Exhibit No. 1
Form 10-QSB
Century Controls International, Inc.
SEC File No. 0-30313
$100,000.00
CENTURY CONTROLS, INC.
12% Convertible Debenture
Due July 1, 2002
CENTURY CONTROLS, INC., a corporation duly organized and
existing under the laws of the state of Minnesota (hereinafter
referred to as the "Company"), for value received, hereby
promises to pay to Michael Baghdoian, or registered assigns, the
registered holder hereof, the principal sum of One Hundred
Thousand Dollars ($100,000.00) on July 1, 2002, upon presentation
and surrender of this Debenture at the offices of the Company
located at 3140 Neil Armstrong Blvd, Ste 226, Eagan, Minnesota,
55121 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 to pay monthly in like lawful tender
interest on the unpaid principal at a rate per month (calculated
on the basis of the actual number of days elapsed in the
preceding calendar month) equal to 1% (subject to adjustment as
provided below), from and after the date of issuance or from the
most recent interest accrual date for which interest has been
paid or duly provided for, as the case may be.
This Debenture is subject to the following further terms and
material provisions:
1. Authorization. This Debenture is duly authorized by
the Company and is fully paid.
2. Term. The date of maturity of this Debenture shall be
July 1, 2002 (the "Maturity Date").
3. Timely Payment and Late Fees. The principal on this
Debenture shall be payable at the offices of the Company. Each
payment of accrued interest shall be made on or before the first
day of each calendar month after the date hereof until the final
payment of interest on the date the principal is paid or made
available for payment. If such payment is received after the
fifth day of the month, the Company shall provide to the holder
of this Debenture a late fee of $250; plus, $250 for each
additional week (calculated on the basis of seven days in a week
accruing after the fifth day of the month) the interest payment
remains delinquent. The interest so payable will, as provided
below, be paid to the person in whose name this Debenture is
registered at the close of business on the regular payment date
for such interest. The interest will be paid by check mailed to
the last known address of the person in whose name this Debenture
is registered or if no such address is listed at the office of
the Company.
4. Conversion. Subject to, and in compliance with, the
provisions contained herein, the holder of this Debenture is
entitled, at holder's option, at any time on or before the
Maturity
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Date (or in case this Debenture or some portion hereof shall be
called for repayment prior to such date, then until and
including, but not after, the close of business within 30 days of
the date of notice of repayment), to convert all or any portion
of the principal amount of this Debenture into fully paid and non-
assessable shares of the Company's $.004 par value common stock
("Common Stock") at a conversion ratio of one share of Common
Stock for that portion of the principal amount and accrued
interest of this Debenture equal to $0.25 per share (subject to
adjustment as provide below). In the event the Company should
receive an offer to merge, sale or reorganize with another
corporation, whereby such corporation offers to purchase the
Company's stock at $0.25 per share or greater, upon the Company's
acceptance of such offer, this Debenture shall immediately
convert into Common Stock at a conversion ratio of one share of
Common Stock for the principal amount of this Debenture equal to
$0.25 per share (subject to adjustment as provide below).
Conversion shall be effected by surrender of this Debenture, duly
endorsed (if so required by the Company), to the Company at its
offices in Eagan, Minnesota, accompanied by written notice of
conversion specifying the amount of the principal of this
Debenture to be converted. On conversion, no adjustment for
interest is to be made, but if the holder surrenders this
Debenture for conversion after the first day of the current
calendar month and before the first day of the next calendar
month, the holder of this Debenture when surrendered for
conversion shall be entitled to receive Common Stock at the
conversion ratio attributable to the principal amount converted.
No fractional shares will be issued upon conversion, but if the
conversion results in a fractional interest, an amount equal to
the market value of such fractional interest, will be paid in
cash. The conversion price and number of shares issued upon
conversion of this Debenture may be subject to adjustment from
time to time as follows:
(a) If the Company shall take a record of the holder
of its Common Stock for the purpose of entitling them
to receive a dividend in Common Stock, the conversion
ratio in effect immediately prior to such record date
shall be proportionately increased, such adjustment to
become effective immediately after the opening of
business on the date following such record date;
(b) If the Company shall subdivide the outstanding
Common Stock into a greater number of shares or combine
the outstanding shares into a smaller number of shares,
or issue by reclassification any of its shares of
Common Stock, the conversion ratio shall be adjusted so
that the holder of this Debenture thereafter
surrendered for conversion shall be entitled to receive
after the occurrence of any of the events described the
number of shares of Common Stock to which the holder
would have been entitled had this Debenture been
converted immediately prior to the occurrence of such
event, such adjustment to become effective immediately
after the opening of business on the date following the
date upon which such subdivision or combination or
reclassification, as the case may be, becomes
effective;
(c) Neither the purchase or other acquisition by the
Company of any shares of Common Stock, nor the sale or
other disposition by the Company of any Common Stock,
warrants, or other securities shall affect any
adjustment of the conversion price or be taken into
account in computing any subsequent adjustment of the
conversion price; and
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(d) If at any time:
(i) The Company proposes to pay any dividend
payable in shares upon its Common Stock or make
any distribution, including a cash or property
dividend, out of earnings or earned surplus, to
the holder of its shares;
(ii) The Company proposes to enter into any
plan of capital reorganization or of
reclassification of the Common Stock of the
Company; or
(iii) The Company proposes to merge,
consolidate or encumber or sell all or
substantially all of its assets other than in the
ordinary course of business,
then, in any one or more of said cases, the
Company shall cause notice to be mailed to the
registered holder of this Debenture at the address of
such holder set forth in the registration records of
the Company. Such notice shall be solely for the
convenience of such registered holder and shall not be
a condition precedent to, nor shall any defect therein
or failure in connection therewith affect the validity
of, the action proposed to be taken by the Company.
Such notice shall be mailed, at least 20 days prior to
which the books of the Company shall close, or a record
date shall be taken for such dividend, share split or
reclassification, consolidation, merger, or sale of
properties and assets, as the case may be. Such notice
shall specify such record date for the closing of the
transfer books.
5. Prepayment. This Debenture is subject to prepayment at
any time after the issue date, upon not less than 30, nor more
than 50 days notice by mail, in whole or in part, at the election
of the Company. At any time prior to the date fixed for
prepayment set forth in the written notice, the holder may
convert the outstanding amount of this Debenture, or any portion
thereof, to Common Stock as provided in paragraph 4, above. On
the date fixed for prepayment, this Debenture shall cease to bear
interest. Upon surrender of this Debenture for repayment in
accordance with said notice of prepayment by the Company, the
amount of principal and interest due shall be paid in cash or
certified funds. If this Debenture is prepaid only in part, it
shall be presented for notation thereon by the Company of such
partial prepayment. The obligation of the Company to redeem this
Debenture shall be evidenced by a resolution of the board of
directors.
6. Satisfaction and Discharge of Debenture. This
Debenture shall cease to be of further effect (except as to any
surviving rights of conversion, transfer or exchange of Debenture
herein expressly provided for) when,
(a) The Company has paid or caused to be paid all sums
payable hereunder by the Company, including all
principal amounts and interest accrued under this
Debenture; and
(b) All the conditions precedent herein provided for
relating to the satisfaction and discharge of this
Debenture have been complied with.
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7. Events of Default. "Event of Default" when used
herein, whatever the reason for such event of default and whether
it shall be voluntary or involuntary or be effected by operation
of law pursuant to any judgment, decree or order of any court, or
any order, rule or regulation of any administrative or
governmental body or be caused by the provisions of any paragraph
herein means any one of the following events:
(a) Default in the payment of any interest on this
Debenture when it becomes due and payable, and
continuance of such default for a period of 60 days;
(b) Default in the payment of the principal on this
Debenture when due, whether at maturity, upon
prepayment by declaration, or otherwise;
(c) Default in the performance or breach of any
covenant or warranty of the Company (other than a
covenant or warranty the default or breach 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, by registered or
certified mail, to the Company by the holder of this
Debenture, a written notice specifying such default or
breach and requiring it to be remedied and stating that
such notice is a notice of default hereunder;
(d) The entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a
bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the
Company under the 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 not stayed and
in effect for a period of 60 consecutive days; or
(e) The institution by the Company of proceedings to
be adjudicated a bankrupt or insolvent, or the consent
by it to the institution of bankruptcy or insolvency
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; or the consent by it
to the filing of any such petition or the appointment
of 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 it of an assignment for the benefit of
creditors, 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 actions.
8. Acceleration of Maturity. If an event of default occurs and
is continuing then, in every such case, the holder of this
Debenture may declare the principal of all this Debenture to be
due and payable immediately, by a notice in writing to the
Company of such default, and upon any such declaration, such
principal shall become immediately due and payable. At any time
after such declaration of acceleration has been made and before a
judgment or decree for payment of money
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9. due has been obtained by the holder, the holder of this
Debenture, by written notice to the Company, may rescind and
annul such declaration and its consequences if all events of
default, other than the non-payment of the principal of Debenture
which have become due solely by such acceleration, have been
cured or waived as provided below. No such rescission shall
affect any subsequent default or impair any right consequent
thereon.
9. Suits for Enforcement. If an event of default occurs
and is continuing, the holder of this Debenture may, in his or
her discretion, proceed to protect and enforce his or her rights
by such appropriate judicial proceedings as the holder shall deem
most effectual to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement under
this Debenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
10. Limitation on Suits. No holder of this Debenture shall
have any right to institute any proceeding, judicial or
otherwise, with respect to this Debenture, or for the appointment
of a receiver or trustee, or for any remedy hereunder, except as
specifically provided herein.
11. Unconditional Right of Holder to Receive Principal and
Interest. Notwithstanding any other provision in this Debenture,
the holder of this Debenture shall have the right, which is
absolute and unconditional, to receive payment of the principal
of and interest on this Debenture on the respective stated
maturity dates expressed in this Debenture (or, in the case of
prepayment, on the prepayment date) and, subject to the
provisions hereof, to institute suit for the enforcement of any
such payment and the right to convert this Debenture in
accordance with paragraph 4, and to institute suit for the
enforcement of such right to convert, and such right shall not be
impaired without the consent of the holder.
12. Corporate Obligation. No recourse under or upon any
obligation, covenant, or agreement contained in this Debenture,
or of any claim based thereon or otherwise in respect thereof,
shall be had against any officer, director, or controlling
shareholder of the Company, past or present, or of any subsidiary
corporation, either directly or through the Company or any
successor corporation, it being expressly understood that this
Agreement is solely a corporate obligation of the Company.
13. Acts of Holder. Any request, demand, authorization,
direction, notice, consent, waiver, or other action provided by
this Debenture to be given or taken by the holder of this
Debenture may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by the holder
in person or by his or her agent or attorney-in-fact, duly
appointed in writing; and, except as otherwise expressly provided
herein, such action shall become effective when such instrument
or instruments are delivered to the Company in the manner
provided for giving notices herein. Such instrument or
instruments and the action embodied therein or evidenced thereby,
are herein sometimes referred to as the "act" of the holder
signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Debenture if the fact
and date of execution by any person of any such instrument or
writing is verified by the affidavit of a witness of such
execution or by the certificate of a notary public or other
officer authorized by law to take acknowledgements. Any request,
demand, authorization, direction, notice, consent, waiver, or
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other action by the holder of this Debenture shall bind any
holder of this same Debenture upon the transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by any person in reliance thereon, whether
or not notation of such action is made upon this Debenture.
14. Notice to Holder; Waiver. Where this Debenture
provides for notice to the holder of any event, such notice shall
be sufficiently given if in writing and mailed, registered,
postage prepaid, to the holder affected by such event, at his or
her address as it appears in the Debenture's register maintained
by the Company, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice.
Where this Debenture provides for notice to the Company, such
notice shall be sufficiently given if in writing and mailed,
registered, postage prepaid, to the Company at its address set
forth above (or at such other address as shall be provided to the
holder of this Debenture in the manner for giving notices set
forth herein), not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice.
Where this Debenture provides for notice, such notice may be
waived in writing by the person entitled to receive such notice,
either before or after the date on which the person entitled to
receive such notice and either before or after the event, and
such waiver shall be the equivalent of such notice.
15. Restrictions. The holder of this Debenture, by
acceptance hereof, both with respect to this Debenture and the
Common Stock issuable upon conversion of this Debenture, agrees
and acknowledges that:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE 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 ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE 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 SATISFACTORY TO THE ISSUER, AND ITS
COUNSEL, TO THE EFFECT THAT THE SALE OR TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE
STATUTES.
16. Modification. The Company, with the consent of the
holder of this Debenture, may modify or amend the provisions of
this Debenture or any supplemental Debenture, or the rights of
the holder of this Debenture. In addition, the Company may
execute, without the consent of this Debenture holder, any
supplemental Debenture: evidencing the succession of another
corporation to the Company; adding to the covenants of the
Company; curing ambiguities, defects, or inconsistencies in this
Debenture or any supplemental Debenture; and issuing additional
Debentures in a different series
17. Subordination. The Company covenants and agrees, and the
holder (and each person holding this Debenture, whether upon
original issue, transfer, assignment or exchange thereof) of this
Debenture, by its acceptance thereof, likewise covenants and
agrees that: (i) the
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payment of the principal of, and interest on, this Debenture by
the Company shall be subordinated and junior in right of payment
to the prior payment in full, in cash or cash equivalents, of all
senior indebtedness now existing or hereafter created; and (ii)
the subordination is for the benefit of, and shall be relied upon
and be enforceable directly by, the holder of senior
indebtedness. The Company and the holder hereby agree not to
amend, modify or change in any manner any provision of this
Debenture so that the terms and conditions hereof, as so amended,
modified or changed, are less favorable to the holders of the
senior indebtedness than the terms hereof on the issue date,
without the prior written consent of the necessary holders of
senior indebtedness. For purposes of this Debenture, "senior
indebtedness" shall mean all indebtedness of the Company now
existing or hereafter incurred, whether secured or unsecured,
which by its terms is superior in right of payment to this
Debenture. The holder of this Debenture by such holder's
acceptance thereof authorizes and expressly directs the Company
on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holder of this
Debenture and the holder of senior indebtedness, the
subordination provisions contained herein, and appoints the
Company as the holder's attorney-in-fact for such purpose.
18. Severability. In case any provision in this Debenture
shall be invalid, illegal, or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
19. Governing Law. This Debenture shall be governed by and
construed and interpreted in accordance with the laws of the
state of Minnesota. The holder hereby irrevocably agrees that
any legal suit, action, or proceeding arising out of or relating
to this Debenture shall only be instituted in any state or
federal court in the state of Minnesota.
20. Legal Holidays. In any case where any date provided
herein shall not be a business day, then (notwithstanding any
other provision of this Debenture) the event required or
permitted on such date shall be required or permitted, as the
case may be, on the next succeeding business day with the same
force and effect as if made on the date upon which such event was
required or permitted pursuant hereto.
21. Delay or Omission; No Waiver. No delay or omission of
the holder of this Debenture to exercise any right or remedy
accruing upon any event of default shall impair any such right or
remedy or constitute a waiver of any such event or default or an
acquiescence therein. Every right or remedy given hereby or any
law may be exercised from time to time, and as often as may be
deemed expedient.
DATED this 13th day of July, 2000.
CENTURY CONTROLS, INC.
By: /s/ Leo Christiansen
Duly Authorized Officer
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Conversion Form
The undersigned hereby irrevocable elects to convert
_____________________________ in principal amount of this
Debenture represented by the within instrument to Common Stock of
Century Controls, Inc., and requests that the certificate(s) for
such shares be delivered to:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
and if the principal amount of this Debenture converted shall not
be all of the principal amount represented by the within
instrument, that the instrument be returned to the undersigned
with notation of the conversion and resulting reduction in
principal at:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Dated _______________________________________, _______________.
____________________________________
In presence of
_________________________________________
