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EXHIBIT 1
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
AND MAY NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT'), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF THE BORROWER THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (A) TO THE BORROWER, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, OR (C) OTHERWISE IN
ACCORDANCE WITH AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND APPLICABLE
STATE SECURITIES LEGISLATION.
THE DEBENTURE REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OR OTHER SECURITIES
ISSUED UPON CONVERSION OF SUCH DEBENTURE MAY BE SUBJECT TO A HOLD PERIOD UNDER
THE RULES AND REGULATIONS OF THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION AND THE SECURITES ACT OF 1933.
DEBENTURE CERTIFICATE
EXPLORE TECHNOLOGIES INC
#1502-1166 Alberni Street, Vancouver
British Columbia
V6E 3Z3
(US)$370,000
IN PRINCIPAL AMOUNT OF 10 % SUBORDINATE CONVERTIBLE DEBENTURES
DUE; August, 1, 2000
Explore Technologies Inc. (the "Borrower"), for value received, hereby
acknowledges itself indebted and, subject to the right of the registered holder
to convert this Debenture into common shares ("Common Shares") of the Borrower
as provided for herein, promises to pay the aggregate principal amount of the
Debentures evidenced hereunder to EuroCapital Holdings A.V.V. (the "registered
holder") as to 100% of the principal amount outstanding on the 1st August, 2000
(the "Maturity Date") or on such earlier date the principal hereof may be
otherwise payable, and to pay interest on said principal amount as hereinafter
provided.
The aggregate principal amount of Debentures evidenced hereunder shall consist
of and be limited to (US)$370,000. (the "Principal Amount"), which is designated
as a "10'% Subordinate Convertible Debentures" due August, 1, 2000.
The Debentures shall be dated as of the date of original issue and shall,
subject to the terms and conditions provided herein, be repayable on the
Maturity Date, and shall bear interest on the principal amount
outstanding from (but excluding) the date the Debenture is issued hereunder up
to and including the Maturity Date, at a rate of 10 % per annum, unless
converted or redeemed prior to such time in accordance with the terms hereof.
Interest will be calculated on a simple basis and will become due and payable on
the maturity date, provided that if such day is not a business day in the
Province of British Columbia, such payment shall be made by the Borrower on the
next business day following.
On the Maturity Date, this Debenture shall mature and shall forthwith become
payable to the registered holder. Subject to any agreement otherwise between the
Borrower and the registered holder, the registered holder shall present and
surrender this Debenture to the Borrower and the Borrower shall forthwith pay
the principal of the Debenture in its entirety and shall pay any and all
interest accruing on the principal.
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Commencing on the day following presentment of the Matured Debenture, interest
will accrue at the rate of 2% per month, compounded monthly and not in advance,
on any unpaid principal and any accrued but unpaid interest.
Unless otherwise agreed to between the Borrower and the registered holder, or as
otherwise expressly provided for herein, interest on the Debenture will be
payable and the principal of the Debenture will be repayable in lawful money of
the United States of America.
For the purposes of transferring or assigning the Debenture and any Common
Shares issued upon conversion of the Debenture (collectively, the "Securities"),
the Securities may be subject to a hold period pursuant to the requirements of
the Securities and Exchange Commission. For any transfer or assignment to a U.S.
person, as defined by Rule 902 of Regulation S, or for the benefit of a US.
person, the transferee or assignee shall be required to provide the Borrower
with a completed Certificate of Transferee in the form of the declaration
attached to Schedule "'B" hereto.
In addition, certificates representing Common Shares which are issued to a U.S.
person shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 AS AMENDED (THE "1933 ACT")- THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES. AGREES FOR THE BENEFIT OF THE CORPORATION THAT
SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A)
TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES 1N ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE 1933 ACT, IF APPLICABLE, OR (C) INSIDE THE UNITED STATES
(i) PURSUANT TO THE EXEMP'T'ION FROM THE REGISTRATION REQUIREMENTS UNDER THE
1933 ACT PROVIDED UNDER RULE 144 THEREUNDER, IF AVAILABLE, AND 1N ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAW, OR (ii) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE LAWS AND
REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON
STOCK EXCHANGES IN CANADA, ON NASDAQ OR ELSEWHERE. A NEW CERTIFICATE. BEARING NO
LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM
THE CORPORATIONS TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A LEGAL
OPINION OR OTHER EVIDENCE SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT
THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH
RULE 904 OF REGULATION S UNDER THE 1933 ACTOR PURSUANT TO ANOTHER APPLICABLE
EXEMPTION."
In the event the borrower is unable or unwilling to repay the principal amount
of the Debenture plus accrued interest , on the maturity date , the registered
holder of the Debenture shall have the right to convert all or any portion of
the Principal Amount of this Debenture which is a multiple of (US)$1,000 into
Common Shares at any time and from time to time, beginning on the day after the
maturity date at a price which is 20% below weighted average trading price of
the shares on the OTC BB for the preceding 5 trading days.
The Debenture Holder may request the Borrower to file a Registration Statement
with the SEC to allow the common shares of the Company, issued under terms of
the conversion of the Debenture, to be free trading.
For greater certainty, if any principal amount of Debenture remains outstanding
after 4:00 p.m. (Vancouver time) on the date which is four months after the
Maturity date, the right to convert such amount into Common Shares of the
Company will wholly terminate and the Subscriber will only be entitled to
repayment in cash on or after such date. Any accrued interest due on the
Debenture surrendered for conversion will be paid in cash within 10 business
days of such conversion.
The registered holder of a Debenture wishing to convert the Debenture, in whole
or in part, shall present and surrender the Debenture and shall give written
notice (the "Notice") of its intention to convert the Debenture (collectively,
the "Conversion Documentation") to the Borrower at their offices at 1502-1166
Alberni Street, Vancouver, British Columbia V6E 3Z3, , unless otherwise directed
by the Borrower in writing.
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The Debenture shall be converted on the later of the day (the "Conversion Date")
which is specified in any Notice and the date of actual receipt of the duly
completed Conversion Documentation by the Borrower or its authorized
representative. The registered holder of a Debenture who has converted its
Debenture shall be entered onto the Borrower's register of common shares as of
the Conversion Date and the Borrower will cause certificates evidencing the
Common Shares to be issued within five business days of the Conversion Date. The
Notice of a registered holder given to effect conversion of the Debenture shall
be substantially in the form attached as Schedule "A" hereto, and shall:
(a) state the number of Debentures to be converted into Common Shares;
(b) provide an acknowledgement by the registered holder that the Common Shares
shall be subject to any remaining time in which the Hold Period has not yet
accrued;
(c) provide an acknowledgement by the registered holder that the Common Shares
shall be subject to certain United States resale and legend requirements; and
(d) provide necessary representations of the registered holder with respect to
U.S. federal and state securities law compliance.
This Debenture is a direct, unsecured obligation of the Borrower ranking equally
with all other subordinated indebtedness and is not secured by any mortgage or
other charge. Furthermore, this Debenture shall rank subordinate to all Senior
Debt (as hereinafter defined);
Senior Debt shall have the following meaning:
(a) indebtedness of the Borrower, whether outstanding on the date of this
Debenture Certificate or thereafter created, incurred, assumed or guaranteed by
the Borrower, which is subject to a registered security interest in favour of
such creditor against any of the assets of the Borrower or any of its
subsidiaries;
(b) renewals, extensions or refundings or any indebtedness referred to in
paragraph (a) above; unless the terms of the instrument creating or evidencing
such indebtedness or the instrument pursuant to which such indebtedness is
outstanding provides that such indebtedness does not rank prior in right of
payment to the Debentures but ranks equally with, or subordinate in right of
payment to, the Debentures.
Upon an event of default (as hereinafter defined) the principal of all
Debentures then outstanding under this Certificate may be declared due and
payable by the registered holder. An event of default, for the purposes of this
Debenture is defined as any of the following events:
1. if the Borrower makes default in payment of any interest due on the
Debenture, which default is not remedied within thirty days of a written
notice addressed to the Borrower from the registered holder that the
Borrower is in default of payment; or
2. if a decree or order of a court having jurisdiction in the premises is
entered adjudging the Borrower a bankrupt or insolvent under the Bankruptcy
and Insolvency Act (Canada) or any other bankruptcy, insolvency or
analogous laws, or issuing sequestration or process of execution against,
or against any substantial part of, the property of the Borrower, or
appointing a receiver of the Borrower or any substantial part of its
property, or ordering the wind-up or liquidation of its affairs unless the
Borrower actively and diligently contests in good faith such decree or
order and has such decree or order stayed on or before 90 days after the
issue of such decree or order by a court; or
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3. if an order is made or a resolution is passed for the winding-up or
liquidation of the Borrower, or if the Borrower institutes proceedings to
be adjudicated a bankrupt or insolvent, or consents to the institution of
bankruptcy or insolvency proceedings against it under the Bankruptcy and
Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada)
or any other bankruptcy, insolvency or analogous laws, or consents to the
fling of any petition therefor or to the appointment of a receiver of the
Borrower or any substantial part of its property, or makes a general
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts generally as they become due or takes corporation action
in furtherance of any of the aforesaid purposes; or
4. if the Borrower makes default in observing or performing any other covenant
or condition of this Debenture Certificate, or the Subscription Agreement
between the Borrower and the registered holder in connection with the
issuing of these Debentures, on its part to be observed or performed and if
such default continues for a period of twenty business days after notice in
writing has been given to the Borrower by the registered holder specifying
such default and requiring the Borrower to rectify the same, unless the
registered holder (having regard to the subject matter of the default)
shall have agreed in writing to the default.
The registered holder may waive any default by the Borrower in the observance or
performance of any covenant, agreement, or condition contained in this Debenture
or any other event which without such waiver would cause the monies hereby
secured to be immediately due and owing; but no such waiver or other act or
omission of the registered hold will extend to or affect any subsequent breach,
default, or event or the rights resulting therefrom.
Upon presentation of this Debenture and a duly completed certificate of
transfer, substantially in the form attached as Schedule "B" hereto, to the
attention of Mr Charlo Barbosa, #1502-1166 Alberni Street, Vancouver, British
Columbia V6E 3Z3 (or as may otherwise be directed by the Borrower in writing),
and subject to compliance with applicable securities laws, which compliance
shall be supported by such legal opinions as may reasonably be required by
counsel to the Borrower at the expense of the registered holder, this Debenture
may be transferred by the registered holder or its executors, administrators or
other legal representatives or its or their attorney duly appointed in writing,
but no such transfer of this Debenture shall be valid unless it has been duly
noted on one of the registers maintained for that purpose.
Nothing in this Certificate or in the holding of Debentures evidenced hereby
shall be construed as conferring upon the registered holder any right or
interest whatsoever as a shareholder of the Borrower or entitle the registered
holder to any right or interest in respect of any common shares except as herein
expressly provided.
The Borrower shall cause a register to be kept, in which shall be entered the
names and addresses of all registered holders of Debentures and the number of
Debentures held by each of them- The Borrower may treat the registered holder of
any Debenture Certificate as the absolute owner of the Debentures represented
thereby for all purposes, and the Borrower shall not be affected by any notice
or knowledge to the contrary except where the Borrower is required to take
notice by statute or by order of a court of competent jurisdiction.
Upon the conversion of the total Principal Amount owing under this Debenture,
all rights under this Debenture, other than the right to receive certificates
representing the Common Shares to which the registered holder is entitled on
such conversion, shall wholly cease and terminate and such Debenture shall be
void and of no effect or value.
If at any time after the date hereof and prior to the Maturity Date, and
provided that any Debentures remain unconverted, there shall be:
(a) a reclassification of the common shares outstanding at the time or a
change in the common shares into other shares or securities or a
subdivision or consolidation of the common shares into a greater or
lesser number of common shares, or any other capital reorganization of
the Borrower; or
(b) a consolidation, amalgamation or merger of the Borrower with or into
any other corporation other than a consolidation, amalgamation or
merger which does not result in any reclassification of the
outstanding common shares or a change of the common shares into other
shares or securities.
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Any of such events being called a "Capital Reorganization"), any registered
holder of Debentures who thereafter shall exercise their right to acquire Common
Shares pursuant to such Debenture shall be entitled to receive, at no additional
cost, and shall accept in lieu of the number of Common Shares to which such
registered holder was theretofore entitled upon such conversion, the aggregate
number of Common Shares, other securities or other property which such
registered holder should have been entitled to receive as a result of such
Capital Reorganization if, on the effective date or record date thereof as the
case may be, the registered holder had been the registered holder of the number
of Common Shares to which such registered holder was theretofore entitled to
acquire upon conversion of this Debenture. If determined appropriate by the
Borrower acting reasonably, appropriate adjustments shall be made as a result of
any such Capital Reorganization in the application of the provisions set forth
herein with respect to the rights and interests thereafter of registered holders
of the Debentures to the end that the provisions set forth herein shall
thereafter correspondingly be made applicable as nearly as may reasonably be in
relation to any Common Shares, other securities or other property thereafter
deliverable upon the conversion of any Debentures. Any such adjustment shall be
made by and approved by the directors of the Borrower and shall for all purposes
be conclusively deemed to be an appropriate adjustment.
The adjustments provided for herein are cumulative and such adjustments shall be
made successively whenever an event referred to herein shall occur, subject to
the limitations provided for herein. No adjustment shall be made in the number
or kind of Common Shares, or other securities which may be acquired on the
conversion of a Debenture, unless it would result in a change of at least one-
tenth of a Common Share (provided, however, that any adjustments which may by
reason of this paragraph not be required to be made, shall be carried forward
and then taken into consideration in any subsequent adjustment).
Notwithstanding any adjustments provided for herein or otherwise, the Borrower
shall not be required upon the conversion of any Debentures to issue fractional
Common Shares in satisfaction of its obligations hereunder and, except as
provided for herein, any fractions shall be eliminated.
So long as any portion of this Debenture remains outstanding prior to the
Maturity Date, the Borrower will send notice to the registered holder thereof of
its intention to fix a record date for the issuance of any dividends in kind to
all or substantially all of the holders of its outstanding common shares. Such
notice shall specify the particulars of the record date far such event, provided
that the Borrower shall only be required to specify in the notice such
particulars of the event that shall have been fixed and determined on the date
of such notice. The notice shall be sent in each case not less than seven (7)
days prior to such applicable record date.
This Debenture shall not become obligatory for any purpose until certified by or
on behalf of the Borrower for the time being under this Certificate. This
Debenture is to be governed in accordance with the Laws of the Province of
British Columbia and Canada.
IN WITNESS WHEREOF the Borrower has caused this Debenture to be sealed with its
common seal and to be signed by its President and Chief Executive Officer as of
this 30th Day of day of May, 2000.
Explore Technologies Inc
/s/ Charlo Barbosa
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Per: Charlo Barbosa
Chief Executive Officer
/s/ Rod Jao
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Per: Rod Jao
President
