Exhibit 10.1

 

THIS CONVERTIBLE DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “1933 ACT”), OR UNDER THE PROVISIONS OF ANY APPLICABLE
STATE SECURITIES LAWS, BUT HAS BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR
PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE 1933
ACT, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS.  THIS DEBENTURE MAY NOT BE
SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT
UNDER PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT; AND IN THE CASE OF AN
EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THIS
DEBENTURE.

 

KCB JADE HOLDINGS, LLC

 

Issue Date: March 19, 2020

$100,000.00 (the “Principal”)

 

CONVERTIBLE DEBENTURE

 

KCB JADE Holdings, LLC, a Delaware limited liability company (the “Company”),
pursuant to this Convertible Debenture (this “Debenture”) for value received,
hereby promises to pay to the order of Zoned Properties, Inc., a Nevada
corporation, or registered assigns (the “Holder”) on the Maturity Date as
hereinafter defined, at the principal offices of the Company, the principal sum
set forth above (the “Principal”), and to pay interest on the outstanding
principal sum at the rate of six and one/half percent (6.5%) per annum (the
“Interest Rate”).  The Maturity Date as defined herein shall be five (5) years
from the Issue Date as set forth above (i.e. March 19, 2025) (the “Maturity
Date”). Interest shall commence accruing on the date hereof, be computed on the
basis of a 365-day year and the actual number of days elapsed, and shall be
payable annually due by the 1st day of each calendar anniversary following the
Issue Date. Principal shall be due and payable on or before the Maturity
Date.  All payments due hereunder shall be made in lawful money of the United
States of America. Any payment otherwise due on a Saturday, Sunday or legal Bank
holiday may be paid on the following business day.    

 

1.Right of Prepayment, Conversion Rights, Maturity Rights and Certain
Adjustments.      

(a)Right of Prepayment. The Company may prepay this Debenture at any point after
eighteen (18) months following the Issue Date, in whole or in part. However, if
the Company elects to prepay this Debenture prior to the Maturity Date or prior
any Conversion outlined below in whole or in part, the Holder will be entitled
to receive a number of Units (as defined in the Limited Liability Company
Operating Agreement of the Company (the “Operating Agreement”)), in addition to
such prepayment amount, constituting ten percent (10%) of the total outstanding
Units and ten percent (10%) of the total Percentage Interest (as defined in the
Operating Agreement) following such issuance and at the time of such issuance.
   

(b)Right of Conversion.    

(i)Voluntary Conversion. On or after six (6) months from the Issue Date, the
Holder is entitled to convert all or a portion of the Principal balance and all
accrued and unpaid interest due hereunder (the “Outstanding Amount”) into a
number of Units equal to the proportion of the Outstanding Amount being
converted multiplied by the Conversion Percentage, as defined below). Should the
Company default on payment hereof, the Holder, may at its option, extend all
conversion rights, through and including the date the Company tenders or
attempts to tender payment in full of all amounts due under this Debenture.
Conversion rights shall terminate upon acceptance by Holder of payment in full
of principal, accrued interest and any other amounts due under this Debenture.

 

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(ii)Conversion Percentage. The Conversion Percentage shall be thirty three
percent (33%) of the total number of Units issued and outstanding at the time of
Conversion, constituting thirty three percent (33%) of the total Percentage
Interest (the “Conversion Percentage”).    

(iii)Clarification. For the avoidance of doubt and by way of example solely:    

(1)In the event that, at a particular time, the Holder elects to convert 50% of
the Outstanding Amount into Units, the Holder shall, at such time, be issued a
number of Units equal to 16.5% of the issued and outstanding Units at such time;
and if, thereafter, the Holder elects to covert 50% of the remaining Outstanding
amount, the Holder shall, at such time, be issued a number of Units equal to
8.25% of the issued and outstanding Units at such time, regardless as to whether
such Converted Amount is 50% of the original converted amount above.    

(2)The intent of the provisions herein is, and such provisions shall be enforced
such that, the Holder shall, upon and at the time of full conversion of all of
the Outstanding Amount, hold a number of Units equal to 33% of the issued and
outstanding Units at such time, regardless of whether such units were issued on
an equal Unit-per-dollar-of-converted Outstanding Amount or not.    

(c)Right of Maturity Units. If the Company (i) does not elect to exercise its
rights of Prepayment prior to the Maturity Date, and (ii) the Holder does not
elect to exercise its rights of Conversion, and (iii) the Company pays to Holder
all outstanding Principal and Interest accrued and due under the terms of this
Debenture on the Maturity Date, then the Holder will still be entitled to
receive a number of Units, in addition to such payment amount, constituting
eight percent (8%) of the total outstanding Units and eight percent (8%) of the
total Percentage Interest following such issuance and at the time of such
issuance.    

2.Waiver and Consent.  To the fullest extent permitted by law and except as
otherwise provided herein, the Company waives demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold the Company liable with respect to this
Debenture.    

3.Costs, Indemnities and Expenses.  The Company agrees to pay all reasonable
fees and costs incurred by the Holder in collecting or securing or attempting to
collect or secure this Debenture, including reasonable attorneys’ fees and
expenses, whether or not involving litigation, collecting upon any judgments
and/or appellate or bankruptcy proceedings.  The Company agrees to pay any
documentary stamp taxes, intangible taxes or other taxes which may now or
hereafter apply to this Debenture or any payment made in respect of this
Debenture, and the Company agrees to indemnify and hold the Holder harmless from
and against any liability, costs, attorneys’ fees, penalties, interest or
expenses relating to any such taxes, as and when the same may be incurred.    

4.Representations; Warranties and Covenants.  The Company represents, warrants
and covenants to the Holder that:    

(a)The Company is duly organized, validly existing and in good standing (if
applicable) under the laws of State of Delaware;    

(b)the Company has authority to own its property and assets and to carry on its
business as now conducted, except, in each case, where the failure to do so, or
so possess, individually or in the aggregate would not reasonably be expected to
result in a material adverse effect;

 

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(c)the Company has all requisite organizational power and authority to execute
and deliver and perform all its obligations under this Debenture.    

(d)the Company is qualified to do business in, and is in good standing (where
such concept exists) in, every jurisdiction in which the nature of its business
makes such qualification necessary, except where the failure to be so qualified
or in good standing individually or in the aggregate would not reasonably be
expected to result in a material adverse effect;    

(e)the transactions contemplated hereby is within the Company’s organizational
powers and have been duly authorized by all necessary limited liability company
action;    

(f)this Debenture has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of such party, enforceable in
accordance with its terms; and    

(g)the transactions to be entered into and contemplated by this Debenture (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any governmental authority, (b) will not (i) violate any
applicable law or (ii) the organizational documents, charter, operating
agreement, or certificate of formation of the Company, (c) will not violate or
result in a default under any indenture or any other agreement, instrument or
other evidence of indebtedness, and (d) will not result in the creation or
imposition of any lien on any asset of such party.    

5.Covenants. So long as any portion of this Debenture remains outstanding, the
Company will not directly or indirectly, without the consent of the Holder (i)
fail to continue to engage in business of the same general type as now conducted
by it and to preserve, renew and keep in full force and effect, its corporate
existence and its assets, rights, privileges and franchises to the extent
necessary or desirable in the normal conduct of business; (ii) fail to comply in
all material respects with all applicable laws, ordinances, rules, regulations,
decisions, orders and requirements of governmental authorities; or (iii) fail to
keep proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities.    

6.Event of Default.  An “Event of Default” shall be deemed to have occurred upon
the occurrence of any of the following: (a) the Company shall fail to make any
payment of the principal, interest, costs, indemnities, or expenses pursuant to
this Debenture when and as the same shall become due and payable; (b) there
shall occur any default, whether in whole or in part, in the due observance or
performance of any obligations or other covenants, terms or provisions to be
performed by the Company under this Debenture or any of the representations and
warranties of the Company shall cease to be true and correct in all respects;
(c) the Company shall make a general assignment for the benefit of its
creditors; (d) the Company shall apply for or consent to the appointment of a
receiver, trustee, assignee, custodian, sequestrator, conservator, liquidator or
similar official for itself or any of its assets and properties; (e) the Company
shall voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief as a debtor under the United States
Bankruptcy Code or any other liquidation, conservatorship, bankruptcy, general
assignment for the benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief laws of the
United States or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally (collectively, the “Debtor Relief
Laws”); (f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed against the Company seeking (1) liquidation,
reorganization or other relief in respect of the Company or its debts, or of a
substantial part of its assets, under any Debtor Relief Law or (2) the
appointment of a receiver, trustee, assignee, custodian, sequestrator,
conservator, liquidator or similar official for itself or any of its assets and
properties; (i) the Company consents to the institution of, or fail to contest
in a timely and appropriate manner, any proceeding or petition described in
clause (f) above.  Upon the occurrence of an Event of Default the entire
Principal balance and accrued and unpaid interest outstanding under this
Debenture, and all other obligations of the Company under this Debenture, shall
be immediately due and payable and the Holder may exercise any and all rights,
power and remedies available to it at law or in equity or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Debenture and proceed to enforce the payment thereof or any
other legal or equitable right of the Holder. The Holder need not provide, and
Company hereby waives, any presentment, demand, protest or other notice of any
kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by the Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

 

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7.Default Interest.  Any amount of principal or interest, which is not paid when
due shall bear interest at the rate of twelve percent (12%) per annum from the
due date thereof until the same is paid.    

8.Maximum Interest Rate.  In no event shall any agreed to or actual interest
charged, reserved or taken by the Holder as consideration for this Debenture
exceed the limits imposed by applicable law.  In the event that the interest
provisions of this Debenture shall result at any time or for any reason in an
effective rate of interest that exceeds the maximum interest rate permitted by
applicable law, then without further agreement or notice the obligation to be
fulfilled shall be automatically reduced to such limit and all sums received by
the Holder in excess of those lawfully collectible as interest shall be applied
against the principal of this Debenture immediately upon the Holder’s receipt
thereof, with the same force and effect as though the Company had specifically
designated such extra sums to be so applied to principal and the Holder had
agreed to accept such extra payment(s) as a premium-free prepayment or
prepayments.    

9.Cancellation of Debenture. Upon the repayment by the Company of all of its
obligations hereunder to the Holder, including, without limitation, the
principal amount of this Debenture, plus accrued but unpaid interest, the
indebtedness evidenced hereby shall be deemed paid in full.  Except as otherwise
required by law or by the provisions of this Debenture, payments received by the
Holder hereunder shall be applied first against expenses and indemnities, next
against interest accrued on this Debenture, and next in reduction of the
outstanding principal balance of this Debenture.    

10.Lost, Stolen or Mutilated Debenture. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Debenture (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Debenture, the Company shall
execute and deliver to the Holder a new Debenture (in accordance with the
provisions herein) representing the outstanding Principal. Whenever the Company
is required to issue a new Debenture pursuant to the terms herein, such new
Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent,
as indicated on the face of such new Debenture, the Principal and interest
remaining outstanding or owed, (iii) shall have an issuance date, as indicated
on the face of such new Debenture, which is the same as the Issue Date, (iv)
shall have the same rights and conditions as this Debenture, and (v) shall
represent accrued and unpaid interest and late charges on the Principal and
interest of this Debenture, from the Issue.    

11.Transfers of Debenture to Comply with the 1933 Act. The Holder agrees that
this Debenture may not be sold, transferred, pledged, hypothecated or otherwise
disposed of except as follows:  (a) to a person whom the Debenture may legally
be transferred without registration and without delivery of a current prospectus
under the Securities Act of 1933, as amended (the “1933 Act”) with respect
thereto and then only against receipt of an agreement of such person to comply
with the provisions of this Section 12 with respect to any resale or other
disposition of the Debenture; or (b) to any person upon delivery of a prospectus
then meeting the requirements of the 1933 Act relating to such securities and
the offering thereof for such sale or disposition, and thereafter to all
successive assignees.

 

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12.Severability.  If any provision of this Debenture is, for any reason, invalid
or unenforceable, the remaining provisions of this Debenture will nevertheless
be valid and enforceable and will remain in full force and effect.  Any
provision of this Debenture that is held invalid or unenforceable by a court of
competent jurisdiction will be deemed modified to the extent necessary to make
it valid and enforceable and as so modified will remain in full force and
effect.    

13.Amendment and Waiver.  This Debenture may be amended only in a writing
executed by the Company and the Holder. Any provision of this Debenture may be
waived only in a writing executed by Holder.  The waiver by Holder of a breach
of any provision of this Debenture shall not operate or be construed as a waiver
of any other breach.    

14.Assignment Successors.  The Company may not assign or transfer this Debenture
or any rights or obligations herein without the prior written consent of the
Holder. Except as otherwise provided herein, this Debenture shall bind and inure
to the benefit of and be enforceable by the Company, the Holder and their
permitted successors and assigns.    

15.Further Assurances.  The Company will execute all documents and take such
other actions as the Holder may reasonably request in order to consummate the
transactions provided for herein and to accomplish the purposes of this
Debenture.    

16.Notices, Consents, etc.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms hereof must be
in writing and will be deemed to have been delivered:  (i) upon receipt, when
delivered personally; (ii) upon receipt of a confirmation email, when sent by
email with return receipt requested; or (iii) one (1) trading day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same.  The addresses and email addresses
numbers for such communications shall be as follows or such other address and/or
facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party three (3)
trading days prior to the effectiveness of such change:

 

If to the Company:

 

KCB Jade Holdings, LLC

Attention: Kathryn Blackwell, President

[________________]

[________________]

Email: [____________]

 

If to Holder:

 

Zoned Properties, Inc.

Attention: Bryan McLaren

14269 N. 87th Street, #205

Scottsdale, AZ 85260

Email: bryan@zonedproperties.com

 

17.Governing Law.  All questions concerning the construction, validity and
interpretation of this Debenture and any and all disputes or controversies
arising out of the subject matter hereof (whether by contract, tort or
otherwise) shall be governed by and construed in accordance with the domestic
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law provision (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.

 

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18.Jurisdiction.  EACH PARTY HERETO AGREES THAT JURISDICTION AND VENUE IN ANY
ACTION BROUGHT BY THE HOLDER PURSUANT TO THIS DEBENTURE SHALL PROPERLY (BUT NOT
EXCLUSIVELY) LIE IN ANY FEDERAL OR STATE COURT LOCATED IN MARICOPA COUNTY,
ARIZONA. EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH
COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH
ACTION.  EACH PARTY HERETO IRREVOCABLY AGREES THAT VENUE WOULD BE PROPER IN SUCH
COURT, AND HEREBY WAIVES ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR
INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION.  EACH PARTY HERETO FURTHER
AGREES THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL CONSTITUTE VALID AND
LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY
OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.    

19.Third Parties.  Nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or entity, other than the Holder
and its permitted successor and assigns, any rights or remedies under or by
reason of this Debenture.    

20.Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS DEBENTURE. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY HERETO UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY HERETO MAKES THIS
WAIVER VOLUNTARILY, AND (D) EACH PARTY HERETO HAS BEEN INDUCED TO ENTER INTO
THIS DEBENTURE BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS ‎
SECTION 21.    

21.Construction and Headings. This Debenture shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
person as the drafter hereof. The headings of this Debenture are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Debenture.    

22.Entire Agreement.  This Debenture (including any recitals hereto) set forth
the entire understanding of the parties with respect to the subject matter
hereof, and shall not be modified or affected by any offer, proposal, statement
or representation, oral or written, made by or for any party in connection with
the negotiation of the terms hereof, and may be modified only by instruments
signed by all of the parties hereto.

 

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, this Debenture is executed by the undersigned as of the
Issue Date.

 

  KCB Jade Holdings, LLC.       By: /s/ Kathryn Blackwell     Kathryn Blackwell
    CEO       By: /s/ Chelsea Mulligan     Chelsea Mulligan     COO

 

Agreed and accepted:

 

Zoned Properties, Inc.

 

By: /s/ Bryan McLaren   Name:  Bryan McLaren   Title: Chief Executive Officer  

 

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