Document:

ex10_18.htm

Exhibit 10.18

SECOND AMENDMENT TO PARTICIPATION AGREEMENT

Block 4 Joint Development Zone

This Amendment to Participation Agreement (“Agreement”) made and entered into this 14th day of March 2006 by and between

ERHC Energy, Inc., a corporation organized and existing under the laws of the State of Colorado, U.S.A. (hereinafter referred to as “ERHC”), and

Addax Petroleum (Nigeria Offshore 2) Limited, a company incorporated in the Federal Republic of Nigeria (hereinafter referred to as “Addax”) and Addax Petroleum
NV, a company incorporated in Curacao, as Parent.

Each of ERHC and Addax is individually a “Party” and they are collectively the “Parties” to this Agreement.

WITNESSETH:

WHEREAS, the Parties have executed a Participation Agreement dated 17 November 2005 (the “PA”) wherein the Parties agreed to the terms and conditions whereby Addax would earn certain rights in Block 4 of the Nigeria-Sao Tome e Principe Joint Development
Zone (the “JDZ”); and

WHEREAS, the Parties have executed an Amendment to Participation Agreement dated 23 February 2006; and

WHEREAS, the Parties now wish to further amend the PA as provided in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1.             We have been advised that the PSC in respect of Block 4 will be executed on 14 March 2006 or later and that the division of interest in the PSC will show that the ERHC/Addax consortium (including preferential rights) will be sixty percent (60%).
In order to give effect to the PA, as amended, Addax and ERHC shall, immediately upon the execution of the PSC execute the letter attached hereto as Exhibit “1” (the “JDA Letter) that will result in Addax owning a thirty-three and three tenths percent (33.3%) interest and ERHC owning a twenty-six and seven-tenths percent (26.7%) participating interest in and to the PSC covering Block 4. ERHC and Addax will do such acts as is necessary to seek approval from the Joint Development Authority to
the JDA Letter and the Assignment.

  

 

  

2.              Except as specifically amended by this Agreement, the PA shall remain unchanged. The Parties hereby affirm and ratify the PA as amended by this Agreement.

Done and executed this 14th day of March 2006.

	
ERHC Energy, Inc.
	  
	  	  	  
	  	  	  
	  	
/s/ Walter F. Brandhuber
	  
	  	
Walter F. Brandhuber
	  
	  	
President and Chief Executive Officer
	  
	  	  	  
	  	  	  
	
Addax Petroleum (Nigeria Offshore) Limited
	  
	  	  	  
	  	  	  
	  	
/s/ I. L. Blair
	  
	  	
I. L. Blair
	  
	  	
Director
	  
	  	  	  
	  	  	  
	
For anion behalf of
	  
	
Addax Petroleum NV
	  
	  	  	  
	  	  	  
	By:	
 
	  	  
	  	
Jean Claude Gandur
	  
	  	
Chairman
	  

 

  

 

  

Exhibit “1”

March 14, 2006

Mr. Carlos Gomes

The Chairman

Nigeria-Sao Tome & Principe

Joint Development Authority

Plot 1101 Aminu Kano Crescent

Wuse II, Abuja

Nigeria

NIGERIA-SAO TOME E PRINCIPE JOINT DEVELOPMENT ZONE - BLOCK 4

Dear Sir:

Congratulations are in order for all involved in the successful execution of the Block 4 PSC on this date.

Please be advised that the interest shown for the ERHC/Addax consortium (including pre-existing rights) as a total of 60% shall be individually owned by Addax in the proportion of 33.3% and by ERHC in the proportion of 26.7%. We have this day entered into an Amendment and Ratification of the JOA executed by all parties
to the PSC and JOA whereby this interest is accepted for ERHC and Addax.

We are looking forward to a long and prosperous project in the development of Block 4.

Sincerely,

	
ERHC Energy Nigeria Block 3 JDZ Limited
	
Addax Petroleum (Nigeria Offshore 2) Limited

	  	  
	  	  
	  	  
	
Walter F. Brandhuber
	
I. L. Blair

	
President and CEO
	
Directorex10_19.htm

Exhibit 10.19

 

am no 3

PARTICIPATION AGREEMENT

This Third Amendment to a Participation Agreement (“Agreement”) is made and entered into this 14th day of July, 2006 by and between

ERHC Energy Nigeria JDZ Block 4 Limited a corporation organized and existing under the laws of Nigeria (hereinafter referred to as (“ERHC”),

ERHC Energy, Inc., a corporation organized and existing under the laws of the State of Colorado, U.S.A. (hereinafter referred to as “ERHC Inc”), and

Addax Petroleum JDZ 4 Limited (formerly Addax Petroleum (Nigeria Offshore 2) Limited), a company incorporated in the Federal Republic of Nigeria (hereinafter referred to as “Addax”); and Addax
Petroleum NV, a company incorporated in Curacao, NA (hereinafter referred to as “Parent”).

Each of ERHC, ERHC Inc and Addax is individually a “Party” and they are collectively the “Parties” to this Agreement.

WITNESSETH:

WHEREAS the Parties have executed a Participation Agreement dated 17th agreement dated 11th April 2006
(the “Amendments”) (the Amendments and the original agreement are together herein referred to as the “PA”) wherein the Parties agreed to the terms and conditions whereby Addax would earn certain rights in Block 4 of the Nigeria-Sao Tome e Principe Joint Development Zone (the “JDZ”);

WHEREAS by a letter dated 10th April 2006 ERHC Inc assigned its rights and obligations under the PA (other than its obligation to guarantee ERHC's obligations under the PA pursuant to clause 10 (c) thereof) to ERHC;

WHEREAS ERHC Inc has an existing arrangement with Godsonic Oil Company Limited (“Godsonic”) whereby a nine percent (9%) Participating Interest was to be transferred by ERHC to Godsonic (the “Godsonic Interest”); and

WHEREAS Godsonic has not required the transfer to it of the Godsonic Interest within the Option Period and the Parties have agreed to extend the Option Period for a further period of one month, in order that negotiations may be concluded between ERHC and Godsonic,
on and subject to the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

  

1

  

am no 3

	
1.
	
The Option Period shall be extended for a further period of thirty (30) days expiring on 9th August 2006.

	
2.
	
Except as specifically amended by this Agreement, the PA shall remain unchanged. The Parties hereby affirm and ratify the PA as amended by this Agreement.

IN WITNESS WHEREOF, the duly authorized representatives of the Parties hereto have executed this Agreement on the day, month and year first above written.

	
ERHC Energy, Inc.
	  
	  	  	  
	  	  	  
	  	
/s/ Walter F Brandhuber
	  
	  	
Walter F Brandhuber
	  
	  	
President and Chief Executive Officer
	  
	  	  	  
	  	  	  
	
ERHC Energy Nigeria JDZ Block 4 Limited
	  
	  	  	  
	  	  	  
	By:	
 
	
/s/ Walter F Brandhuber
	  
	  	  	  
	  	
Walter F Brandhuber
	  
	  	
President and Chief Executive Officer
	  
	  	  	  
	  	  	  
	
Addax Petroleum JDZ 4 Limited
	  
	  	  	  
	  	  	  
	By:	
 
	
/s/ David Codd
	  
	  	
David Codd
	  
	  	
Authorised signatory
	  
	  	  	  
	  	  	  
	
For and on behalf of
	  
	
Addax Petroleum NV
	  
	  	  	  
	  	  	  
	By:	
 
	
/s/ David Codd
	  
	  	
David Codd
	  
	
Authorised SignatoryNEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

    

    Original
Issue Date:  June 5, 2009

    
      Original
Conversion Price (subject to adjustment herein): $0.50

    

    

    $500,000.00

    

    STRAIGHT
CONVERTIBLE DEBENTURE

    DUE
JUNE 30, 2010

     

    FOR VALUE
RECEIVED, The Saint James Company, a North Carolina corporation (the “Company”),
promises to pay to Pinnacle Resources, Inc., a Wyoming corporation, or its
registered assigns (the “Holder”), the
principal sum of $500,000.00 on June 30, 2010 (the “Maturity Date”), or
such earlier date as this Debenture is required to be repaid as provided
hereunder, and to pay interest to the Holder on the then-outstanding principal
amount of this Debenture in accordance with the provisions
hereof.  This Debenture is subject to the following additional
provisions:

     

    Section
1.       
     Definitions.  For
the purposes hereof, capitalized terms shall have the following
meanings:

     

    “Alternate
Consideration” shall have the meaning set forth in Section
5(e).

     

    “Bankruptcy Event”
means any of the following events:  (a) the Company commences a case
or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency, or liquidation
or similar law of any jurisdiction relating to the Company; (b) there is
commenced against the Company any such case or proceeding that is not dismissed
within 60 days after commencement; (c) the Company is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e) the
Company makes a general assignment for the benefit of creditors; (f) the Company
calls a meeting of its creditors with a view to arranging a composition,
adjustment, or restructuring of its debts; or (g) the Company by any act or
failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Budget” means the
agreed-upon use by the Company of the principal of this Debenture, the
preparation and agreement in respect of such Budget to be concluded not later
than June 19, 2009, at 5:30 p.m. (Colorado time).

     

    “Business Day” means
any day except any Saturday, any Sunday, any day which shall be a federal legal
holiday in the United States or any day on which banking institutions in the
State of Colorado are authorized or required by law or other governmental action
to close.

     

    “Conversion Date”
shall have the meaning set forth in Section 4(a).

     

    “Conversion Price”
shall have the meaning set forth in Section 4(b).

     

    “Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of this
Debenture in accordance with the terms hereof.

     

    “Debenture Interest
Rate” shall have the meaning set forth in Section 2(a).

     

    “Debenture Register”
shall have the meaning set forth in Section 2(b).

     

    “Draw-Down” means the
release of principal of this Debenture to the Company in such amounts as will
permit the Company to utilize the principal hereof in the manners and at the
times set forth in the Budget; provided, however, that all Draw-Downs
shall have been completed not later than July 24, 2009 at 5:30 p.m. (Colorado
time), and, if not then otherwise required under the Budget, shall have been in
amounts reasonably ratable during the period commending on the date hereof and
terminating on such final date.

     

    “Equity Conditions”
means, during the period in question, (i) the
Company shall have duly honored all conversions occurring by virtue of one or
more Notices of Conversion of the Holder, if any, (ii) the Common Stock
is trading or quoted on a Trading Market and (and the Company believes, in good
faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (iii) there is no existing Event of
Default or no existing event that, with the passage of time or the giving of
notice, would constitute an Event of Default, (iv) the issuance of the shares in
question to the Holder would not violate the limitations set forth in Section
4(c) herein, (v) there has been no public
announcement of a pending or proposed Fundamental Transaction that has not been
consummated, and (vi) the Holder is not in possession of any information
provided by the Company that constitutes, or may constitute, material non-public
information.

     

    “Event of Default” shall have the meaning set forth in Section
8.

     

    “Fundamental
Transaction” shall have the meaning set forth in Section
5(b).

     

    “Interest Payment
Date” shall have the meaning set forth in Section 2(a).

     

    “Late Fees” shall have
the meaning set forth in Section 2(d).

     

    “Colorado Courts”
shall have the meaning set forth in Section 9(d).

     

    “Notice of Conversion”
shall have the meaning set forth in Section 4(a).

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Original Issue Date”
means the date of issuance of this Debenture, regardless of any transfers hereof
and regardless of the number of instruments that may be issued to evidence this
Debenture.

     

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

     

    “Share Delivery Date”
shall have the meaning set forth in Section 4(d).

     

    “Trading Day” means a
day on which the New York Stock Exchange is open for business.

     

    “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question:  the New York Stock Exchange,
NYSE Alternext US, the Nasdaq Global Select Market, the Nasdaq Global Market,
the Nasdaq Capital Market, the OTC Bulletin Board, or the Pink OTC Markets,
Inc.

     

    Section
2.            
Interest.

     

    a)           Payment of Interest in Good
Funds.  The Company shall pay interest in good funds to the
Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of 8% per annum in excess of the WSJ Prime Rate on
the date hereof (the “Debenture Interest
Rate”), payable on the Maturity Date (the “Interest Payment
Date”).

     

    b)           Interest
Calculations.  Interest shall be calculated on the basis of a
360-day year, consisting of twelve 30 calendar day periods, and shall accrue
daily commencing on the Original Issue Date until payment in full of the
outstanding principal, together with all accrued and unpaid interest and other
amounts which may become due hereunder, has been made.  Interest
hereunder will be paid to the Person in whose name this Debenture is registered
on the records of the Company regarding registration and transfers of this
Debenture (the “Debenture
Register”).

     

    c)           Late
Fee.  All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the lesser of 6%
per annum in excess of the Debenture Interest Rate or the maximum rate permitted
by applicable law (“Late Fees”) which
shall accrue daily from the date such interest is due hereunder through and
including the date of actual payment in full.

     

    Section
3.             Registration of Transfers
and Exchanges.

     

    a)           Different
Denominations.  This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same.  No service charge
will be payable for such registration of exchange.

     

    b)           Reliance on Debenture
Register.  Prior to due presentment for transfer to the Company
of this Debenture, the Company and any agent of the Company may treat the Person
in whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the
contrary.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Section
4.             Conversion.

     

    a)           Voluntary
Conversion.  At any time after the Original Issue Date until
this Debenture is no longer outstanding, this Debenture (inclusive of principal
and all accrued and unpaid interest thereon) shall be convertible, in whole or
in part, into shares of Common Stock at the option of the Holder, at any time
and from time to time (subject to the conversion limitations set forth in
Section 4(c) hereof).  The Holder shall effect conversions by
delivering to the Company a Notice of Conversion, the form of which is attached
hereto as Annex
A (a “Notice of
Conversion”), specifying therein the principal amount and the accrued and
unpaid interest thereon of this Debenture to be converted and the date on which
such conversion shall be effected (such date, the “Conversion
Date”).  If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder.  To effect conversions hereunder, the
Holder shall not be required to surrender this Debenture to the Company
physically unless the entire principal amount of this Debenture, plus all
accrued and unpaid interest thereon, has been so
converted.  Conversions hereunder shall have the effect of lowering
the outstanding principal amount and the unpaid interest thereon of this
Debenture in an amount equal to the applicable conversion.  The Holder
and the Company shall maintain records showing the principal amount(s) and the
accrued and unpaid interest thereon so converted and the date of such
conversion(s).  The Company may deliver an objection to any Notice of
Conversion within one Business Day of delivery of such Notice of
Conversion.  In the event of any dispute or discrepancy, the records
of the Holder shall be controlling and determinative in the absence of manifest
error.  The Holder,
and any assignee by acceptance of this Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of a portion of
this Debenture, the unpaid and unconverted principal amount of this Debenture
may be less than the amount stated on the face hereof.

     

    b)           Conversion
Price.  The conversion price in effect on any Conversion Date
shall be $0.50, subject to adjustment herein (the “Conversion
Price”).

     

    
      
         

      

      
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    c)           Conversion
Limitations.  The Company shall not effect any conversion of
this Debenture, and a Holder shall not have the right to convert any portion of
this Debenture, to the extent that, after giving effect to the conversion set
forth on the applicable Notice of Conversion, the Holder (together with the
Holder’s Affiliates, and any other person or entity acting as a group together
with the Holder or any of the Holder’s Affiliates) would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).  For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall exclude the number of
shares of Common Stock that are issuable upon (A) conversion of the remaining,
unconverted principal amount of this Debenture beneficially owned by the Holder
or any of its Affiliates, and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for
purposes of this Section 4(c), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  To the extent that the limitation contained
in this Section 4(c) applies, the determination of whether this Debenture is
convertible (in relation to other securities owned by the Holder together with
any Affiliates) and of which principal amount of this Debenture is convertible
shall be in the sole discretion of the Holder, and the submission of a Notice of
Conversion shall be deemed to be the Holder’s determination of whether this
Debenture may be converted (in relation to other securities owned by the Holder
together with any Affiliates) and which principal amount of this Debenture is
convertible, in each case subject to the Beneficial Ownership Limitation. To
ensure compliance with this restriction, the Holder will be deemed to represent
to the Company each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy of such
determination.  In addition, a
determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder.  For purposes of this Section 4(c),
in determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following:  (A) the Company’s most recent periodic or
annual report, as the case may be; (B) a more recent public announcement by the
Company; or (C) a more recent notice by the Company or the Company’s transfer
agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Debenture, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Debenture held by the
Holder.  The Holder, upon not less than 61 days’ prior notice to the
Company, may increase or decrease the Beneficial Ownership Limitation provisions
of this Section 4(c).  Any such increase or decrease will not be
effective until the 61st day
after such notice is delivered to the Company.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 4(c) to correct this paragraph
(or any portion hereof) that may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation.  The limitations contained
in this paragraph shall apply to a successor holder of this
Debenture.

     

    
      d)      
      Mechanics of
Conversion.

    

     

    i.           Conversion Shares Issuable
Upon Conversion of Principal Amount.  The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by the quotient
obtained by dividing (x) the outstanding principal amount of this Debenture to
be converted by (y) the Conversion Price.

     

    ii.          Delivery of Certificate Upon
Conversion.  Not later than three Trading Days after each
Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the
Holder a certificate or certificates representing the Conversion Shares
representing the number of Conversion Shares being acquired upon the conversion
of this Debenture.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    iii.         Obligation
Absolute.  The Company’s obligations to issue and deliver the
Conversion Shares upon conversion of this Debenture in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law by
the Holder or any other Person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in connection
with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may
have against the Holder.

     

    iv.        Reservation of Shares
Issuable Upon Conversion.  The Company covenants that it will
at all times reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon conversion of this
Debenture, as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder, not less than such
aggregate number of shares of the Common Stock as shall be issuable (taking into
account the adjustments of Section 5) upon the conversion of the outstanding
principal amount of this Debenture and payment of interest
hereunder.  The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid and nonassessable.

     

    v.         Fractional
Shares.  No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of this Debenture.  As to
any fraction of a share that the Holder would otherwise be entitled to purchase
upon such conversion, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole
share.

     

    vi.        Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that, the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder of this Debenture and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.

     

    
      
         

      

      
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    Section
5.             Certain
Adjustments.

     

    a)           Stock Dividends and Stock
Splits.  If the Company, at any time while this Debenture is
outstanding:  (A) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company upon
conversion of, or payment of interest on, this Debenture); (B) subdivides
outstanding shares of Common Stock into a larger number of shares; (C) combines
(including by way of a reverse stock split) outstanding shares of Common Stock
into a smaller number of shares; or (D) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event.  Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination, or re-classification.

     

    b)           Fundamental
Transaction.  If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person; (B) the Company effects any sale of all or
substantially all of its assets in one transaction or a series of related
transactions; (C) any tender offer or exchange offer (whether by the Company or
another Person) is completed, pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property; or (D) the Company effects any reclassification of the Common Stock or
any compulsory share exchange, pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash, or property (in any such
case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction, the same kind and amount of securities, cash, or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the “Alternate
Consideration”).  For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders
of Common Stock are given any choice as to the securities, cash, or property to
be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any conversion of
this Debenture following such Fundamental Transaction.  To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new debenture consistent with the foregoing provisions and evidencing the
Holder’s right to convert such debenture into Alternate
Consideration.  The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 5(b)
and ensuring that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

     

    c)           Calculations.  All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a
share, as the case may be.  For purposes of this Section 5, the number
of shares of Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding any treasury
shares of the Company) issued and outstanding.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    d)           Notice to the
Holder.

     

    i.           Adjustment to Conversion
Price.  Whenever the Conversion Price is adjusted pursuant to
any provision of this Section 5, the Company shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.

     

    ii.           Notice to Allow Conversion
by Holder.  If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange, whereby the Common Stock is converted into other
securities, cash, or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation, or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall
cause to be delivered to the Holder at its last address as it shall appear upon
the Debenture Register, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights, or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the
failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert this Debenture
during the 20-day period commencing on the date of such notice through the
effective date of the event triggering such notice.

     

    Section
6.             Reserved.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    Section
7.            
Registration
Rights.  If the Company at any time proposes to register any of
its securities under the Securities Act of 1933, as amended, for sale to the
public, whether for its own account or for the account of other security holders
or both, except with respect to Registration Statements on Forms S-4, S-8, or
another form not available for registering the Conversion Shares for sale to the
public, provided the Conversion Shares have not otherwise been registered for
resale pursuant to an effective registration statement, each such time it will
give at least ten days’ prior written notice to the Holder and to the record
holder(s) of the Conversion Shares, as relevant, of its intention so to
do.  Upon the written request of the Holder and such record holders,
as appropriate, received by the Company within ten days after the giving of any
such notice by the Company to register any of the Conversion Shares not
previously registered, the Company will cause such Conversion Shares as to which
registration shall have been so requested to be included with the securities to
be covered by the registration statement proposed to be filed by the Company,
all to the extent required to permit the sale or other disposition of the
Conversion Shares so registered by the holder thereof (the “Seller”).  In
the event that any registration pursuant to this Section 7 shall be, in whole or
in part, an underwritten public offering of common stock of the Company, the
number of Conversion Shares to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided,
however, that the
Company shall notify the Seller in writing of any such
reduction.  Standard mutual indemnification terms and conditions shall
apply in respect of any such registration statement.  The Company
shall bear the costs and expenses of such registration; the Seller shall bear
the costs and expenses, including brokerage commissions and underwriter’s
discounts in respect of the resale of the Conversion
Shares.  Notwithstanding the foregoing provisions, the Company may
withdraw or delay or suffer a delay of any registration statement referred to
herein without thereby incurring any liability to the Seller.

     

    Section
8.             Events of
Default.

     

     
a)           “Event of Default”
means, wherever used herein, any of the following events (whatever the reason
for such event and whether such event shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree, or order of
any court, or any order, rule or regulation of any administrative or
governmental body):

     

    i.           any default in the payment of (A) the principal amount
of any Debenture or (B) interest and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and
payable;

     

    ii.           the
Company shall fail to observe or perform any other covenant or agreement
contained in this Debenture (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (vi) below), which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice
of such failure sent by the Holder and (B) 10 Trading Days after the Company has
become or should have become aware of such failure;

     

    iii.           any
representation or warranty made in this Debenture, any written statement
pursuant hereto, or any other report, financial statement, or certificate made
or delivered to the Holder shall be untrue or incorrect in any material respect
as of the date when made or deemed made;

     

    iv.           the
Company shall be subject to a Bankruptcy Event;

     

    v.           the
Common Stock shall not be eligible for listing or quotation for trading on a
Trading Market and shall not be eligible to resume listing or quotation for
trading thereon within five Trading Days; or

     

    vi.           the
Company shall fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date pursuant to Section 4(d) or the
Company shall provide at any time notice to the Holder, including by way of
public announcement, of the Company’s intention to not honor requests for
conversions of this Debenture in accordance with the terms
hereof.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

     b)           Remedies Upon Event of
Default.  If any Event of Default occurs, the outstanding
principal amount of this Debenture, plus accrued but unpaid interest and other
amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in
cash.  Commencing five days after the occurrence of any Event of
Default that results in the eventual acceleration of this Debenture, the
interest rate on this Debenture shall accrue at an interest rate equal to the
smaller of 6% per annum in excess of the Debenture Interest Rate or the maximum
rate permitted under applicable law.  Upon the payment in full of the
Mandatory Default Amount, the Holder shall promptly surrender this Debenture to
or as directed by the Company.  In connection with such acceleration
described herein, the Holder need not provide, and the 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 acceleration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall have all
rights as a holder of the Debenture until such time, if any, as the Holder
receives full payment pursuant to this Section 8(b).  No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

     

    Section
9.           Miscellaneous.

     

     a)           Notices.  Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, including, without limitation, any Notice of Conversion, shall
be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address
set forth above, or such other facsimile number or address as the Company may
specify for such purpose by notice to the Holder delivered in accordance with
this Section 9.  Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
the Holder appearing on the books of the Company, or if no such facsimile number
or address appears, at the principal place of business of the
Holder.  Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section 9 prior to 5:30 p.m. (Colorado time),
(ii) the date immediately following the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section 9 between 5:30 p.m. (Colorado time) and 11:59 p.m. (Colorado time)
on any date, (iii) the second Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.

     

     b)           Absolute
Obligation.  Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and accrued interest, as
applicable, on this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed.  This Debenture is a direct debt
obligation of the Company.

     

     c)           Lost or Mutilated
Debenture.  If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, reasonably satisfactory to the
Company.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

     d)           Governing
Law.  All questions concerning the construction, validity,
enforcement, and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Colorado, without regard to the principles of conflict of laws
thereof.  Each party agrees that all legal proceedings concerning the
interpretation, enforcement, and defense of the transactions contemplated hereby
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees, or agents) shall be commenced in the state
and federal courts sitting in the City of Denver, County of Denver (the “Colorado
Courts”).  Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the Colorado Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such Colorado Courts, or such Colorado Courts are
improper or inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Debenture
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
applicable law.  Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby.  If either party shall commence an
action or proceeding to enforce any provisions of this Debenture, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation, and prosecution of such action or
proceeding.

     

     e)           Waiver.  Any
waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture.  The failure of the Company or the Holder to insist upon
strict adherence to any term of this Debenture on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Debenture.  Any waiver by the Company or the Holder must be in
writing.

     

     f)           Severability.  If
any provision of this Debenture is invalid, illegal, or unenforceable, the
balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless remain
applicable to all other Persons and circumstances.  If it shall be
found that any interest or other amount deemed interest due hereunder violates
the applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law.  The Company covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the Company
from paying all or any portion of the principal of or interest on this Debenture
as contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

     g)           Next Business
Day.  Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

     

     h)           Headings.  The
headings contained herein are for convenience only, do not constitute a part of
this Debenture and shall not be deemed to limit or affect any of the provisions
hereof.

     

     i)        
   Assumption.  Any
successor to the Company or any surviving entity in a Fundamental Transaction
shall (i) assume, prior to such Fundamental Transaction, all of the obligations
of the Company under this Debenture pursuant to a written agreement in form and
substance satisfactory to the Holder (such approval not to be unreasonably
withheld, delayed, or denied) and (ii) issue to the Holder a new debenture of
such successor entity evidenced by a written instrument substantially similar in
form and substance to this Debenture, including, without limitation, having a
principal amount and interest rate equal to the principal amount and the
interest rate of this Debenture and having similar ranking to this Debenture,
which shall be satisfactory to the Holder (any such approval not to be
unreasonably withheld or delayed).  The provisions of this Section
9(i) shall apply similarly and equally to successive Fundamental Transactions
and shall be applied without regard to any limitations of this
Debenture.

     

    IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a
duly authorized officer as of the date first above indicated.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	 	THE SAINT JAMES
      COMPANY
	 	 
	 
      	
                                  By:

                                	 
      
	 	 	
                                  Wayne
      Gronquist, Secretary

                                
	 	 
	 
      	
                                  Facsimile
      No. for delivery of
  Notices:  ___-___-____

                                

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    ANNEX
A

     

    NOTICE
OF CONVERSION

     

    The undersigned hereby elects to
convert principal under the Straight Convertible Debenture due June 5, 2009 of
The Saint James Company, a North Carolina corporation (the “Company”), into
shares of common stock (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below.  If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,
except for such transfer taxes, if any.

     

    By the delivery of this Notice of
Conversion the undersigned represents and warrants to the Company that its
ownership of the Common Stock does not exceed the amounts specified under
Section 4 of this Debenture, as determined in accordance with Section 13(d) of
the Exchange Act.

     

    The undersigned agrees to comply with
the prospectus delivery requirements under the applicable securities laws in
connection with any transfer of the aforesaid shares of Common
Stock.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	 
      	
                                          Date
      to Effect
      Conversion:           
      _______________________________

                                        
	 
      	 
      
	 
      	
                                          Principal
      Amount of Debenture to be Converted:   
      _________________

                                        
	 
      	 
      
	 
      	
                                          Number
      of shares of Common Stock to be issued:  
      _________________

                                        
	 
      	 
      
	 
      	
                                          Signature:       
      ______________________________________________

                                        
	 
      	 
      
	 
      	
                                          Name:    
      ___________________________________________________

                                        
	 
      	 
      
	 
      	
                                          Address
      for Delivery of Common Stock Certificates:

                                        
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    SCHEDULE
1

    

    CONVERSION
SCHEDULE

    

    The
Straight Convertible Debenture due on June 5, 2009 in the aggregate principal
amount of $____________ are issued by The Saint James Company.  This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.

    

    Dated:

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  	
                                                          Date of Conversion

                                                          (or for first entry,

                                                          Original Issue Date)

                                                        	 	
                                                          Amount of

                                                          Conversion

                                                        	 	
                                                          Aggregate

                                                          Principal

                                                          Amount

                                                          Remaining

                                                          Subsequent to

                                                          Conversion

                                                          (or original

                                                          Principal

                                                          Amount)

                                                        	 	
                                                          Company Attest

                                                        
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	 
      	 	 
      	 	 
      	 	 
      
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        14

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