TEXAS PETROLEUM CORPORATION
ISSUE OF $5,000,000 FIXED AND FLOATING CONVERTIBLE DEBENTURE
D E B E N T U R E
1. FOR VALUE RECEIVED, TEXAS PETROLEUM CORPORATION, a company
incorporated under the laws of the State of Colorado, United
States of America, and having its registered office at Suite
2000, 9101 E. Kenyon, Denver, Colorado, USA 80237 (hereinafter,
the "Company"), will pay to the holder hereof (hereinafter, the
"Debenture Holder"), the principal sum of Five Million Dollars
($5,000,000) or the total aggregate principal amount which may at
any time be outstanding, whichever is the lesser, in lawful money
of the United States of America at the offices of the Company or
such other place as the Debenture Holder may in writing from time
to time direct and will at the same place pay interest in like
money on so much of the principal sum hereby secured as shall be
outstanding and unpaid hereunder, at such time as it shall become
due and payable, at the rate of Ten Percent (10%) per annum from
the time of the advance or expenditure of the funds, calculated
monthly not in advance, to be calculated from the date hereof, to
be computed monthly on the first day of each and every month
commencing on the first day of November, 1992, and payable as
more fully set forth hereinbelow.
2. This Debenture is issued subject to and with the benefits
and conditions appended hereto which form an integral part
hereof.
3. As security for the due payment of the principal sum and
interest thereon and all other monies which may become payable
hereunder and the performance and observance of the obligations
and covenants of the Company herein contained, the Company
hereby:
(a) grants, assigns, transfers, and charges to and in favour of
the Debenture Holder as and by way of a specific charge all its
right, title, and interest in and to those Company assets
described in Schedule A hereto, and all Company assets of a like
kind or nature hereafter acquired by the Company as they pertain
to Schedule A hereto, whether in substitution therefor or in
addition thereto; and
(b) charges in favour of the Debenture Holder as and by way of a
floating charge on all its undertaking and good will, of
whatsoever nature and kind, both present and future, including
and without limiting the generality of the foregoing, of those
assets described in Schedule A hereto; and
(c) grants, assigns, transfers, and charges to and in favour of
the Debenture Holder as and by way of an option, the right to
convert any portion or all of the principal sum of Five Million
Dollars ($5,000,000), or the total aggregate principal amount
which may at any time be outstanding, whichever is the lesser, in
lawful money of the United States of America and interest or the
total aggregate principal amount and interest which may at any
time be outstanding, whichever is the lesser, into restricted
common shares of the Company at a price of fifty cents (US$0.50)
per share. Any shares issued under the conversion privileges of
this Debenture shall carry an "A" share purchase warrant allowing
the holder thereof to purchase from the Company, at a price of
seventy-five cents (US$0.75), one additional restricted share for
each "A" share purchase warrant held. The share purchase warrant
shall be valid for a period of two (2) years after the date of
issuance of the said share purchase warrant. Any "A" share
purchase warrants exercised will be issued one common share and
one "B" share purchase warrant allowing the holder thereof to
purchase from the Company, at a price of one dollar (US$1.00),
one additional restricted share for each "B" share purchase
warrant held. The shares being offered herein have not been
registered with the U.S. Securities and Exchange Commission under
the United States Securities Act of 1933 (the "Act") and may not
be resold, directly or indirectly, (a) to any "U.S. Person" (as
defined in Regulation S under the Act) or in the United States of
America, or (b) to any other individual pursuant to Rule 144,
unless the shares are first registered under the Act or an
exemption from registration under the Act is available.
IN WITNESS WHEREOF, the Company has hereunto caused the common
seal to be affixed in the presence of its duly authorized officer
or officers in that behalf this thirty- first day of October,
1992.
The Common Seal of TEXAS PETROLEUM )
CORPORATION was hereunto affixed in the)
presence of: )
)
)
By: /S/ Sidney B. Fowlds, Director )
)
)
By: /S/ A.V. Feimann, Director )
CONDITIONS REFERRED TO IN AND
FORMING PART OF THE ATTACHED DEBENTURE
SECTION 1 - Security; Principal Repayment; Election of Interest
Payment or Royalty
1.1 The floating charge hereby created shall in no way hinder or
prevent the Company until the security hereby constituted shall
become enforceable, from:
(a) selling, disposing of, or dealing with the subject matter of
such floating charge in the ordinary course of its business and
for the purpose of carrying on the same, or
(b) pledging, assigning, or giving security on the subject
matter of such floating charge to its bankers under the Bank Act
or any similar banking statute applicable in the United States of
America.
1.2 For security and repayment purposes herein, the loan shall
be defined as the loan principal and any unpaid interest
outstanding.
SECTION 2 - General Covenants
2.1 The Company covenants with the Debenture Holder that it has
good right and authority to charge its undertaking and assets as
herein provided; that it will forthwith register, file, and
record this Debenture at the proper offices where such
registration, filing, or recording may be necessary to protect
the security hereby constituted; and that it will do, observe,
and perform all matters and things necessary or expedient to be
done, observed, or performed by virtue of any law of the United
States of America, or the State of Colorado or any municipality
thereof, or as the Debenture Holder shall reasonably require for
the purpose of creating and maintaining the security hereby
constituted.
2.2 The Company covenants with the Debenture Holder that it will
at all times maintain its corporate existence, will carry on and
conduct its business in a proper, efficient, and businesslike
manner and in accordance with good business practice; will keep
any Computer Centers in good condition and repair according to
the nature, description, and uses thereof; will keep or cause to
be kept proper books of account in accordance with sound
accounting practice; will, if and when required in writing by the
Debenture Holder, furnish it with copies of all audited financial
statements of the Company furnished to its shareholders and of
all interim statements furnished to its directors or shareholders
after the date hereof; will permit the Debenture Holder or its
representatives to enter upon the premises of the Company at any
reasonable time to inspect the books and records of the Company
and take extracts therefrom and generally make such examination
of the books and records as it deems fit and to inspect or
otherwise check the assets of the Company; will pay or cause to
be paid all taxes, rates, government fees, or dues levied,
assessed, or imposed upon it and its property or any part thereof
as and when the same shall become due and payable, save and
except when and so long as the validity of any such taxes, rates,
fees, dues, levies, assessments, or imposts is in good faith
contested by it and will, if and when required in writing by the
Debenture Holder, furnish it for inspection with receipts for any
of such payments; will duly observe and conform to all valid
requirements of any governmental authority relative to any of its
property, licenses, and/or franchises; will fully and effectively
maintain and keep maintained any Computer Centers and that it
will not permit or suffer any judgment for the enforcement of any
builder's, contractor's, workman's, or other lien or privilege
upon it or in respect of any of the charged premises to remain
unsatisfied, provided that the non-payment of any such judgment
or the enforcement of any such lien, privilege, or charge shall
not be deemed to be a breach of this covenant if the Company
shall desire to contest the same and shall furnish security to
the satisfaction of the Debenture Holder for the due payment of
the amount claimed in respect thereof in case it shall be held to
be a valid lien, privilege, or charge; will give the Debenture
Holder an exclusive right, for a three-year period from the date
hereof, to lend money to the Company such that up to Five Million
Dollars can be outstanding at any given time, and the Company
agrees it will not contact or utilize other lenders unless and
until its outstanding indebtedness exceeds Five Million Dollars;
and will insure and keep insured its such buildings, plant,
equipment, apparatus, all its stock in trade, and any other
insurable property and assets relating to any Computer Centers
against such perils and in such amounts as may be usual and
prudent with companies carrying on a similar business or holding
similar assets.
2.3 The Company covenants it will not without the consent in
writing of the Debenture Holder:
(a) sell or otherwise dispose of by conveyance, transfer, lease,
or otherwise the whole or substantially the whole it its assets
and undertaking; or
(b) create or permit any charge, lien, or other encumbrance or
security upon such undertaking, assets, or property, or any part
or parts hereof, as pertain to the security created hereunder,
ranking or purporting to rank in priority to or pari passu with
the charges created by this Debenture.
2.4 If the Company shall fail to perform any covenant on its
part herein contained, then the Debenture Holder may in its
absolute discretion perform any such covenant capable of being
performed by it and, if any such covenant requires the payment or
expenditure of money, the Debenture Holder may make such payment
but shall be under no obligation to do so; and all sums so paid
or expended by the Debenture Holder shall be immediately payable
by the Company, shall bear interest at the rate quoted in the
Debenture set forth until paid, and shall be secured hereby,
having the benefit of the lien hereby created in priority to the
indebtedness evidenced by the Debenture. No such performance or
payment shall relieve the Company from any default under the
Debenture or any consequences of such default.
SECTION 3 - Events of Default and Enforcement
3.1 Notwithstanding anything to the contrary contained in the
Debenture, all unpaid principal and interest owing under this
Debenture shall forthwith become due and payable and the security
hereby constituted shall become enforceable in each of the events
following:
(a) If the Company makes default in the due and punctual payment
of any principal of or interest hereunder on demand;
(b) If the Company makes default in the performance or
observance of any other covenant or condition herein contained on
its part to be observed or performed;
(c) If the Company shall become bankrupt or insolvent or shall
be subject to the provisions of any Act or law in force in the
United States of America for the benefit of creditors, or go into
liquidation, either voluntarily or under an order of a court of
competent jurisdiction, or make a general assignment for the
benefit of creditors, or otherwise acknowledge insolvency;
(d) If distresses or executions be levied or issued against all
Computer Centers, or against such Computer Center or Centers as
shall take in more than Fifty Percent (50%) of Company revenues,
or any property of the Company associated therewith;
(e) If the Company ceases or threatens to cease to carry on its
business or the operations of all of its Computer Centers or such
Computer Center or Centers as shall take in more than Fifty
Percent (50%) of Company revenues; or
(f) If any prior security which has been permitted hereby
becomes enforceable pursuant to the terms and conditions thereby
contained.
3.2 Whenever the security hereby constituted shall have become
enforceable, the Debenture Holder may proceed to realize the
security hereby constituted and to enforce its rights by
proceedings in any court of competent jurisdiction or by any
other action, suit, remedy, or proceedings authorized or
permitted hereby or by law or in equity. No other remedy for the
realization of the security hereof or for the enforcement of the
rights of the Debenture Holder shall be permitted, except as set
forth hereinbelow.
3.3 Whenever the security hereby constituted shall have become
enforceable, the Debenture Holder may by instrument in writing
appoint any person to be a receiver (which term shall include a
receiver and a manager) of the assets charged by this Debenture,
including any profits thereof, and may remove any receiver and
appoint another in his stead, and such receiver shall have power
to manage sales operations capable of producing such gross
receipts as are charged under this Debenture, and for and in
connection with such purpose may take any proceedings in the name
of and on behalf of the Company and carry on or concur in
carrying on the business of the Company, and in so doing shall
have the same powers as the Company would have had in carrying on
the same if it had not been in default hereunder, and for and in
connection with such purpose may borrow or raise money by way of
Receiver's certificate or otherwise on the security of any part
or parts of the assets charged by this Debenture for cash or by
conditional sale and to sell and carry any and all such sales
into effect by selling in the name of and on behalf of the
Company or otherwise, and to make any arrangements or compromises
which he shall think expedient. The rights and powers conferred
by this paragraph are supplementary to and not in substitution
for any rights of the Debenture Holder. The Debenture Holder may
from time to time fix the remuneration of such receiver and
direct the payment thereof out of charged receipts. All monies
from time to time received by such receiver shall be paid by him,
first in discharge of all rents, taxes, rates, insurance
premiums, and accounts payable affecting the ability of the
Company to continue to earn the charged receipts; secondly, in
payment of his remuneration as receiver; thirdly, in keeping in
good standing all liens and charges on the Computer Centers, if
any, ranking prior to the security hereby constituted; fourthly,
in payment of any principal due and payable to the Debenture
Holder, whether due and payable upon this Debenture or otherwise;
fifthly, in payment of the interest accruing due to the Debenture
Holder whether accruing due on this Debenture or otherwise; and
lastly, the residue of any monies so received shall be paid to
the Company. The Debenture Holder in appointing or refraining
from appointing such receiver shall not incur any liability to
the receiver, the Company, or otherwise, nor shall the Debenture
Holder be responsible for any acts of the receiver.
3.4 In case the security hereby constituted shall have become
enforceable, the Debenture Holder shall have the power to waive
the default provided that no act or omission of the Debenture
Holder in the premises shall extend to or be taken in any manner
whatsoever to affect any subsequent default or any rights
resulting therefrom, and provided further that if such waiver
takes place after the security hereby constituted has become
enforceable, the security hereof shall, notwithstanding anything
to the contrary herein contained, be deemed not to have become
enforceable, and the floating charge herein contained shall be
deemed not to have crystallized or become fixed or specific and
shall continue as a floating charge as if such breach or default
had not occurred, but nothing herein contained shall in any way
affect the validity of any acts by any receiver appointed
pursuant hereto or any disposition of assets of the Company made
pursuant hereto prior to waiver.
3.5 The Company agrees to pay to the Debenture Holder forthwith
on demand all cost, charges, and expenses, including, but not in
limitation of the generality of the foregoing, legal fees on an
attorney-client basis, of or incurred by the Debenture Holder in
connection with the recovery or enforcement of payment of any
monies owing hereunder whether by realization or otherwise. All
such sums, together with interest thereon at the rate set forth
in this Debenture until paid, shall be added to the indebtedness
secured by the Debenture and shall also be secured thereby,
together with all other indebtedness secured thereby.
SECTION 4 - Notice
4.1 Any notice given by the Debenture Holder in connection with
this Debenture may be given by mailing the same addressed to the
Company at its registered office and any notice so mailed shall
be conclusively deemed to have been received by the Company on
the next business day following that on which it was so mailed.
Any notice given by the Company to the Debenture Holder in
connection with this Debenture may be given by mailing the same
addressed to the Debenture Holder in care of North American Oil &
Gas Corp., P.O. Box 500, Grand Cayman Island, B.W.I., and any
notice so mailed shall be conclusively deemed to have been
received by the Debenture Holder on the next business day
following that on which it was so mailed. The Debenture Holder
and the Company may by notice in writing to the other give notice
of change of its address for the giving of notices as herein
provided.
SECTION 5 - Proviso for Redemption
5.1 If the Company, its successors or assigns, shall pay or
cause to be paid to the Debenture Holder the monies secured by
this Debenture and shall otherwise observe and perform the terms
thereof, then this Debenture and the rights thereby granted shall
cease and be void and thereupon the Debenture Holder shall at the
request and at the expense of the Company, its successors or
assigns, cancel and discharge the charge constituted by this
Debenture and execute and deliver to the Company, its successors
or assigns, such deeds and other instruments as shall be
requisite to satisfy the charge hereby constituted.
SECTION 6 - General
6.1 This Debenture may be given as additional security to
another security or securities to secure the repayment by the
Company of any principal sum contained in such other security or
securities, and all payments made under the provisions of this
Debenture and any conversions of debt into restricted stock
hereunder shall reduce pro tanto the amount outstanding under
this Debenture as well as the amount secured under the provisions
of said other security or securities, if any, and the Company
further covenants with the Debenture Holder that any default
under any covenant, term, or condition contained in any of the
securities above referred to shall constitute default hereunder.
Notwithstanding any other provision set forth herein, the Company
retains the right to borrow up to Five Million Dollars under this
instrument, and if the Company makes any payments to the
Debenture Holder or if the Debenture Holder shall exercise any
right of conversion set forth hereinabove, such payments or such
conversions of debt to equity shall be deducted from the amount
outstanding under the Debenture. In the event of such repayment
or conversion, the Company shall retain the right to borrow
additional sums under this Debenture so long as amounts
outstanding shall not exceed Five Million Dollars.
6.2 Time is of the essence of this Debenture.
6.3 Neither the taking of any judgment or the exercise of any
power of seizure or sale shall operate to extinguish the
liabilities of the Company to make payment of the principal sum
hereby secured or interest thereon nor shall such operate as a
merger of a covenant or affect the right of the Debenture Holder
to interest at the rate hereinbefore specified.
6.4 The Company agrees that neither the preparation nor the
execution nor the registration of this Debenture shall bind the
Debenture Holder to advance the monies hereby secured nor shall
the advance of a part of the monies secured hereby bind the
Debenture Holder to advance any unadvanced portion thereof, but
nevertheless the charge hereby created shall take effect
forthwith upon the execution of these presents by the Company,
and the aforesaid legal and other fees and disbursements if not
paid by the Company are to be secured by the charge hereby
created whether or not the whole or any balance of the principal
sum remains not advanced, and the said fees and disbursements
shall remain payable forthwith without demand therefor with
interest at the rate provided for in this Debenture, and in
default all remedies hereunder and at law and in equity shall be
exercisable.
6.5 This Debenture shall be interpreted under the laws of the
State of Colorado, United States of America, and shall be deemed
to be a Colorado contract.
6.6 This Debenture and all its provisions shall enure to the
benefit of the Debenture Holder, its successors and assigns, and
shall be binding upon the Company, its successors and assigns.
SCHEDULE A
to a Debenture of
TEXAS PETROLEUM CORPORATION, dated this 31st day of October 1992.
This Debenture will be secured by, and loan principal and
interest will be repaid out of:
All Company assets of a like kind or nature hereafter acquired by
the Company including but not limited to the E.T.
"TeleManagement" System, 1-900 services, 1-800 services,
VoiceMail services and Computer Centers, whether in substitution
therefore or in addition thereto as more fully set forth in the
Loan Agreement attached hereto and made a part hereof by this
reference.
