shares of Common Stock at a price equal to the Conversion Price as
described in Section 1.02 above.
Section 4.02 Re-issuance of Debenture. When the Holder elects to
convert a part of the Debenture, then the Company shall reissue a new
Debenture in the same form as this Debenture to reflect the new principal
amount.
Section 4.03 Termination of Conversion Rights. The Holder's right
to convert the Debenture into the Common Stock in accordance with paragraph
4.01 shall terminate on the date that is the second (2nd) year anniversary
from the date hereof and this Debenture shall be automatically converted on
that date in accordance with the formula set forth in Section 4.01 hereof,
and the appropriate shares of Common Stock and amount of interest shall be
issued to the Holder.
ARTICLE V.
Section 5.01 Anti-dilution. In the event that the Company shall
at any time subdivide the outstanding shares of Common Stock, or shall issue
a stock dividend on the outstanding Common Stock, the Conversion Price in
effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and in the event that the Company shall
at any time combine the outstanding shares of Common Stock, the Conversion
Price in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the date of
such subdivision, dividend or combination as the case may be.
-4-
Section 5.02 Consent of Holder to Sell Capital Stock or Grant
Security Interests. Except for the Standby Equity Distribution Agreement
dated the date hereof between the Company and Cornell Capital Partners, LP,
so long as any of the principal of or interest on this Debenture remains
unpaid and unconverted, the Company shall not, without the prior consent of
the Holder, issue or sell (i) any Common Stock or Preferred Stock without
consideration or for a consideration per share less than its fair market
value determined immediately prior to its issuance, (ii) issue or sell any
Preferred Stock, warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock
without consideration or for a consideration per share less than such Common
Stock's fair market value determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest in
any of the assets of the Company, or (iv) file any registration statement on
Form S-8.
ARTICLE VI.
Section 6.01 Notice. Notices regarding this Debenture shall be
sent to the parties at the following addresses, unless a party notifies the
other parties, in writing, of a change of address:
If to the Company, to:
Global Concepts, Ltd.
14 Garrison Inn Lane
Garrison, NY 10524
Attention: Michael Margolies
Telephone: (845) 424-4100
Facsimile: (845) 424-4003
With a copy to:
Robert Brantl, Esq.
322 4th Street
Brooklyn, NY 11215
Telephone: (718) 768-6045
Facsimile: (718) 965-4042
If to the Holder:
Cornell Capital Partners, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07303
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
With a copy to:
David Gonzalez, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
-5-
Section 6.02 Governing Law. This Debenture shall be deemed to be
made under and shall be construed in accordance with the laws of the State of
New Jersey without giving effect to the principals of conflict of laws
thereof. Each of the parties consents to the jurisdiction of the
U.S. District Court sitting in the District of the State of New Jersey or the
state courts of the State of New Jersey sitting in Hudson County, New Jersey
in connection with any dispute arising under this Debenture and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens to the bringing of any such
proceeding in such jurisdictions.
Section 6.03 Severability. The invalidity of any of the
provisions of this Debenture shall not invalidate or otherwise affect any of
the other provisions of this Debenture, which shall remain in full force and
effect.
Section 6.04 Entire Agreement and Amendments. This Debenture
represents the entire agreement between the parties hereto with respect to
the subject matter hereof and there are no representations, warranties or
commitments, except as set forth herein. This Debenture may be amended only
by an instrument in writing executed by the parties hereto.
Section 6.05 Counterparts. This Debenture may be executed in
multiple counterparts, each of which shall be an original, but all of which
shall be deemed to constitute on instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
Company as executed this Debenture as of the date first written above.
GLOBAL CONCEPTS, LTD.
By: /s/ Michael Margolies
------------------------------
Name: Michael Margolies
Title: Chairman & CEO
-6-
EXHIBIT "A"
NOTICE OF CONVERSION
(To be executed by the Holder in order to Convert the Debenture)
TO:
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The undersigned hereby irrevocably elects to convert US$ -----------
of the principal amount of the above Debenture into Shares of Common Stock of
Global Concepts, Ltd., according to the conditions stated therein, as of the
Conversion Date written below.
Conversion Date:
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Applicable Conversion Price:
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Signature:
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Name:
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Address:
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Amount to be converted:
US$
Amount of Debenture ----------------------------------------
unconverted:
US$
----------------------------------------
Conversion Price per
share: US$
----------------------------------------
Number of shares of
Common Stock to be issued:
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Please issue the shares
of Common Stock in the
following name and to the
following address:
Issue to:
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Authorized Signature:
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Name:
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Title:
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Phone Number:
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Broker DTC Participant Code:
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Account Number:
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